FCA US To Pay US$300 Million In Fines Over Diesel Emissions Fraud

FCA US, a Stellantis company, has pleaded guilty to one criminal felony count and agreed to pay approximately US$300 million in criminal penalties as a result of the company’s conspiracy to defraud US regulators and customers. Three FCA US employees were also indicted for conspiracy to defraud the United States and to violate the Clean Air Act, along with six counts of violating the Clean Air Act, after it was determined that diesel engines the company made were programmed to meet emissions rules only during emissions tests.

The legal action comes five years after Volkswagen pleaded guilty to criminal charges in a scandal that has become known as ‘Dieselgate’.

FCA US admitted to making false and misleading representations about the design, calibration and function of the emissions control systems on more than 100,000 model year 2014, 2015, and 2016 Jeep Grand Cherokee and Ram 1500 diesel vehicles, and about these vehicles’ emission of pollutants, fuel efficiency, and compliance with US emissions standards.

According to the Department of Justice, FCA US entered a guilty plea to one count of conspiracy to defraud the US, commit wire fraud, and violate the Clean Air Act. Pursuant to the plea agreement, FCA US has agreed to pay a criminal fine of US$96,145,784 and forfeit US$203,572,892.

“FCA US engaged in a multi-year scheme to mislead US regulators and customers,” said Assistant Attorney General Kenneth Polite Jr of the Justice Department’s Criminal Division. “[The] guilty plea demonstrates the department’s dedication to prosecuting all types of corporate malfeasance and holding accountable companies that seek to place profits above candour, good corporate governance, and timely remediation.”

According to the company’s admissions and court documents, beginning at least in 2010, FCA US developed a new 3.0-litre diesel engine for use in FCA US’ Jeep Grand Cherokee and Ram 1500 vehicles that would be sold in the US. FCA US designed a specific campaign to market them to US customers as “clean EcoDiesel” vehicles with best-in-class fuel efficiency. However, according to court documents, FCA US installed software features in the vehicles and engaged in other deceptive and fraudulent conduct intended to avoid regulatory scrutiny and fraudulently help the vehicles meet the required emissions standards, while maintaining features that would make them more attractive to consumers, including fuel efficiency, service intervals, and performance.

The Department of Justice said FCA US deliberately calibrated the emissions control systems on the vehicles to produce less nitrogen oxide (NOx) emissions during the federal test procedures, or driving ‘cycles’, than when the vehicles were driven by FCA US’ customers under normal driving conditions. FCA US then engaged in deceptive and fraudulent conduct to conceal the emissions impact and function of the emissions control systems from its US regulators and US customers by:

  • Submitting false and misleading applications to US regulators to receive authorisation to sell the vehicles
  • Making false and misleading representations to US regulators in person and in response to written requests for information
  • Making false and misleading representations to consumers about the vehicles in advertisements and window labels, including that the vehicles complied with US emissions requirements, had best-in-class fuel efficiency as measured by EPA testing, and were equipped with “clean EcoDiesel engine[s]” that reduced emissions.

For example, FCA US referred to the way it manipulated one method of emissions control as “cycle detection” and “cycle beating”. Without the “cycle beating” use of this emissions control software, the vehicles were unable to pass the emissions portions of the federal test procedures while also receiving a fuel efficiency rating that could be marketed to FCA US’ potential customers as “best-in-class,” consistent with the FCA US 3.0-litre diesel programme’s goals, timing, and marketing strategy.

According to the Department of Justice, as FCA US knew the decision to calibrate the emissions control system used on the vehicles to perform differently “on cycle” versus “off cycle” would be subjected to significant scrutiny by US regulators, the company made false and misleading representations to regulators to ensure that it obtained regulatory approval to sell the vehicles in the US.

Under the terms of the guilty plea, which remains subject to court approval, FCA US has agreed to continue co-operating with the Department of Justice in any ongoing or future criminal investigations relating to this conduct. Additionally, as part of the guilty plea, FCA US has agreed to continue implementing a compliance and ethics programme designed to prevent and detect fraudulent conduct throughout its operations. The company will report to the department regarding remediation, implementation and testing of its compliance programme and internal controls.

The US government said it reached agreement with FCA US based on several factors including the nature and seriousness of the offense conduct, the company’s failure to voluntarily and timely disclose the conduct that triggered the investigation, and its failure to conduct sufficiently timely or appropriate remedial action. FCA US received credit for co-operation with the department’s investigation and has enhanced, and committed to enhance, its compliance programme and internal controls.

Sentencing is scheduled for 18 July 2022.

In the related criminal prosecution, three FCA employees – Emanuele Palma, Sergio Pasini, and Gianluca Sabbioni – were indicted for conspiracy to defraud the US and to violate the Clean Air Act, along with six counts of violating the Clean Air Act. They await trial while the FBI and EPA’s Criminal Investigations Division are investigating the case.