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FCA US LLC to pay ~$300M in criminal penalties over diesel emissions test cheating

FCA US LLC (FCA US), formerly Chrysler Group LLC, was sentenced in federal court in Detroit and ordered to pay a fine of $96,145,784 and a forfeiture money judgment of $203,572,892. The court also imposed a three-year term of organizational probation. FCA US had reached an agreement on the terms of the settlement early in June.

The conviction results from the company’s conspiracy to defraud US regulators and customers by 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 company’s admissions and court documents, beginning at least as early as 2010, FCA US developed a new 3.0-liter diesel engine for use in FCA US’ Jeep Grand Cherokee and Ram 1500 vehicles that would be sold in the United States. FCA US designed a specific marketing campaign to market these vehicles 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 to help the subject vehicles fraudulently meet the required emissions standards, while maintaining features that would make them more attractive to consumers, including with respect to fuel efficiency, service intervals, and performance.

Specifically, FCA US purposely calibrated the emissions control systems on the subject vehicles to produce less NOx emissions during the federal test procedures than when the vehicles were being 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 (a) submitting false and misleading applications to US regulators to receive authorization to sell the vehicles, (b) making false and misleading representations to US regulators both in person and in response to written requests for information, and (c) making false and misleading representations to consumers about the subject vehicles in advertisements and in 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.

FCA US referred to the manner in which 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 FCA US’ 3.0-liter diesel program’s goals, timing, and marketing strategy.

Because FCA US knew that 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, FCA US made false and misleading representations to regulators to ensure that it obtained regulatory approval to sell the vehicles in the United States.

Under the terms of FCA’s guilty plea, which has been approved by the Court, FCA has agreed to continue to cooperate with the Department of Justice in any ongoing or future criminal investigations relating to this conduct. In addition, FCA US has also agreed to continue to implement a compliance and ethics program designed to prevent and detect fraudulent conduct throughout its operations and will report to the department regarding remediation, implementation, and testing of its compliance program and internal controls.

The government reached this agreement with FCA US based on several factors including, among others, the nature and seriousness of the offense conduct, the company’s failure to disclose voluntarily and in a timely manner the conduct that triggered the investigation, and its failure to conduct sufficient, timely, or appropriate remedial action. FCA US received credit for cooperation with the department’s investigation and has enhanced, and committed to further enhance, its compliance program and internal controls.

In the related criminal prosecution, three FCA employees, Emanuele Palma, Sergio Pasini, and Gianluca Sabbioni were indicted for conspiracy to defraud the United States and to violate the Clean Air Act and six counts of violating the Clean Air Act. They await trial. An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The FBI and EPA’s Criminal Investigations Division are investigating the case.

Trial Attorney Michael P. McCarthy and Assistant Chief Michael T. O’Neill of the Criminal Division’s Fraud Section; White Collar Unit Chief John K. Neal and Assistant U.S. Attorney Timothy J. Wyse of the U.S. Attorney’s Office for the Eastern District of Michigan; and Senior Trial Attorney Todd W. Gleason of the Environment and Natural Resources Division’s Environmental Crimes Section are prosecuting the case.


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