U.S. Government Focuses on Need for Deterrence and Oliver Schmidt’s Obstruction of Justice

Oliver Schmidt, a former senior manager in Volkswagen’s U.S. Engineering and Environmental Office, is scheduled to be sentenced on December 6 in federal court in Michigan. In a sentencing brief, the government, in asking for a sentence of seven years, points to the need to deter others from similar corporate misconduct:

Companies are legal fictions. They do not act. They commit crimes only through the actions of individuals – their employees and agents. While holding a company accountable for corporate wrongdoing is legally sound, by itself, it is insufficient to promote general deterrence. The best form of deterrence is deterrence aimed at the very individuals within corporations who actually make the decisions to commit crimes. It is rare that these individuals are held to account. It is rarer still that in the largest and most complex cases that these individuals are apprehended and available to be punished. The decisions of such corporate managers and executives, when those decisions are driven by greed and by a bad purpose, can have tremendous negative consequences for the rest of society – decisions that affect consumers, shareholders, and the public; decisions that affect the economic and physical health of hundreds of thousands of people. The enormous criminal and civil fines and settlements imposed on VW, along with the oversight of a corporate compliance monitor, hopefully will reorient VW’s business priorities and serve as a message to other companies that might be inclined to cut similar ethical corners. But unless individual actors are also punished, future corporate employees and contractors may be tempted to justify their criminal behavior as just “doing their jobs” or “following orders.” Holding VW AG accountable, but not the decision makers at VW AG, is insufficient. The defendant is the first such decision maker to be held to account, the first person who was “in the room” when the decisions were made, the first person who was in a position to shape company policy.

In distinguishing Mr. Schmidt from James Liang, a Volkswagen engineer who received a 40 month sentence, the government asserts that Mr. Schmidt engaged in obstruction of justice and, unlike Mr. Liang, did not seek to cooperate with the government:

In addition to committing the underlying criminal offense, the defendant has admitted to obstruction of justice, as reflected in his plea agreement and his agreed-upon Guidelines calculation. The defendant obstructed justice in several ways. First, on August 31, 2015, the defendant met with key engineers at VW whom he knew were heavily involved in the defeat device scandal and: (1) informed them that they would receive a litigation hold the following day from VW’s legal department and (2) encouraged them to destroy documents before receiving that litigation hold, or in the defendant’s words, he told them, in sum and substance, “you can’t delete documents after you receive the hold.” According to first-hand witnesses the government has found credible, his co-conspirators then deleted documents relating to the diesel emissions scandal, including some who literally did so in front of Schmidt. The defendant now describes this incident as him just “joking.” Second, according to VW’s internal forensic investigation, Schmidt deleted documents relevant to the diesel emissions scheme. The defendant now claims that his deletions were “an accident.” Third, Schmidt met with federal agents in November 2015, near the outset of the investigation, and provided information that falsely exculpated himself and members of VW executive management. The information the defendant provided has since been discredited by numerous witnesses and Schmidt’s contemporaneous emails, which the government subsequently obtained. Indeed, during a multi-hour interview, Schmidt disclaimed any personal wrongdoing, and portrayed himself as an innocent bystander who tried to do the right thing and was attempting to assist U.S. authorities. Schmidt has not reconciled how his statements to federal agents in November 2015 are consistent with his guilty plea and the accompanying statement of facts to which he has now agreed.

Steven T. Webster, Webster Book LLP