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Testing Times

December 2015 - Crime. Legal Developments by Rahman Ravelli Solicitors.

More articles by this firm.

Why the VW emissions-testing scandal is as much about fraud, compliance and liability as it is about clean air.

As the Volkswagen emissions-testing scandal deepens, the German car maker faces investigations in a number of countries. These investigations will look at the way millions of cars function, the role of hundreds (and possibly thousands) of employees and Volkswagen’s activities from 2009 to the present.

Significantly, it has emerged that other car manufacturers – BMW, Chrysler, General Motors, Land Rover and Mercedes-Benz – are under scrutiny from the US regulator that exposed Volkswagen’s manipulation of emissions tests. So while VW has admitted that it fitted up to 11 million vehicles worldwide with software to manipulate the tests and has lost its chief executive in the face of a criminal investigation, other companies have good reason to be worried.

Liability

As the coming weeks and months are likely to show, the investigations into emissions test fraud are likely to look very closely at the issue of liability: liability of the car making firms and the personal liability of those individuals working within them. There appears little doubt that fraud has been perpetrated against both the agencies whose job it is to monitor, test and record emissions and the people who bought the cars having been given incorrect emissions data. Perhaps the only questions that now need to be answered are who was responsible for what went on and what will be their fate. Investigators in a number of countries are now sifting through evidence to see just who was involved in what looks like fraud on a massive scale.

Once the answer to this question has been answered, it is fairly safe to assume that VW will make every effort to distance itself from what has gone on and the people who end up being blamed for it. But if VW has any real desire to prevent such large-scale wrongdoing in the future then it needs to take a very long, hard look at how it can make it impossible for such activity to ever be carried out again.

Anti-fraud culture

To put it in simple terms, VW needs to develop and nurture an anti-fraud culture. It is shocking to realise that it did not already have such a culture. But what has now happened at VW can be seen as a warning to its staff – and to many people working in all manner of professions – about the dangers of workplace fraud.

As solicitors with experience of defending many people accused of fraud, we have achieved success in such cases by being able to use reliable documentation and testimony to prove clients’ innocence. VW (and many other companies) would do well to remember this when it looks to instigate a culture that makes it easier to prevent, or at least identify, fraud by its employees. Failure to create such a culture could lead to further raids on VW premises, which would be a public relations disaster as well as a major obstacle to keeping the car giant’s manufacturing and sales arms functioning efficiently and successfully. If VW ever wants to challenge allegations of fraud made against it in the future, it will only be able to if it has an anti-fraud culture and appropriate procedures in place. Such procedures will make it easier to disprove any allegations made. But more importantly, they will have made it far more difficult for fraud to have been perpetrated.

Procedures

Such procedures involve taking a close look at the work carried out, the people who carry it out and the amount of – or lack of – supervision in place while they carry it out.

It may seem an obvious point, but all work carried out must be the subject of comprehensive records. These records have to be kept contemporaneously, with no delays or omissions. All records should be kept in duplicate and filed away. Should an investigation begin, any resulting allegations can then be challenged if those being accused have access to up-to-date, accurate records of their activities.

But records are not the be-all-and-end-all. A firm looking to prevent fraud needs to look closely at the potential for it being carried out in its name – regardless of whether it does not know or even suspect that it is being committed by its staff or representatives. Some business figures may argue that they are too busy to be bogged down with compliance. If that is the case, the logical course of action would be to hire legal specialists who are experts in compliance. Such expertise can be vital in making sure a company or organisation is run in a way that ensures all potential for fraud has been “designed out’’. This can be done through the implementation of procedures and staffing arrangements.

Responsibility

There is a responsibility on those at the top to make sure that a company does not merely pay lip service to the idea of tackling fraud. Senior figures in a company have to give plenty of thought to an anti-fraud policy, whether or not they hire legal experts. Any policy has to be monitored, reviewed and revised whenever necessary so that it is always capable of deterring and preventing fraud – and of allowing anyone to flag up their concerns about fraud. If this does not happen, an inadequate, unsuitable or poorly-enforced policy will be of little or no value when it comes to fraud prevention.

While VW undergoes seismic changes in the wake of its emissions scandal, it is worth making the point that fraud in manufacturing – or any other sector – is unlikely to be completely eradicated. If there are benefits to be gained from fraud, someone will always be tempted to commit it.

The challenge for VW now is to make sure the potential benefits of fraud and the scope for committing it successfully are massively reduced.