By Maria Armental 

IAV GmbH, a Volkswagen AG supplier, has agreed to plead guilty and pay a $35 million fine for its role in the German auto giant's emissions-cheating scheme, the U.S. Justice Department said Tuesday.

The Berlin-based engineering company, half-owned by Volkswagen and with U.S. operations in Michigan, designed the software that allowed Volkswagen to cheat vehicle emissions tests, according to federal prosecutors.

The Wall Street Journal reported in January that IAV was in talks to resolve a criminal case, citing sources familiar with the matter.

"By helping VW cheat on U.S. emissions tests in violation of the Clean Air Act, IAV put its corporate success over public health and unfairly disadvantaged its competitors," said Jean E. Williams, deputy assistant attorney general, in prepared remarks.

Under the terms of the agreement, subject to approval in Detroit federal court, IAV agreed to plead guilty to a felony count of conspiracy for helping Volkswagen to rig diesel-powered vehicles with illegal software that allowed them to pass U.S. government emissions tests.

As part of the settlement agreement, an independent monitor is to audit IAV's compliance practices for two years. The company has also agreed to cooperate in the Justice Department's ongoing investigation and prosecution of individuals in connection with the emissions-cheating probe.

A plea hearing for IAV has been scheduled for Jan. 18.

IAV's U.S. subsidiary, IAV Automotive Engineering Inc., isn't a part of the settlement agreement and wasn't involved in the violation, IAV said.

"The misconduct identified does not reflect who we are as a company," IAV President Kai-Stefan Linnenkohl said in a statement.

Volkswagen pleaded guilty last year to criminal charges related to the emissions fraud and agreed to pay more than $20 billion in U.S. penalties, including a $2.8 billion criminal fine, to settle cases with the government, regulators, state attorneys general and customers.

Volkswagen's final U.S. legal tab will depend on how many customers accept the auto maker's offers to repurchase vehicles that featured the software.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

December 18, 2018 13:36 ET (18:36 GMT)