Corruption comes in all shapes, sizes and forms. It certainly goes far beyond bribery made illegal under the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act. I was reminded of this fact this week and the company formerly known as Chrysler Group LLC, now FCA US LLC (Chrysler here) has been criminally convicted, according to a Department of Justice (DOJ) Press release, “pay a fine of $96,145,784; and a forfeiture judgment of $203,572,892. The court also imposed a sentence of three years of organizational probation. About all I can say after reading the press release and underlying Information and Court agreement is that Lee Iacocca and Walter Chrysler are both turning in their graves now.
The plea deal detailed a series of corruptions so deep and systemic within the organization that it’s a wonder anyone wanting a clean diesel type of vehicle would buy a Chrysler again (even if it’s rebranded as an “FCA US” vehicle. LLC» ). Indeed, the criminal assessment of over $300 million was only made after a civil penalty of $310 million. That means over $600 million in civil and criminal fines and penalties before we even get to the costs of pre-resolution investigation and post-resolution corrective action. If you apply the standard pre and post settlement cost multiplier of two to five X; you can see that the company paid a very high price for its conduct.
The basic facts of the case and Chrysler’s actions included deliberately creating a vehicle designed to evade and defeat emissions testing from at least 2010 to 2017, about two years after the testing scandal broke. emissions from Volkswagen. Additionally, Chrysler engineers and others intentionally lied to the US government during the emissions certification process. Finally, Chrysler’s conduct after the scandal broke was so desperate that the company did not receive full credit for its full cooperation or for accepting full responsibility for its actions.
The underlying facts were as daunting to read as any I have recently come across. Reportedly, as early as 2010 at least, Chrysler developed a new 3.0-liter diesel engine for FCA US Jeep Grand Cherokee and Ram 1500 vehicles to be sold in the United States. They were marketed as “Clean EcoDiesel” vehicles with best-in-class fuel efficiency. However, and in contrast, the company installed software features and engaged in other deceptive and fraudulent behavior intended to avoid regulatory scrutiny while “retaining features that would make them more appealing to consumers, including regarding fuel efficiency, maintenance intervals, and performance.
According to the information, the company deliberately calibrated the vehicle’s emission control systems to produce fewer NOx emissions during federal test procedures, or driving “cycles,” than when the vehicles were driven by customers in normal driving conditions. But as the press release noted, Chrysler went further by “engaging in deceptive and fraudulent conduct to conceal the impact on emissions and the function of emission control systems from its U.S. regulators and its US customers by (a) submitting false and misleading applications to US regulators to receive clearance to sell the vehicles, (b) making false and misleading statements to US regulators in person and in response to written requests for information , and (c) make false and misleading statements to consumers” in advertisements and window labels, including that the vehicles met U.S. emissions requirements, had best-in-class fuel efficiency such as measured by EPA testing and were equipped with a “clean EcoDiesel engine[s]which reduced emissions.
A number of people identified in the plea deal have also been criminally charged. According to the press release, “As part of related criminal proceedings, three FCA employees, Emanuele Palma, Sergio Pasini and Gianluca Sabbioni have been charged with conspiracy to defraud the United States and violate the Clean Air Act and six counts of violation of the Clean Air Act. Law. They are awaiting their trial. Of those involved, most worked on the corruption show work as early as 2010 and some were with the company through 2020.
For reasons not explained in any of the resolution documents, the company avoided the imposition of an external monitor. They do, however, have an obligation to report to the DOJ on the annual compliance program reports required under the plea agreement. Reporting is required for three years on a prospective basis.
Join me tomorrow as I examine some of the lessons learned from this sordid affair for the anti-corruption compliance professional.