Volkswagen agrees to record $14.7B settlement over emissions cheating

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NEW YORK — Volkswagen’s deliberate cheating on emissions tests will cost it a record $14.7 billion. That’s far more than any other automaker has paid for wrongdoing.

Owners of the nearly 500,000 affected diesel cars will share in up to $10 billion in payments for their cars, according to documents filed in federal court in California.

Volkswagen’s wrongdoing constituted “the most flagrant violations of our consumer and environmental laws in our country’s history,” said Deputy Attorney General Sally Yates. “We cannot undo the damage that’s been done to our air quality but we can offset that damage.”

She said the settlement is only a preliminary step in the case and, that the automaker still faces possible criminal charges as well as civil penalties for Clean Air Act violations.

Car owners will get a cash payment of at least $5,100 to compensate them for the lost value of the cars, as well as for Volkswagen’s deception in promising that they were buying a “clean diesel.” Most of the buyers paid extra for a car with a diesel engine.

Volkswagen also will either repurchase or fix the 487,000 U.S. cars sold under the VW or luxury Audi brands, depending on what the owners want.

In addition to the amount paid to customers, Volkswagen will have to pay $2.7 billion in environmental cleanup and $2 billion to promote zero-emission vehicles.

The cars had software installed that severely limited emissions when the cars were having their emissions tested, then dumped up to 40 times the allowable levels of some pollutants when being driven on the road. VW admitted to the wrongdoing in September.

Volkwagen faced up to $18 billion in fines for violation of the U.S. Clean Air Act, and it has already set aside that much money to settle the case.

The settlement amount dwarfs other payouts by other automakers.

General Motors paid a criminal fine of $900 million for a faulty ignition switch tied to at least 124 deaths, and an additional $600 million to victims and their families. It also faces a class action lawsuit seeking damages on behalf of car owners.

Toyota agreed in 2012 to pay a $1.2 billion fine, and settled with car owners for an additional $1.1 billion in the unintended acceleration case.

The largest payout for a single instance of corporate wrongdoing is the $20.8 billion that BP agreed to pay last year to settle various charges related to the 2010 Deepwater Horizon disaster in the Gulf of Mexico. Out of that payment, $5.5 billion is allocated for federal Clean Water Act penalties, $8.1 billion for natural resource damage and $4.9 billion to compensate various Gulf states affected by the oil spill. BP has estimated its total cost for the disaster, including compensation to businesses and individuals, at $54.6 billion.

Several major Wall Street banks have paid more than $20.8 billion in fines and penalties related to the financial crisis. But that total reflected multiple settlements for different instances of wrongdoing.

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