Justice Department subpoenas Volkswagen for violation of FIRREA Law

The Justice Department subpoenaed Volkswagen based on the violation of Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), a law giving investigators broad scope to investigate the company.

The department expanded its probe of Volkswagen (VW) to go after the German auto maker over emissions cheating, and looked at possible violations of tax laws.

VW has admitted that its Volkswagen, Audi and Porsche diesels marketed as environmentally friendly were equipped secretly with illegal devices that hid above-regulation pollution levels from regulators.

FIRREA was enacted in response to the savings and loan crisis as a way of probing fraud in the banking industry. In recent years, it was used to investigate big banks that packaged shoddy mortgages into securities that lost much of their value when the U.S. housing market collapsed.

FIRREA may be a novel use of the civil financial fraud law, but it can be an another potential source of penalties after admitting it used illegal software that allowed diesel-powered vehicles to pollute more on the road than during government emissions tests, Reuters reported.

Former civil frauds prosecutor Brian Feldman told that FIRREA gave criminal prosecutors and civil government lawyers flexibility to share information, making it an attractive option for the government. If prosecutors get the information through a grand jury subpoena, they are generally unable to share it with their civil counterparts.

VW is already facing multiple investigations in the United States and other countries regarding the cheating, which affected over 600,000 vehicles in the United States and more than 11 million worldwide. Moreover, the company is currently battling, among others, with the Environmental Protection Agency, the Justice Department's criminal division, state attorneys and civil lawsuits from car buyers-over alleged fraud in marketing the fuel efficiency of some 580,000 of its vehicles in the U.S.

VW has an intensive settlement talks with the U.S. Justice Department and US clean air regulators. The company has until March 24 deadline to tell a U.S. judge whether it has an acceptable fix for almost 600,000 diesel cars.

Meanwhile, prosecutors in Paris said they had opened an investigation into "serious fraud" against the embattled German carmaker, assigning three magistrates to head it. At the same time, German prosecutors said the number of suspects under their own investigation had increased from six to 17, but that no former or current board members are involved.

VW's Chief Executive Matthias Mueller told his employees that the emissions scandal will inflict "substantial and painful" financial damage on the carmaker. The scandal will keep VW busy for a long time.

In 2015, VW set aside 6.7 billion euros ($7.39 billion) to cover costs of recalling of about 11 million diesel vehicles globally.

Nitrogen oxide is a pollutant associated with respiratory problems and defeat devices are prohibited in the United States, where the VW scam was originally exposed, as well as in other countries.

Tags

Volkswagen, Audi, Porsche, FIRREA, environment lawsuit, nitrogen oxide

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