Volkswagen is in hot water. News broke recently that it has been putting “defeat devices” in millions of diesel cars to make them seem much cleaner than they really are. The defeating software Volkswagen used caused their cars to register excellent results in emissions tests, while the cars were actually emitting up to 40 times more pollutants in everyday driving. That means more smog in the air, more asthma and other respiratory diseases, and so on.

The fraud is so huge that it’s hard to get your head around it. It has been going on for about a decade, and involves popular diesel models such as Jettas, Beetles, Golfs, and Passats. Half a million cars sold in the U.S. may have the deceptive software, and there may be as many as 11 million cars with it worldwide.

It’s virtually impossible that this could have happened by accident. There are just too many bogus test results, in too long a period of time, and involving too many models. Some automotive experts believe this could not have happened unless people throughout VW’s hierarchy were in on it. Company CEO Martin Winterkorn claims innocence, but he stepped down almost immediately after the story went public.

Consumers who thought they were doing the right thing for the environment by getting cars marketed as “clean diesel” are understandably enraged. Besides being duped, they now have cars which are less valuable than they thought. A class action, or several class actions, are now a foregone conclusion. VW has already set aside $7.3 billion to deal with the recall and related fallout, but the eventual fines, penalties, and other financial consequences could be much higher.

The more interesting question now is the one about white collar crime. The U.S. Justice Department, hit with withering criticism for its “fines only” approach to corporate crime, recently announced a change in policy. It says it will no longer provide credit for cooperation unless corporate criminals “provide all relevant facts about the individuals involved in corporate misconduct.” Justice investigators are now supposed to “focus on individuals” right from the beginning of their investigations. Perhaps most importantly, the Department is no longer supposed to agree to plea deals which require dismissal of charges against individual officers or employees of corporations.

The systemic emissions fraud by VW is tailor-made for application of this new policy. It will be interesting to see if the Department puts its money where its mouth is and actually follows its own guidelines. If it does, it will put large corporations everywhere on notice, and it may actually change behavior in the long run. If it doesn’t, then this will end up being just another “cost of doing business” episode like the Deepwater Horizon disaster, the global bank HSBC money-laundering scheme, and the GM ignition switch coverup. Stay tuned!

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