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Speaker 1: And now turning to the Volkswagen settlement. Loretta Lynch is

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Speaker 1: ending her tenure as Attorney General with a bang in

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Speaker 1: a landmark settlement with Volkswagen felony guilty please by Volkswagen

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Speaker 1: to an emissions cheating scandal, one of the largest clear

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Speaker 1: air of penalties, and the indictment of six high level

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Speaker 1: v W executives in Germany. It's one of the top

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Speaker 1: environmental cases in President Obama's administration and the capstone for

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Speaker 1: Lynch's enforcement of corporate misconduct. Lynch said that in a

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Speaker 1: ten year conspiracy, Volkswagen sold hundreds of thousands of cars

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Speaker 1: that were respuing harmful nitrogen oxide into the atmosphere up

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Speaker 1: to forty times above the legal limit. Volkswagen knew of

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Speaker 1: these problems, and when regulators expressed concern, Volkswagen obfuscated, they denied,

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Speaker 1: and they ultimately lied. The agreement requires the German automaker

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Speaker 1: to pay four point three billion dollars in penalties and

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Speaker 1: to submit to compliance monitoring. Prosecutors detailed on a lab

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Speaker 1: borate scheme inside Volkswagen to commit the fraud and then

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Speaker 1: cover it up, with at least forty employees allegedly involved

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Speaker 1: in destroying evidence. Here we saw a company where this

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Speaker 1: knowledge and the choice that they made went to the

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Speaker 1: executive level, and that did set it apart from other companies.

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Speaker 1: US prosecutors are still investigating just how high up the

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Speaker 1: corporate ladder the scheme went, and Lynch held out the

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Speaker 1: possibility of charges against more VW executives. Our guests are

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Speaker 1: Eric Gordon, professor at Michigan Law School and the Raw

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Speaker 1: School of Business, and Anthony Sabino, founding partner at Sabino

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Speaker 1: and Sabino. Eric. The Justice Department has been criticized for

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Speaker 1: many years for not holding corporate leaders accountable for corporate crimes. Here,

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Speaker 1: one of v w's highest level executives was indicted along

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Speaker 1: with five others. Is this a major breakthrough justice the

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Speaker 1: Obama administration is ending? You know, I think the timing

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Speaker 1: is not a coincidence. People are leaving in their their

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Speaker 1: good people. They're well intentioned people, and they've really been

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Speaker 1: stung by the allegations that their softies. So they don't

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Speaker 1: have a lot of time now it's just a few days, um,

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Speaker 1: But what we've seen in the last few months is

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Speaker 1: attempts to sort of rehabilitate the reputation, reputation that might

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Speaker 1: have been sort of unfairly given to them. Um, you know,

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Speaker 1: it's it's interesting that it's happening just now, um, just

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Speaker 1: in time for another administration to come in. So who

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Speaker 1: knows what it signals. But you know, I know I

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Speaker 1: I don't know the Attorney General, but I know people

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Speaker 1: in the administration, and they've taken it quite personally. They've

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Speaker 1: really been stung by the criticisms, including by criticisms I've

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Speaker 1: leveled Anthony in this plea agreement Volkswagen, Uh, as I

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Speaker 1: understand it admitted that its employees agreed to deceive both

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Speaker 1: regulators and customers. Can we look at this as Volkswagen

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Speaker 1: has sort of, uh, you know, given up its employees

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Speaker 1: in this case in order to kind of deal to

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Speaker 1: some extent. Yes, again, I think Volkswagen realizes that this

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Speaker 1: was the cost of achieving a settlement with the United

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Speaker 1: States governments. I have no doubt that Attorney General Lynch,

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Speaker 1: and she's always been known as a hard charging, very

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Speaker 1: thorough litigator, both in private practice as well as in

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Speaker 1: her various roles at the Justice Department as U S

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Speaker 1: Attorney por prior to being the A G. That they

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Speaker 1: demanded this as part of the bargain, and UH again

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Speaker 1: allegations which now at a pair to be admitted to UH,

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Speaker 1: thereby becoming facts of a sort. UH. Seems to be

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Speaker 1: very little doubt that these folks to do what they

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Speaker 1: were accused of, and Volkswagen viewed it as a necessity

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Speaker 1: put upon them. I think also something that struck me

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Speaker 1: from these very recent developments is that this is in

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Speaker 1: more contrast to in earlier stage of the Obama administer vision,

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Speaker 1: when there have been accusations that people who played a

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Speaker 1: part in the Great Recession back in O eight oh nine, etcetera.

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Speaker 1: We're not criminally prosecuted. But again, as I've always said, UH,

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Speaker 1: it's not a crime to make errors in judgment, it's

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Speaker 1: not a crime to be stupid, etcetera, etcetera, and that

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Speaker 1: was a large component of the Great Recession. This, in contradistinction,

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Speaker 1: is something very different where you have elements of very

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Speaker 1: deliberate behavior, because, after all, the essence of the crime here, UH,

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Speaker 1: the alleged crime is that these defeat devices were deliberately

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Speaker 1: made with these computer algorithms to give false readings on

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Speaker 1: the environmental on the pollution levels, and you can only

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Speaker 1: write an algorithm with a great deal of deliberation, and

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Speaker 1: deliberation means intent, it means malice. And apparently the government

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Speaker 1: had enough there to convince Volkswagen to plead guilty as

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Speaker 1: an entity, and two, as you said, give up its

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Speaker 1: own people who participated in that conspiracy. From that point, Eric,

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Speaker 1: this settlement is the largest criminal fine imposed on an automaker.

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Speaker 1: It's almost five times what GM paid and four times

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Speaker 1: what Toyota paid to settle their cases. Why so large? Yeah,

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Speaker 1: because this is really severe. Um you had you know,

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Speaker 1: in GM, Um, you probably had some stupidity and some

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Speaker 1: cover up. UM. In v W, what you had is

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Speaker 1: a company that made a conscious decision we will violate

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Speaker 1: the law. We will pollute the air in order to

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Speaker 1: sell cars. Uh. Nobody at GM said, well, in order

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Speaker 1: to sell cars, we're gonna put in this Crumby ignition switch.

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Speaker 1: They put in an igniance switch that turned out to

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Speaker 1: be Crumby, and they knew about it and didn't change it.

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Speaker 1: But they didn't upfront say wow, we're gonna make some money.

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Speaker 1: We gotta make money. We gotta sell cars. Um, and

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Speaker 1: the only way we can do it is by putting

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Speaker 1: in a Krumby ignition switch. So the wrongdoing here is,

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Speaker 1: to use the technical legal term, just so yucky. It's

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Speaker 1: just so despicable that, uh, you know, I'm surprised that

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Speaker 1: the multiple wasn't even higher. Our guests or Eric Gordon,

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Speaker 1: professor at Michigan Law School and the Raw School of Business,

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Speaker 1: and Anthony Sabino, founding partner at Sabino and Sabino. Anthony.

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Speaker 1: The question is whether the those executives, those five executives

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Speaker 1: in Germany are ever going to be tried in the

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Speaker 1: US because German law bars extradition of the country's citizens.

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Speaker 1: So can they hide out in Germany for the rest

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Speaker 1: of their lives if they want to, Well, they can

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Speaker 1: hide out in Germany or although I don't think that's

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Speaker 1: an absolute necessity because Volkswagen is a far flung gold organization,

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Speaker 1: so they might be able to live in other parts

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Speaker 1: of the world, to travel to other parts of the world.

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Speaker 1: But you know what, ju I'm really not going to

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Speaker 1: lose sleep over whether these gentlemen ever faced trial in

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Speaker 1: the United States. Certainly, I think many of us would

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Speaker 1: prefer to see that, but I really don't think that's

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Speaker 1: since the important issue. I think that we can look

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Speaker 1: at what's been achieved already, and that is the following.

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Speaker 1: Volkswagen has been properly chastened by this massive settlement four

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Speaker 1: point three billion dollars in criminal fines and layer that

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Speaker 1: on top of the fourteen or so billion they're already

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Speaker 1: going to pay to the States and the dealers and

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Speaker 1: so forth for getting the offending vehicles off the street,

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Speaker 1: not to mention the slow shareholder lawsuits. They're going to

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Speaker 1: be penny for a long time. Uh. These gentlemen have

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Speaker 1: been stung by these accusations. I don't really see them

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Speaker 1: as being viable in any capacity with Volkswagen. Their roles

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Speaker 1: are certainly going to be diminished. UM German companies UM

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Speaker 1: have slightly different rules in terms of their leadership as

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Speaker 1: far as shareholders and what they call a super supervisory

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Speaker 1: board interacting on behalf of shareholders. But but I honestly

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Speaker 1: think that they will be a massive change in command

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Speaker 1: at Volkswagen. And again, let me be clear, I don't

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Speaker 1: think anyone should escape their day in court to face

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Speaker 1: charges such as this, But once again I don't think

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Speaker 1: that's just compelling an issue. Uh, there was there were

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Speaker 1: achievements here, Eric eric Um. One of these men, Oliver Schmidt,

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Speaker 1: was actually arrested in uh in the US, in Miami,

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Speaker 1: where he apparently was on vacation. That really struck me

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Speaker 1: in this story was that as bad of an idea

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Speaker 1: as I thought, as I think it is for him

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Speaker 1: to have convocationing here in the US with this probe

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Speaker 1: hanging over him, you know, he wouldn't have done that

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Speaker 1: if you were my client. I mean, I mean, for

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Speaker 1: one thing, none of these people are going to take

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Speaker 1: their their grandchildren, um to Disney World. Um. And you

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Speaker 1: know there are certain countries uh that if they traveled to,

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Speaker 1: they could be extradited if they go to the wrong country. UM.

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Speaker 1: I have a slight disagreement with Anthony in that. UM.

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Speaker 1: You know, Volkswagen is paying a lot of money and

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Speaker 1: it's and it's having it's creating real problems for them. Uh.

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Speaker 1: It's it's not clear that they're going to have enough

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Speaker 1: money to finance moving to electric cars without raising more capital.

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Speaker 1: So it's a real problem for Volkswagen. But Volkswagen never

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Speaker 1: makes decisions. Chrysler doesn't make decisions, Feiser doesn't make decisions.

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Speaker 1: Individuals make decisions. Uh. And I'm actually a subscriber to

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Speaker 1: the idea that you have to you have to scare

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Speaker 1: those individuals, the individuals who are not in their heart

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Speaker 1: going to do the right thing. You have to scare them.

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Speaker 1: And the fact that it's big trouble for VW is

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Speaker 1: really different than you could be going to jail and

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Speaker 1: not see your grandchildren at all. And Anthony, that is

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Speaker 1: part of the criticism that's been leveled against the Justice Department,

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Speaker 1: that they haven't gotten the individuals here. They got the individuals,

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Speaker 1: but they may not be able to try them. That's

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Speaker 1: true enough. But again, as I said earlier with the

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Speaker 1: program UH, there were individuals that escaped the bar of justice,

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Speaker 1: if you will, because you can prosecute for stupidity, your

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Speaker 1: bad judgment. Again I referenced the Great Recession. UH. In

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Speaker 1: this instance, there are attempts on going, certainly to bring

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Speaker 1: these individuals to America to face these charges. But again,

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Speaker 1: the law is the law, and if you cannot extracize

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Speaker 1: them from Germany, so be it. I'm not saying at

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Speaker 1: all that that's the optimum result. I certainly would have

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Speaker 1: a strong preference to see them be prosecuted here in

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Speaker 1: the States. Thank you. Eric Gordon, professor at Michigan Law

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Speaker 1: School and the Raw School of Business, and Anthony Sabino,

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Speaker 1: founding partner at Sabino and Sabino coming up on Bloomberg Law.

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Speaker 1: Eric Holder is taking a new role. He is going

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Speaker 1: after jerrymandering and looking forward in today's discussion with other

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Speaker 1: Democrats of what to do. This is Bloomberg