Commentary: VW fraud deserves prison time

Little learned from 2008 abuses

Volkswagen has admitted lying to regulators and millions of customers. This lie gave VW a years-long head start on any honest competitors. The scam polluted air worldwide for six years. For now, the scandal has lost investors $26 billion in stock value.

The firm is under investigation in Germany for multibillion-dollar fraud. No kidding. If no one goes to prison for this one, we'll all have to wonder: How bad does corporate behavior have to be?

VW wrote software that ran diesel engines cleanly during emission tests. In the real world, people steer and use pedals. Those actions triggered that software to shut down. The engines then spewed a 20- to 40-fold increase in pollution.

No one at VW who knew about this could reasonably have believed they would get away with it for long. Every doctored diesel rolling off the assembly line was proof against them. There are 11 million of these vehicles on the road. Almost half a million are in the United States. There are, in effect, 11 million smoking guns -- or cars, rather.

Cold-blooded figuring that they'd be dominant in the diesel market by the time they got caught is the most reasonable explanation for this brazen act. The company is probably surprised to have gotten away with this for six years.

While the plot lasted, VW posted the best emission numbers with the best performance. Some rivals should have figured out what was going on. Maybe they did. Very early, expanded tests in Germany after this scandal broke indicate other diesel car makers did likewise. The fact VW wasn't ratted out by a competitor may be an "honor among thieves" thing. No matter. Some environmental group or regulator or smart customer with an engineering or chemistry degree was going to notice.

VW's plot began no later than 2009 and possibly as early as 2008. On Nov. 24, 2009, the German chancellor and the French president announced their governments' plans to bail out an auto industry that was in meltdown. Taxpayers helped save these hucksters. VW became the largest automaker in the world in the years since. Now we know how.

Not lying your way to the top matters. Not boosting the earning report for the next quarter by gambling the long-term value of your investor's shares matters. Not ripping millions of people off matters. Not lying to the whole world matters. Not putting other people at a competitive disadvantage when they run their businesses ethically and lawfully matters. Not poisoning the air matters.

There's no criteria -- conservative or liberal, public or private, ethical or pragmatic -- by which this scam shouldn't be a crime.

VW's cynical ploy only makes sense when financial markets forgive all sins, however deplorable. Markets know no government will let a major financier or high-wage employer fail. Yes, VW's stock has taken a beating. Within a few years, we'll be reading articles in business magazines about their "miraculous" turnaround. If you're too big to fail, you're big enough to get away with anything.

In a free market operating within a legal system in which fraud was a crime, this scandal would shut VW down. Then there would be fewer scandals like this. Other people would take heed.

Not long ago, this same kind of cynical trickery brought the whole world's economy to the brink. Clearly, the lessons of the Great Recession didn't take -- much less stick -- in the management of, for instance, the biggest firm in Germany.

Too big to fail is one thing. Too big to jail is another. If someone can't put VW decision-makers in prison, change the laws so we can in such cases in the future. Let anyone else who does this go behind bars. Put those pictures and stories into business magazines. Put someone who deserves it in orange overalls. Feed him at a cafeteria and give him some outdoor views that all include razor wire for the rest of his life. That will get other managers' attention.

The goal of prison isn't just to punish the guilty. It isn't even mostly to punish the guilty. It's to convince others not to do the same thing.

Even if the prospect of prison doesn't give any top-tier execs pause, engineers and others working for them will think twice before quietly going along. If the underlings know they'll be the ones going to prison instead of the bosses when the gig is up, we'll hear about the stunts the bosses want to pull before they happen.

Commentary on 10/03/2015

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