A senior manager at Fiat Chrysler Automobiles was charged in connection with the Justice Department's probe into excess emissions in diesel vehicles, according to documents unsealed Tuesday.
Emanuele Palma, 40, a diesel drivability and emissions senior manager at FCA, was charged with conspiring to commit wire fraud, defraud the United States, violating the Clean Air Act and making false statements about the emissions system used on Fiat Chrysler's U.S. diesel vehicles, according to a grand jury indictment dated Sept. 18.
Magistrate Judge Elizabeth A. Stafford entered a not guilty plea on Palma’s behalf. U.S. attorney Timothy Wyse wanted GPS monitoring of Palma because he considered the flight risk “severe,” but he was released on a $10,000 unsecured bond.
Wyse said during the hearing that Palma “was the lead manager, the lead engineer of producing deceptive software that went into over 100,000 vehicles.” Wyse said “as a result of his engineering decisions, his management, his lies, that these vehicles on the road admitted dramatically higher pollutants then were allowed by law.” Wyse said Palma then lied to investigators.
Palma’s attorney, Kenneth Mogill, is ready to contest the charges, saying after the hearing: “We intend to defend this vigorously.”
Conspiracy to defraud the U.S., commit wire fraud and violate the Clean Air Act, carries a maximum five-year sentence with a max penalty of $250,000. Counts two through seven regarding violations of the Clean Air Act come with a maximum two-year sentences with a $250,000 max penalty. Counts eight through 11 that deal with wire fraud carry maximum sentences of up to 20 years and a $250,000 fine. Counts 12 and 13 regarding false statements carry up to five-year sentences with potential fine to $250,000.
"We continue to fully cooperate with the authorities, as we have throughout this issue," an FCA spokeswoman said by email.
Palma’s name surfaced last year in a federal class-action lawsuit filed against FCA in San Francisco. Palma, while working for supplier VM Motori, wrote an email to colleagues in 2012 saying FCA “knows tEng is the only way to get to 30 mpg, so don’t worry about this topic,” the suit said. He was referring to software called “t_engine” that was capable of detecting whether a vehicle was undergoing emissions testing.
Palma’s LinkedIn profile shows that he was VM Motori's manager for diesel engine calibration in Auburn Hills, Mich., at the time of the email and left the supplier in December 2014 to join FCA the next month. FCA bought a 50 percent stake in VM Motori in 2011, and purchased the remaining shares from General Motors in 2013.
Fiat Chrysler agreed to pay about $800 million to resolve civil claims from the Justice Department, state officials and customers alleging the company installed illegal software allowing more than 100,000 diesel-powered vehicles to dupe government emissions tests and then pollute beyond legal limits on the road. The settlement did not resolve any potential criminal liability, the Justice Department said when unveiling the agreement.
FCA at the time said the settlement did not change the company's "position that it did not engage in any deliberate scheme to install defeat devices to cheat emissions tests."
Mark Chernoby, FCA's head of North American safety and regulatory compliance said in that statement: "We acknowledge that this has created uncertainty for our customers, and we believe this resolution will maintain their trust in us."
Despite the civil settlement, Fiat Chrysler could face other financial penalties related to the criminal investigation, depending on what it turns up. The indictment could be a sign of more to come, said Peter Henning, a former U.S. prosecutor who’s now a law professor at Wayne State University.
“It’s hard to think that one person could create a defeat device and not have it noticed by anyone else,” Henning said. “The whole thing with defeat devices is they’re there to sneak things past the EPA," he said, “so it’s hard to think it would be just one person.”
The renewed focus from U.S. prosecutors on FCA's alleged emissions violations follows cases against Volkswagen Group and a number of that automaker's current and former executives over use of illegal software to fool government diesel-emissions tests and mislead regulators and consumers.
Volkswagen and some of its executives pleaded guilty to criminal charges in the scandal, and the German automaker paid billions of dollars in penalties.
German prosecutors on Tuesday charged former Volkswagen CEO Martin Winterkorn and other company executives in the scandal. A Winterkorn lawyer said the former CEO rejected the claims. He was previously charged in the United States.
The indictment unsealed Tuesday says Palma and unnamed co-conspirators "purposefully calibrated the emissions control system" in Fiat Chrysler vehicles to produce lower emissions under federal test cycles and release higher amounts of nitrogen oxides during real world driving conditions. They concealed the those moves from U.S. environmental regulators, the indictment alleged.
The alleged fraud allowed Palma and the unnamed co-conspirators to obtain a favorable fuel economy rating that made FCA vehicles more attractive to potential customers, the indictment said. Prosecutors alleged the conduct resulted in deceptive claims to customers that the vehicles featured "clean EcoDiesel engines," the indictment said.
Vince Bond and Bloomberg contributed to this report.