FTC Claims VW Mobile Phones Missing -- WSJ
December 10 2016 - 3:02AM
Dow Jones News
Auto maker's workers erased or lost phones regulator sought in
diesel-engine probe
By William Boston
The U.S. Federal Trade Commission alleged in a new federal
district court filing that Volkswagen AG erased or lost 23 mobile
phones of key employees, calling the lost phones a "bright red
flag" in the wake of last year's disclosure of the car maker's
decadelong emissions-cheating scandal.
The allegation was contained in a motion filed with the federal
district court in San Francisco. U.S. authorities charged the
company in September 2015 with violating the Clean Air Act.
Volkswagen declined to comment beyond its court filing in
response to the FTC.
"In the context of the massive scandal at the center of this
case, twenty-three lost or bricked phones is a bright red flag,
especially when they include phones that belonged to important
individuals," according to the filing by Jonathan Cohen, a lawyer
with the Division of Enforcement of the FTC's Bureau of Consumer
Protection. A bricked phone is one that can't be turned on.
The FTC in March filed a civil complaint in federal court to
seek damages for consumers, alleging that Volkswagen "deceived
consumers" with its "clean diesel" advertising campaign. The motion
it has filed with the federal district court seeks an additional
half day of testimony to support its case.
Volkswagen's attorneys dismissed the FTC arguments and said the
commission was trying to use this case to put pressure on separate
talks over a settlement for owners of 3.0 liter diesel vehicles
which are still under way. In June, Volkswagen agreed to a $14.7
billion settlement affecting owners of 2.0 liter diesel
vehicles.
In March, a former employee named Daniel Donovan alleged in a
lawsuit filed in Michigan that he was fired when he tried to stop
Volkswagen employees from deleting data after the company had been
ordered to preserve all data and documents.
Mr. Donovan alleged that Volkswagen's information-technology
department didn't stop routine deletion of data at its data center
in Auburn Hills, Mich., for three days after the Environmental
Protection Agency's disclosure of emissions-cheating.
Volkswagen declined to comment on the allegations, saying only
that the circumstances of Mr. Donovan's termination of employment
were "unrelated to the diesel issue."
Mr. Donovan later withdrew his lawsuit.
At the time he filed his suit, Mr. Donovan's attorney declined
to comment.
In June, German prosecutors in Braunschweig, which is near
Volkswagen's headquarters, opened an investigation of an unnamed
member of the car maker's legal department, alleging that for
several weeks after the EPA's announcement the member of the legal
team encouraged employees to destroy or remove documents containing
any information related to the diesel scandal.
Volkswagen said at the time that the employee had been suspended
pending the outcome of the investigation.
The FTC investigative lawyers said a witness designated by
Volkswagen Group of America for deposition testimony in August
didn't sufficiently answer questions about how Volkswagen handled
its responsibility to preserve evidence in the wake of disclosure
of the diesel scandal.
A Justice Department trial attorney said in a letter to
Volkswagen's outside lawyer that the witness "was either unprepared
or otherwise unable to provide responsive information to certain
topics." The witness "answered 'I don't know' or some variation
thereof over 250 times, including in response to questions he
should have been able to answer," the FTC said in the filing.
The FTC motion says that Volkswagen "goes to some lengths to
downplay the significance of the lost or bricked phones." The
phones were assigned to employees of Volkswagen's U.S.
subsidiary.
The FTC requested additional testimony from Volkswagen's witness
in a motion filed on Nov 30.
Volkswagen filed a rebuttal to that request on Dec. 1, asking
the court to deny the FTC's request. Attorneys for Sullivan &
Cromwell, representing Volkswagen, argued in their brief that
preparation of the witness had been "extraordinarily thorough" and
that the witness "spent 20 days preparing for this one deposition."
Volkswagen's attorney said the witness answered "thousands of
questions" by five examiners.
The commission said in its filing that Volkswagen had determined
there was no concern about data destruction, but had failed to
provide any evidence as to how it came to that conclusion.
The FTC argues that it "should not have to accept VW's assurance
that there is nothing to see and that we should just move
along."
Write to William Boston at william.boston@wsj.com
(END) Dow Jones Newswires
December 10, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.