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Framework for VW Settlement Announced

Devil Will Be in the Details
For Immediate Release

Statement by Emily Scarr, Maryland PIRG Foundation Director, on today’s announced VW settlement.

“Seven months after news of Volkswagen’s emission scandal broke, we're glad to hear that there is a 'framework' for a settlement in the cases related to VW's 567,000 fraudulently marketed, illegally polluting cars. This framework appears to include all of the elements that a deal should include, but the devil will be in the details.

"Given the nature of VW's violations, a settlement needs to make consumers whole and compensate for the environmental damage while totaling a penalty large enough to discourage VW and others from this behavior in the future. In the meantime, it’s worth noting that further delay means that these polluting cars remain on the road - emitting up to 40 times the allowable level of pollution - for even longer.

"For more details on what a strong settlement agreement ought to look like, please see the open letter that we released earlier this week with other consumer and environmental groups."
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The Maryland PIRG Foundations is a non-profit, non-partisan public interest advocacy organizations that stand up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society.

Please see the letter below for details about the criteria by which a proposal should be evaluated.

April 18, 2016
The Honorable Charles R. Breyer
Senior District Judge, U.S. District Court
Northern District of California
San Francisco Courthouse
450 Golden Gate Avenue, Courtroom 6 – 17th Fl
San Francisco, CA 94102

The Honorable Loretta Lynch
Attorney General of the United States
Department of Justice
Robert F. Kennedy Building
950 Pennsylvania Avenue NW, Room 5111
Washington, DC 20530

The Honorable Gina McCarthy
Administrator, U.S. Environmental Protection Agency
William Jefferson Clinton Federal Building
1200 Pennsylvania Avenue NW, Room 3000
Washington, DC 20460

The Honorable Mary Nichols
Chair, Air Resources Board
P.O. Box 2815
Sacramento, CA 95812

Hinrich J. Woebcken
Interim President & CEO, Volkswagen Group of America, Inc.
2200 Ferdinand Porsche Dr
Herndon, VA 20171

Dear Judge Breyer, Attorney General Lynch, Administrator McCarthy, Chair Nichols, and President Woebcken:

We, the undersigned consumer, environmental, and public health organizations, write in advance of the April 21 deadline for a proposal that deals with Volkswagen’s emission scandal. We would like to submit our criteria by which we believe a proposal should be evaluated.

After seven months since news of the scandal broke, Volkswagen still has not committed to making consumers or the environment whole again for the harm caused by its deceitful use of “defeat devices” in 567,000 “clean” diesel cars, emitting up to 40 times the legal limit of smog causing NOx pollutants.

A proposal to hold Volkswagen accountable to consumers, our environment, and public health and that deters future violations by VW or other companies should be evaluated by the following criteria:

1. Mitigate past, ongoing, and future emission

• Affected cars that can be fixed to meet emission standards should be fixed.
• Affected cars that can only be partially fixed should receive the available repair if owners choose not to accept buybacks of their cars.
• Volkswagen should offset its past and ongoing emission violations. The future emission violations of cars that are not fixed or only partially fixed should also be calculated and offset.
• Develop a robust in-use testing protocol to ensure that if the vehicles are repaired, the vehicles remain in full compliance for the vehicles’ full useful life, in real world driving conditions.
• The emissions control system must not be allowed to degrade over time to exceed the standards, and EPA and CARB must assure the public that there is no further cheating by Volkswagen

2. Make consumers whole by offering to buy back their affected cars

• Simply fixing the cars still leaves customers less than whole. Whether a full or partial fix is available, the cars could get lower gas mileage and have weaker performance than promised and advertised, and the Kelley Blue Book values will likely diminish further.
• Full compensation is a buyback at full purchase price of the cars.
• However, VW should at least compensate owners 1.5 times the Kelley Bluebook value of the affected vehicles on the day before the scandal was discovered or publicized, as NHTSA has ordered manufacturers in some other recalls to do.
• Bought back cars that cannot be fully repaired to meet emission standards should be scrapped.

3. Mitigate environmental harm caused by scrapping cars
• Environmental harm caused by scrapping cars should be assessed and offset

4. Assess large civil penalties.
• The Clean Air Act sets a maximum penalty of $37, 500 per car or over $18 billion in total penalties. A large civil penalty will send a strong deterrent message to others not to violate the law.
• VW should not be allowed tax writeoffs for any penalties.

5. Set up Supplemental Environmental Projects (SEPs)
• In addition to offsetting the NOx emissions directly attributable to the defeat devices and offsetting environmental harms caused by scrapping cars, VW should set up Supplemental Environmental Projects (SEPs).
• Volkswagen would be motivated to work with the EPA to create a SEP, which could offset a portion of the civil penalties while achieving concrete pollution reductions. The SEP should direct a substantial amount of funds, perhaps calculated on a per-car basis, to create a fund for state and local governments, as well as private-sector entities, to implement projects to reduce pollution from on-road vehicles and increase deployment of zero-emission electric vehicles.
• Any SEP should be above and beyond other remedies so automakers don’t take the lesson that all they need to do to cure cheating is to pay money as a cost of doing business.

6. Criminally charge responsible executives and hold the firm criminally accountable
• Full justice includes criminally charging individual executives who are responsible for the scandal.
• It also includes the full array of criminal monetary penalties and other criminal remedies available under the law against the firm, not only to punish it but also to deter similar misconduct by others.

All government enforcement agencies and civil society parties should have an opportunity to hold the company accountable for one of the largest corporate scandals in history. We believe that evaluating a proposal by the above criteria is essential to compensating consumers and the environment and deterring future criminal acts.

Sincerely,

Clean Air Watch
Environment America
Joan Claybrook, President Emeritus Public Citizen
Public Citizen
U.S. PIRG Education Fund

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