From the article:
> Mr. Schmidt did not identify any Volkswagen superiors who might have pressured him to lie to regulators.
I think the point here is refusal to co-operate with prosecutors. They wanted to know who at Volkswagen told him to lie, and they would have been happy to let him off the hook if he co-operated. He refused, essentially continuing to demonstrate his loyalty to VW and thus perpetuating his complicity in the criminal justice process of the very crime he was now convicted of. He failed to demonstrative effective repentance, and now must serve as warning example to other white collar criminals.
Which makes it likely that there is some kind of deal in the background between Schmidt and VW. After all his inside knowledge of the subject matter would be a very powerful weapon for the prosecutors and very dangerous for VW.
That's incredibly dangerous for all involved.
First, it's piling another crime onto all the other crimes.
Second, any such agreement, by nature of being illegal, would be unenforceable. Even if he has already collected on it, the company would be required to demand the money back if the deal is ever discovered. Yet if he had somehow managed to hide the money out of the company's reach, he would have been in a position to renege on the deal.
TL/DR: don't make illegal deals with criminals who are smart enough to understand the prisoners' dilemma.
Except, he may have a trump card significant enough that the mutual knives to throats will ensure his reward upon his inevitable early release. Enforcement doesn’t require legal means - it’s called blackmail.
Then why would he travel to the US?
Well the buck stops somewhere, right?
Unless the CEO personally ordered it (which seems unlikely), someone somewhere below the CEO ordered this. You will eventually find someone down the chain who cannot identify a superior that pressured them to do it.
That in no way implies he's covering for superiors out of loyalty to VW.
Literally right above the paragraph I quoted says Schmidt sought lenience on the grounds that he was ordered to lie to the regulators by his supervisors and a company lawyer.
Looks like in his own mind his only crime was being loyal to a corrupt foreman. Classically German.
> In a letter to the judge before the sentencing, Mr. Schmidt said his loyalty to Volkswagen had led him to be “misused by my own company.” He cited a meeting in 2015 with a senior official at the California Air Resources Board at which he concealed the existence of software that allowed Volkswagen to cheat on emission tests.
> “A script, or talking points, I was directed to follow for that meeting was approved by management level supervisors at VW, including a high-ranking in-house lawyer, ” he said in the letter. “Regrettably, I agreed to follow it.”
None of that implies he was ordered to lie to regulators. It says he concealed software and followed a script, not that the people who wrote or approved the script knew he would be lying to regulators by following that script, or that he was concealing software.
Agreed that it makes sense for that to factor into the punishment.
I think you may have mistaken the justice system as fair or rational.
The justice system punishes people. There are around 2.2M people in US prisons.
Schmidt was involved in corruption --- for profit --- which duped ordinary people into releasing around 1MM tons of pollution in to the atmosphere in a single year; about the same as all the power generation for the 66 million people in the UK.
What's the scale of the damage that most of the other 2.2M people in prison did? Sold some drugs? Stole a crappy old car?
> The justice system punishes people. There are around 2.2M people in US prisons.
The justice system punishes society by failing to adequately rehabilitate offenders. As a result many go on to reoffend. So really the current system is only punishing the next innocent victims of crimes perpetrated by released inmates.
See the difference in reoffending rates between Norway and the USA, and their different approaches to prison time. For a start, the US views the inmates as "criminals", Norway views the inmates as people who did something illegal.
>"US views the inmates as "criminals", Norway views the inmates as people who did something illegal."
Interesting point you are making here. In Norway's case it's "what someone did", and if he stops doing it, it's fine again whereas if you think/say "these people are criminals" it appears as if these people are inherently bad, which is a worse basis to help people improve.
You might be interested in "Breaking the Cycle" on Netflix. It shows the difference in approach between Norway and the US.
I don't disagree, but it seems to me like this has little relevance to this kind of white-collar crime. Business executives who broke the law don't need GEDs, college degrees, or vocational programs.
I don't disagree with you at all. In fact, I would hope that if one were to see locking this middle manager in prison as pointless, it could act as a mental stepping stone to reconsidering the purpose of the prison system in general.
Experience suggests the actual result will be a two-tiered justice system where rich criminals are far less likely to go to prison, even when committing serious crimes.
We've had decades of soft touch corporate fines that haven't done shit to curb bad behaviour (see: banks), those punishments are utterly ineffective.
Giving execs who order criminal acts jail time will be far more effective. Just you watch - VW will absolutely colour between the lines now.
It's easy to gamble when it's the house's money on the table, but when the instigators face real punishment they'll sharpen right up.
Emphasis on "soft touch". The punishment amounts of money are often very small compared to the profit gained.
In the EU, fines can be expressed as a percentage of annual revenue. So imagine something strict enough to work. I'm sure a fine of 25% of annual global revenue for 10 years would put a lot of pressure where it needs to be, for example.
The issue with that is that it’s effectively collective punishment for everyone working at VW, whether they had any part in the cheating or not. If also fails to punish individuals who may since have moved on or retired.
Targeting the individuals responsible seems more fair and efficient on the whole, if more difficult to implement.
Well, maybe its time to start looking at a corporate death penalty. We kill people who do really bad and are convicted. Take it out of the shareholders. Oh, and yes, also imprison executives who do that. This doesn't have to be an either/or. Do both.
Or, maybe a few million dollar fine, after they got a profit of a few billion. That'll learn 'em!
I've seen people say this often, how do you envision it working?
What happens to all the employees, assets, shareholders etc.?
If VW is "executed" do you mean all the shares are seized and re-sold or do you mean everyone loses their jobs - discs are wiped, factories demolished etc etc.?
As long as you realise that "taking it out on the shareholders" means your 401K, your parents IRAs, etc.
Seeing how most corporations care more about pleasing shareholders than pleasing the government, workers, or customers, then yes, this kind of behavior needs to negatively impact investors as well. That would powerfully disincentivize profitable behavior that hurts society overall.
Those people benefitted from the illegal goings on as well.
Collective punishment incentivises the company to put safeguards into place. Papertrails for all decisions, four eyes principle, transparency etc.
Corporations are people, right? Punish the person. The corporation can decide whether to shift the punishment down to the responsible people (conduct their own internal investigation to find the responsible people, and punish them appropriately), and work towards a structure where these things won't happen or can be detected early.
Very much agree. I think seven years sounds excessive though. Two or three years would be enough to get the point across for most people.
> In this case, the financial penalties imposed on the companies themselves seem like a more effective tool.
I disagree with this part. Fining the company just pushes prices up to compensate for the loss. It might cause the company to not be competitive and go out of business but that's mostly punishing people who didn't do anything. We need to hold the individuals responsible for their behavior. I agree with you that prison doesn't seem effective but if we use financial penalties they should be harsh and targetting the individual. I suspect someone who has been very rich for decades suddenly being lower middle class or poor would be much scarier than going to a country club with an ancle bracelet for a few years.
In a sane world the fines which would the bottom line of the company get the attention of the shareholders who challenge the million+-dollar salaries of the executives who oversaw all this and boot them out. I would hope there's stuff in their contracts to prevent these executives from receiving a golden parachute or receiving compensation for unvested options etc in this situation (i.e I think normal firing rules don't apply when you're fired for "gross misconduct" and this sounds pretty much like that to me).
But then that is in a sane world. You're right that most companies would just either eat the losses, or hike up prices to compensate - leaving the executives with another jolly story to tell at the country club.
I don't expect that at all, because someone like this has mechanisms to land back on their feet more easily than most.
the risk of recidivism is about nil
Why? As far as I know, recidivism in corruption is rather common. And if you send the corruptors home with a pat on the back, it will probably be more common.
Fair point, speaking of corruption in general. I meant more along the lines of doing specifically this again. The situation has changed such that companies are not likely to get away with gaming emissions in this way anymore. But yes, someone inclined to cheat in one way might be inclined to cheat in others.
Why can't we have both (which seems to be happening in this case)? It seems like it's appropriate and efficient, and will actively discourage people from similar activities, at the individual level.
OP seems to dance around saying the idea that punishing people is wrong.
OP is wrong.
We want cultural and financial incentives not to do wrong. We also want raw primal fear, if you do this evil shit they’re gonna get you and lock you away forever type fear... if you do this stuff.
I don't believe that punishing people is wrong. I believe that punishing people is a waste of resources unless it accomplishes useful goals, such as discouraging that person or others from behaving in a similar manner in the future.
And if you accept that that is the goal, it is then logical to put resources toward the most efficient means of accomplishing it, to maximize your chances of success. I find it unlikely that long prison terms are that most efficient means in most cases (an exception might be dangerous likely re-offenders), given considerable evidence that it is ineffective in discouraging most forms of crime, and in some cases can increase likelihood of engagement in crime by ex-convicts.
Edit: there probably is value in some amount of prison time as a deterrent though, as I elaborate on in the comment below. My main point is that I highly doubt there is anything like a linear relationship, if any relationship at all, between the length of prison sentences and the effectiveness of the deterrent. And given that (if in fact it's true,) we might as well keep sentences reasonably short, and use the resources saved more effectively.
So what exactly do you propose? I agree that yes drug dealers and likes don’t stop selling drugs or killing people because of prison sentence. But they are afraid of cops because they prefer not to get locked up.
Likewise capital punishment does not prevent or lower murderer rate. There is no correlation at all.
So we have to seperate prevention and fear. The fear that you’d have to go to jail is the reason why punishment exists. we want people to know their actions are always held accountable in the perfect system - but unfortunately not.....
Prevention is education and make sure every community has a fair balance of income - a poor community is of course going to have a high crime in theory.
I don't have all the answers. And I do think some amount of prison as a deterrent is probably effective. But consider this: how many things would you consider doing if getting caught would mean a year in prison, but wouldn't do if it could mean 10 years? I can't think of very many. Like, assume you have no other reason to avoid doing these things, so it's something you saw as a completely moral act. Either one I'm going to do everything possible to avoid; I'll avoid the act if it isn't completely necessary, and if I perceive that it is, I'll do whatever I can to avoid getting caught. But I can't see my behaviour really changing based on the length of the term - what would be _worth_ a year in prison but not 10? (Especially considering that in any kind of theft or something along those lines, you're not going to get to keep what you took if caught.)
Now, I'm a pretty analytical person, so I'm probably most likely to be affected by deterrents (although perhaps also most likely to believe I could avoid getting caught!) A more impulsive criminal might not consider the possible consequences much at all; certainly not enough to distinguish between a low or high number of years locked up.
So if we take it as a given that long prison terms are not particularly more effective at deterrence than short ones - and I believe there is evidence to back that up, but I'm not an expert; if I were actually in a position to change these things I'd obviously do the research! - and that keeping people in prison costs a large amount of money, it seems to me best to reduce prison terms to the minimum degree possible while maintaining their deterrent benefit, and to redirect the savings into things that evidence suggests are effective in reducing crime (education, social programs, etc.)
Ironically, given my initial comment, this kind of highly calculated crime (the VW emissions) is probably most likely to be deterred by prison sentences. Once again though, I don't expect a long sentence (and 7 years seems long to me for a non-violent crime) would be any more effective than a short one. I mean, would you risk _any_ non-trivial amount of time behind bars just to help your bosses make more money?
> In this case, the financial penalties imposed on the companies themselves seem like a more effective tool.
The ultimate goal here is to hold car makers accountable for their systematic fraud and violation of emissions standards. Accountability will deter future violators.
There's no better way to convince "golden-parachute" executives to take these transgressions seriously than to put violators in jail.
GDPR in the EU grants authorities ability to fine businesses €20 million or 4% of global revenue, whichever is greatest, when they have a data breach where neglect played a role. I imagine that a fine of similar proportion will have some effect on other companies to not do it. The risk is too great.
Weird that big business then faces a relatively softer punishment.
Well this is the maximum punishment, the fine doesn't have to reach those limits if the company can't pay it anyway. In practice I suspect that small businesses either fly under the radar or are given some degree of leniency.
> I suspect that small businesses either fly under the radar
Off topic, but this is what I dislike about the GPDR, the subjective enforcement. Do I as an SMB stop selling to EU because I can't afford the potential fine (risk management of course, never would intentionally violate)? Or do I trust arbitrary selective enforcement?
Unless you explicitly deal with sensitive information, you shouldn't worry.
I agree with you in principle, but how would you have punished the banks post-2008, for instance?
Would you fine them $100 billion? While many were already on the brink of bankruptcy, because of the self-inflicted damage? If anything, they received money from the government to survive.
Granted, they should have never been allowed to get to the point where not saving them meant an even bigger crash for the economy. They shouldn't have been allowed to leverage their money as much as they did, and they should have been split up into dozens of smaller banks.
But failing that, it seems like imprisonment of wealthy billionaire executives who thought "they've got nothing to lose" if they risk their customers' money the way they did seems like the best option there.
The unfortunate reality is that most of the people who win the lottery of life, and luck their way into high levels of the financial industry are essentially untouchable.
Reaches for bailouts with one hand, and then does million dollar refurbishments. Then cracks jokes about it later, after moving on to being a shill wasting space on Ubers board, essentially wasting the time and resources of Uber, by being a paid voice of Kalanick.
His decision to piss money so thoughtlessly, and get precisely nothing as punishment is depressing.
My friends from Eastern Europe share stories of outrageously corrupt politicians, that everyone knows is corrupt. I sometimes wonder, if many parts of the western world are really so different. Instead of politics, the corrupt parasites congregate at the head of large businesses. It does seem to work out better for them.
I’ve always looked at prison as more of a deterrent for committing crimes. If he wasn’t criminally charged maybe others would think committing similar actions would be worth just paying fines. You might say that people in the auto industry wouldn’t copy his actions but I’d say prison works this way on a societal level.
what is a more effective deterrent than this?
the wealthiest among us can afford any fine, and it stings.
but who has seven years of their life to give away? nobody. this is catastrophic for the individual and his family, and it should be.
"So the goal must be to discourage others from committing similar offenses. Fair enough, but there must be a better and more efficient way to accomplish that than locking people in a compound for several years."
I mean, if you've got an idea, I'd love to hear it. But it seems to me that's it's not just the thought of, "This is illegal; I might go to prison," but it's "This is illegal; I might go to prison, and they're actually pursuing executives responsible for these things."
"In this case, the financial penalties imposed on the companies themselves seem like a more effective tool."
The problem with just punishing the company as a whole, instead of also pursuing the executives responsible, is that it doesn't actually discourage acting badly. Any individual action tends to get lost in the amorphous blob of the company. The company might suffer, and the individual might be asked to resign with their golden parachute, but they're not going to suffer. They're not going to feel any actual pain that would stop anyone else from doing the same thing.
Agreed. Some prison time seems warranted but 7 years seems harsh, even considering what he did was very bad and harmful to a lot of people. (But Americans simply love prison, apparently).
The ones who are getting off easily, IMHO, are the regulators. Their job would be to make sure cars respect emissions limits in all contexts, and that would mean actively testing the cars in many different configurations.
How is it possible that it never occurred to anyone there, to test cars in real-world conditions, just to make sure the results they were getting weren't contaminated by the normal testing setup?
This is utter intellectual laziness and should incur some kind of reprimand.
Or maybe regulators should hire Mr Schmidt and put him in charge of future testing. He would know what to look for.
> The ones who are getting off easily, IMHO, are the regulators.
...and the politicians who are supposed to oversee them.
I agree 100%.
> This is utter intellectual laziness
Of course this was done under a laughably thin guise of impartiality ("if we use real-world tests, we would introduce an unfair element of randomness"), but in truth it was clear to anyone who cared that the regulations are deliberately softened to make it easy for manufacturers.
Boring example: the European driving cycle only defines measurements up to a top speed of 130km/h. So it's legal for manufacturers to ignore regulations from 131km/h onwards. Why not enforce adherence up to the rated top speed? Because... uh...
> How is it possible that it never occurred to anyone there, to test cars in real-world conditions
It has occurred to many people. Manufacturers have fought it tooth and nail -- I wonder why.
Even in Germany, which all but depends on its automotive industry, this is widely considered a disgrace (except, of course, in the circles relevant to the inception of regulations).
In fact, many people consider it a strategic mistake to go soft on the German auto industry, allowing them to fall behind. I'm sure it'll bite them. But only after the current politicians and CEOs have left office, so why should they care?
>Boring example: the European driving cycle only defines measurements up to a top speed of 130km/h. So it's legal for manufacturers to ignore regulations from 131km/h onwards.
Just because it's not on the cycle, does not mean regulations don't apply. It means they are not verifying compliance.
Yep, but being in compliance with the regulations is defined as being in compliance with the cycle (I agree it's dumb).
Ah, well I haven't read the euro regs, but that's not how it works in the US or Canada.
"Volkswagen Emissions Scandal Could Cause 1,200 More Premature Deaths" (from vehicles in Germany alone!)
Seven years is a very light sentence for this. I would guess that sort of damage makes him easily a top 1% criminal. Of the entire world.
“could cause N deaths” is very different from “have caused N deaths beyond any reasonable doubt”.
Could cause 1200 deaths is definitely will cause 10 deaths and probably will definitely cause 300 deaths.
Probably you mean, has caused x deaths directly instead of has caused x deaths indirectly?
No. To be considered a criminal, you need to be found guilty of a crime, and for that the prosecutors need to prove beyond all reasonable doubt that you committed the act.
Good point. Furthermore, those deaths would have probably been caused anyway, since diesel technology doesn't suddenly make 2x less emissions. Maybe fewer diesels would have been sold, so
there would have been 800 deaths instead of 1200
deaths, because the drivers would have bought one running on gas, but yeah, the law isn't designed for these number games.
Right. It needs to be proved beyond all _reasonable_ doubt, not beyond _all_ doubt. It's reasonable to believe that this person committed a crime.
It is proven that he was complicit in faking emissions tests, and it is proven that those extra emissions will lead to the premature deaths 100s of people.
That’s quite simply not how the law works. To convict someone of murder, you need a direct causal link between VW’s actions (as opposed to another car company’s actions) and a particular person dying. Statistics games don’t cut it.
Thank you for the lesson, but I never said the man should be guilty of murder. I'm merely stating that since his actions lead to the death or injury of hundreds or thousands of people he should be duly penalised to dissuade future would-be law breakers.
In a case like this maybe statistics do need to play a larger role.
We call that an ex post facto law.
He literally helped trick people to think they emitted less than they were, probably leading to a higher emission rate overall.
That effects everyone on the entire planet. I think committing a crime that affects ever single human life should be considered a very serious crime. That should lead to very serious punishments.
I do not think the punishment was harsh.
Seven years in prison for any person who ever got in a body spray fight as a kid/teen!
Seriously though, scale of impact only matters in the context of the weight of the impact, otherwise lots of preposterous things would be dire crimes.
Obviously you're missing the most critical words of my sentences. This effects all of humanity, including you and me. Even if your comparison is utterly silly, a spray fight would not emit more than it would otherwise since you still have manufactured the bottle already.
When lying about emissions people tend to get taxed lower for the lower emissions (at least in many countries in the EU) and also people rather buy a car with a low emission than a car with a higher emission rate.
Should we jail all police officers who fail to catch every criminal instead of disincentivizing crime, too?
We should demote police officers who run a search warrant and fail to find an obvious piece of evidence that was right in front of them because they didn't think of opening a door.
Let's not take it out on the people who did what they were required to do by law.
> but I'm unsure that prison is an effective mechanism here (or for many other crimes, for that matter)
If you acknowledge that prison isn't an effective method for many other crimes, what's your specific point here, in relation to this case?
What puts this person apart from, say, someone in prison for taking drugs?
If we agree that prison is a giant waste of time, should we really be starting with white collar criminals?
I think a lot of people couldn't care less if the company might face fines several years later, when they might not even be around.
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It's good that people are being held accountable, but I'm unsure that prison is an effective mechanism here (or for many other crimes, for that matter). I mean, what's the goal exactly? I'd say the risk of recidivism is about nil, so it's not about protecting society from him, or about rehabilitation. So the goal must be to discourage others from committing similar offenses. Fair enough, but there must be a better and more efficient way to accomplish that than locking people in a compound for several years. In this case, the financial penalties imposed on the companies themselves seem like a more effective tool.
That lower level engineer was a higher level manager, I thought? At least someone on HN said so (so it must be true). Not really a grunt.
Also it was seen as a positive thing because it gave regular employees an excuse to say no when execs come asking to cheat.
Oliver Schmidt, the person the current article is about, is a former engineer, now executive.
James Liang was previously convicted. He was an engineer working at the VW test center in LA. His group was directly working to keep CARB and the EPA from discovering the defeat device. My understanding is he was really a mid level engineer.
My source for this information is a book about the scandal and also the history of the VW/Audi engineering culture called "Faster, Higher, Farther: The Volkswagen Scandal". Its well worth the read.
Mr. Schmidt had been a Volkswagen employee since 1997 and was named general manager of the company’s engineering and environmental office in Auburn Hills, Mich., in 2013
Execs dont cheat.. They force you into a corner and apply pressure.
Even higher-ups are replaceable. Gov'ts need to really catch the shareholders, they own the misbehaving company, and they push them so hard for profits that the workers/managers are lured into cheating the system.
The United States used to hold stockholders accountable back in the late 19th century, when there were many more fraudulent and poorly run industrial and railroad companies. As a result, shareholders were so afraid of liability they gave their voting power to "voting trusts" run by bankers, notably JP Morgan. The banks ended up having seats on the boards of the majority of companies in an industry and would use their position to stop companies from competing with each other (after all, competition lowers the profits of all companies in an industry, which makes it less likely they will be able to repay the debt they owe to banks). The result was we ended up with monopolies in nearly everything, from meatpacking to barbed wire to railroads...
In other words, not only would punishing shareholders be unfair and stifle investment, it might have other unintended consequences that would hurt the economy.
It still does via Fines which directly hurt shareholders. The real problem is the fines rarely add up to a significant percent of a companies liquid assets let alone value. Thus, when the penalty is vastly lower than the direct gains, it just promotes bad behavior.
Really, you need to spread the pain across every level from grunt to CEO to shareholder. With relative culpability based on influence on and benefit from such behaviors.
The limit to shareholders should be monetary (civil liability?)
It should be limited to the most recent (five?) years of profit at a maximum; but determined by the valued magnitude of the profits obtained by the infringement (multiplied by something, maybe 3-5?, for punitive effect).
Each stock should have that share of debt added to it; zero interest over time, full remainder due upon sale, and reduced by future dividends. The actual debt needn't be tracked per stock; it is sufficient to differentiate between affected and not.
Criminal liability belongs with those actively participating or criminally negligent in their oversight.
What about the CEO and the board?
Any book(s) you could recommend to read more about this bit of history and the resulting monopolies?
Yeah definitely read The Robber Barons. It covers all the major tycoons of the 19th century and their financial shenanigans. A surprisingly exciting read, full of wicked deeds. To tell one story from the book, there was a battle over a railroad where thugs hired by opposing companies got on trains at different stains and advanced towards each other. The trains collided and the soldiers jumped off and fought with clubs.
The only other book I've read about the era is The House of Morgan, which covers the history of JP Morgan bank. It's highly recommended as well. It tells a convincing tale as bankers as the good guys (gentlemen bankers), who funded Thomas Edison, the transatlantic cable, Charles Lindbergh's transatlantic flight, and who raised the funds and managed the purchases necessary to win WWI.
If anyone else has finance books to recommend I'd love to hear them.
If you partially own a company you are responsible for that part.
> Even higher-ups are replaceable. Gov'ts need to really catch the shareholders, they own the misbehaving company, and they push them so hard for profits that the workers/managers are lured into cheating the system.
OK, I was with everyone saying higher-ups need to be held accountable, but now you're spewing utter nonsense. It's not like the shareholders knew what was going on. What are they going to be "held accountable" for? For being lied to by a cheating company? It's almost like going after taxpayers because they subsidized a criminal's public transportation.
Also, lots of shareholders did lose big? Take a look at VOW 2014 - 2018. The price is basically just now recovering.
Not really a loss unless they had to sell in that timeframe. Earnings and dividends are a more appropriate metric for impact to shareholders.
No, that's not really how that works.
They have had a loss, which they may or may not have felt (e.g. if they had to sell, they most certainly did; If those shares were collateral, which is extremely common, they most certainly did). And then there was a gain, which they only had if they did not have to sell.
There's also the issue of opportunity cost.
Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands.
> Really, the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands.
“When the price of a stock can be influenced by a "herd" on Wall Street with prices set at the margin by the most emotional person, or the greediest person, or the most depressed person, it is hard to argue that the market always prices rationally. In fact, market prices are frequently nonsensical.”
“Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper.” — Warren Buffett
It would be great to recite that as response when you get a margin call. But your broker is still going to seize your collateral based on its price, not value.
I thought we were talking about shareholders, not speculators.
Your premise of "the only way economics make sense is if you assume that everything is valued at its real value at any time -- not just when it changes hands" is absurd on its face; one only need look back nine or ten years for confirmation of this. If what you say were true, Bear Stearns would still exist, and you would have to claim that those real estate hedge funds were at their "real value" both in 2006 and in 2007 even though the latter was pennies on the dollar. Is it any comfort to say, "well, that stock collapsed but I at least I bought it at its 'real value' that it had up until yesterday?"
Unless your point is that economics cannot possibly make any sense, I suppose.
Speculators are shareholders.
Bear stearns had pledged 104% of their capital. They weren’t the only one in such a condition, and in this sense it is unfair, but the closing down was justified.
The law was changed from “mark to market” (the standard evaluation for decades) to “Mark to fantasy” specifically so that many bankruptcies would not need to be declared - but without a $700B injection at the time, many more would have happened.
You cannot have consistent book keeping if two entities can book the same item at the same time for materially different values at the same time. It is as simple as that.
Why? The other way seems to make sense to me.
It only makes sense if you have complete information about every market participant, their plans, liabilities, obligation, etc.
If I had VW stock that I had to sell in between to pay my down payment, i most definitely have lost, regardless of it going up later. If I used my VW stock as collateral for something else, I would have had much less collateral to pledge.
Assuming a “buy and hold” universal is not a reasonable assumption.
Assuming anyone might need to liquidate at any minute is not necessarily more reasonable, but it is more consistent with reality
The more excepted model is that capital gains (and losses) are equivalent to dividends. So yes it was a loss.
If they didn’t sell any stock, there was no capital gain or loss.
The board are responsible to shareholders; most shareholders are simply too small to have any effect though. I wonder if diluting the shares is in any way a reasonable or feasible solution. You could put the newly created shares in Trust for the country’s pension system or something.
And how would that work?
Most shareholders with enough voting rights to matter are organizations themselves. This would essentially cease any attempt due to the absurd and never-ending complexity holding people accountable.
"Corp X needs to be accountable!"
"It's shareholders must pay!"
[looks up shareholders]
"Corp Y is a shareholder of X"
"Corp Y needs to be accountable!"
"It's shareholders must pay"
[looks up shareholders]
"Corp Z is a shareholder of Y"
"Corp Z needs to be accountable!"
The separation of ownership and management is what got us in this problem to begin with. Pointing the finger back at ownership when it's a corporation with thousands, or maybe even millions, of shareholders is stepping backwards in time and approach.
Owners don't make the decisions, managers who effectively have no boss make decisions and they're the ones who should pay.
Also, isn’t the biggest VW shareholder Bavaria?
Its the state of Niedersachen (Lower Saxony), not Bavaria.
And they are not the largest shareholder, they hold about 20%. Qatar holds 17% and Porsche a tad over 50%.
Not all of these shares have a vote
I really enjoy the string of responses your comment has elicited. People really like only being liable for the amount of money they put into something. Regardless if the downsides of their actions end up costing more than the inputs.
Individual shareholders are not capable of meaningfully directing company action unless they act in aggregate and even then it would be very hard for individual stockholders to make this happen because of the low frequency with which shareholder meetings are held.
Stockholders - especially those that originally bought company stock when it was issued - assume liability already, if the company goes under their stock is worthless, if the company is fined their dividends drop.
To make them liable beyond that for something they themselves do not control in a way that would enable you to assign blame is excessive.
People would make more responsible choices if they were liable for the effect of their actions and not just what the corp could get away with.
> their dividends drop
Corporations are rarely fined even 100% of their profits from illegal actions.
If the punishment is simply going to be temporary drop in returns, and that maximum damage inflicted upon a corporation and investor is dissolution, that dissolution should be wielded with a casual frequency. Corporations are benefiting from breaking the law. They get caught, and they still benefit.
Many of these arguments center around 1) a drop in returns is punishment enough 2) it would be difficult. Both are simplistic pat answers that defend the corporation as a one-way valve for wealth that disintermediates the criminal from the crime. How is it that I am responsible for all of my actions, except when my action is a pooled investment?
The ultimate question is can money only harm up to its denominal value?
Apart from the Porsche family that would be all 8 million citizens in the state of Lower Saxony and the 2.5 million in Qatar? Why stop at the shareholders? Some shares are owned by pension funds. Surely those greedy savers would fit in your giant prison too.
If you have mutual funds, index funds... You are likely a shareholders of a misbehaving company. So... Are you ready for jail time?
Yeah, when Tesla hypothetically defrauds customers and governments, my 1000 shares is going to carry a lot of weight at that shareholders meeting. Oh, did you mean mutual funds and the like? Like the one your 401K might hold? How hard did you think about this before posting?
Well at least your Tesla shares are safe from this particular scandal!
So if I have a 401k with some money in a broad index fund which includes VW, I should be in jail?
That's what the fines are for. That is essentially money out of shareholders pockets.
Like pension funds and passive ETFs that are shareholders of most if not all public companies?
Sharehlders get punished when the stock drops.
Or are you suggesting we lock up anybody who owns a few shares?
So I could go to jail for holding an index fund?
Shouldn't you not care if lower people or higher people are charged as long as its the people responsible? Why is there a presumed guilt of higher level executives? I don't get it.
Is it just a carry over from disliking wealthy privileged people in general? Someone please chime in.
Because "higher level people" are the ones who make the decisions to do things like this, and they nearly always get away with it. The engineers who added the system are responsible, too, but at the end of the day, if they had said no VW would have found someone else to do it.
When companies act against the interest of the societies in which they exist, it's at the direction of executives, managers, or other "higher level people." If they're caught, their punishments sometimes don't even negate their wrongdoing, let alone match up to crimes which are generally less harmful to the rest of the world. They get away with it, and when they don't, it's not that bad for them. The lack of justice is infuriating.
> Because "higher level people" are the ones who make the decisions to do things like this
That's a big assumption, IMO. It's quite a huge assumption on how high it actually goes.
> and they nearly always get away with it.
Based on on your presumption of guilt?
I don't support presuming the guiltiness of top level executives that had no idea "because they should have known." Its reminiscent of a witch hunt.
Wrong. They get paid the amount of money they do because they are supposed to be in charge. Because they are "taking responsibility." If they are not responsible, then they should not get those amounts of money. If they are responsible, then they get the entirety of responsibility, not just the benefits.
He’s not making a neutral value judgment, he’s commenting on a particular case where it’s clear that top management was on board for almost a decade.
I was really cynical once I saw that only a lower-level engineer had been charged and convicted of wrongdoing so far. Glad to see that someone higher-up is also being held responsible.
German-American here, I haven't followed the case in the German media extensively, but there is a widespread public opinion that this was a welcome opportunity to punish a pesky German competitor, by throwing the book at them by the US government working together with the US auto lobby. If the same had been done by GM for example, they don't think anyone would have went to prison for even a day.
The other half is asking when the German justice system will finally start their prosecution.
"If the same had been done by GM for example, they don't think anyone would have went to prison for even a day"
I don't disagree that the government went after VW hard, and it's very likely that the fine would've been much lower had the same crime been perpetrated by GM.
However, I think government took a tougher stance because VW was a foreign company, period; not because VW was viewed as a competitor to domestic car makers. People don't cross shop domestic and VW.
> People don't cross shop domestic and VW.
Huh? Don't most people just shop for ... cars?
There are definitely brands that I __will not ever__ buy.
//Most// American Cars: Won't buy because I really distrust the quality of the engineering and the reliability of the end product.
Volvo: My parent's car /always/ had seriously expensive maintenance issues; I don't recall them even doing things half as bad to their car as what I do to mine. (OMG the bumps in the place I'm living right now x.x;)
British Cars: Not even Top Gear UK liked the non-sports car versions.
Mainland Asian cars: Something about the cabin and control configuration just feels /wrong/ to me; I might consider them again if I see one that feels right. This is just based on a very small sample size of rental cars I've driven over the years.
Cars that I'd comparison shop and have on the short list?
Pretty much any Japanese car. There have been some annoying recalls on things like airbags, but I've never been burned and the control configuration just feels right.
EDIT: >> I forgot about Subaru. No data, would consider.
Tesla; They're expensive... but by the time I buy another car (will we still be buying cars?) maybe they'll have caught up. Their engineering I actually respect.
I honestly don't know why the other American car companies can't match that standard... maybe they're too busy being chasing profits instead of building a quality brand the right way.
British cars??? What Britsh cars. Cars made in the UK include (from memory) Rolls Royce (full of German bits), Aston Martin (full of German bits), Nissan (Japanese), Honda (Japanese), Jaguar Land Rover (Indian, was German), Ford (Yankee). These are only assembled in the UK of course. They are made all over the world.
British cars??? What Britsh cars.
Needless to say, they'll all contain foreign-made components.
Lotus is a subsidiary of a Chinese auto group of course. But the other two make fine British cars!
JLR isn't Indian, it may be owned by an Indian congomerate, but management, design, engineering and most manufacturing are all in the UK.
PS: I would classify Ford Europe as an Anglo-German car company : Design and Engineering are mainly in Cologne and south UK (e.g. Chelmsford). There is actually not that much sharing with the US, most of the European line-up is specific.
> PS: I would classify Ford Europe as an Anglo-German car company : Design and Engineering are mainly in Cologne and south UK (e.g. Chelmsford). There is actually not that much sharing with the US, most of the European line-up is specific.
Note this is slowly changing now, with ever less duplication of similar car models around the world.
Indeed, especially with the (very gradual) hatchbacking and downsizing of the US market
>JLR isn't Indian
None of this is clear cut for any of the others I mentioned either! They all have supply chains all over the EU and further afield.
Of course they all have supply chains across the world, however nearly all auto manufacturers are still heavily based in one country. Nissan is clearly a Japanese automaker, even if it sources diesel engines from France etc. Following this definition, JLR is completely a UK car company.
Anecdotally, not so much. My next door neighbors won't buy anything but Toyota. The guy across the street is committed to Mopar. Friend of mine only looks at Subarus. My mom hasn't bought a car that wasn't from GM in decades, if ever. I'm the black sheep of the family in this regard, having owned one of almost every brand. Except VW, haven't tried something from them yet.
I grew up in a deeply GM oriented household. Ridiculous devotion IMO and it stemmed from my dad's 1960s car era timeframe. Switching brands depends on the person's priorities. I certainly would love to continue buying domestic but GM has been horrendous to me from a corporate standpoint. Long story but I just want something that's reliable and I've sworn on Mary Barra's (now defunct) blog that I'll never buy GM again. I'm a man of my word.
I won't be buying another domestic at all again for gassers. If I get another ICE it'll be a Honda Civic, always liked them and they finally have a hatchback which is my preferred style. That said my wife just got a Suburu Crosstrek and my next car is a Tesla Model 3. I'm expecting fit and finish and maybe minor issues with the Tesla but overall I believe it's time to move to electric and never look back.
I don't say this too often about too many things but I'm very eager to hand Tesla money as I believe in the mission(s) that Musk is on. Tesla being a domestic corporation doens't hurt at all either. I don't own any stock.
I swore I'd never buy another domestic. And now I drive a Chevy. First one I ever bought myself, to be honest (my first vehicle was a Chevy pickup, but it was a gift from my dad so that doesn't count...). I love the reliability of the Japanese cars I've owned, but there are certain cars that you can't buy from anybody but Ford and GM. And so I find myself driving a Camaro SS 1LE. Paragon of reliability it is not, but egads is it quick.
I've owned a fair number of Subies and probably am going back to them for my next daily driver. Unless I get something like a Bolt. Can't see myself happy with a Model 3, I've owned too many cars with touchscreens and I dislike 'em.
I could see some people swaying back and forth, not me though. I had a Firebird Formula in the 90s, 2800RPM stall converter, Keith Black forged pistons, LT1 hotcam kit (or LT4 don't recall at this point), etc, I know what that stuff is all about, been there. I've really had it with low(er) quality vehicles going into the shop. I'm willing to pay more for a less feature-filled, basic car that has a higher probability of not seeing the shop. I'm done.
The one exception is the Tesla stuff, and that's because they're paving the way forward and I want to support it. If I made enough money, I'd stretch my budget and already have a Model S (anyone hiring?). I fully expect them to be slightly problematic. I don't use the most stable software on my computer at all times either. :) Rebooting the computer and dragging the car into the shop are two different levels of inconvenience. Being domestic does help Tesla in my book. We'll be happy with our Subaru alongside. And never ruling out Honda Civics, while I hate modded ones, a nice base 40MPG+ Civic always got my engine pumpin. I get a kick out of efficiency as much as I do horsepower.
Anyway, I'm certainly an example of crossing "lines" in the auto industry. From Pontiac domestic powerhouse to Honda gas sipper to Tesla electric. GM screwed me over multiple times, financially, broken promises from them. That corporation has no use for me to even stay alive, won't get another cent from me. And if I'm not buying GM, why bother with Ford/Chrysler which are also inferior quality to the Korean/Japanese stuff. But crossing mental buying-boundaries, I don't care, I mostly just don't want to wrench or have my car wrenched on frequently.
there are stats for this:
People do comparison shop and change brands.
people change brands for sure, but within subset of brands, and not across all brands. It's more likely you cross shop VW with Japanese than with domestic.
No specific order:
2 Acura RDXs, 2 Dodge Stratus (coupe and sedan), 1 Toyota Prius, 1 Nissan Murano, 1 Hyundai Elantra (wife's car)
Current - Acura RDX (lease) and a Ford Mustang (buy). And that's just me. I don't think anyone in my family is brand specific. Dad likes Ford but drives a Chevy last 2 cars. Has a used Saab SUV also.
Whatever looks pretty / getting good reviews / fulfills a need. I wanted a convertible this time around; Mustang fit the bill nicely.
Would never say I wouldn't buy a VW - just haven't liked the style yet. I'd buy (lease) an Audi Q5 or Porsche Macan though - their in the VW family. I'm trying to get a Macan when the RDX lease runs out.
Not in the HN tax brackets they don't.
Sure they do. If you're in the market for a hot hatch you're probably getting a VW GTI or a Ford Focus ST.
Not in the diesel market though. No US manufacturer sells a diesel passenger car in the USA.
I personally don't know whether that's true. But even if it is it is a claim dramatically smaller in scope than the one I was replying to.
As far as I can tell, the Staatsanwaltschaft Braunschweig (which has jurisdiction over the headquarters in Wolfsburg) opened investigations at the beginning of the year against a few dozen executives, including then-chairman-of-the-board Winterkorn (http://www.staatsanwaltschaften.niedersachsen.de/startseite/...).
I don't know of any charges so far, which is worrying, but the StA put "the end of the year" as their target for convicting people, so they clearly expect these cases to take on the order of a year or two to carry through. http://www.ndr.de/nachrichten/niedersachsen/braunschweig_har...
Audi's former head of R&D, Ulrich Hackenburg, and Porsche's former head of engine developent, Wolfgang Hatz, are the other big two (aside from Winterkorn) in the crosshairs.
Not "just engineers". They were, but they were responsible for some extraordinarily impressive stuff when they were. Hatz also presided over powertrain development for what is indisputably Porsche's truly golden era for its sports cars, where they are almost never regarded as anything but some of the best on the planet.
You realize the VW is also a part a of the US economy right?
They invested a billion dollars building out their facility in Chattanooga, TN and employ thousands of people, contributing to the economy and tax coffers. This is not their first plant either.
Hurting VW also hurts Americans and the local economy there.
Any US Auto Lobby also represents VW, Honda and Toyota in addition to Ford, GM and Chrysler. They all make cars in the US and have significant operation there.
The question is whether the overall gains outnumber the local losses.
Cheating on emission endangers the whole planet, protecting few workers is the last concern here, especially since tables are readily available to convert the estimated emissions in deaths and other long term damage and the numbers aren’t pretty
Nowhere in my comment is there anything that even remotely condones cheating or protecting people who do so.
If you actually read the parent post post that I was responding to:
>"but there is a widespread public opinion that this was a welcome opportunity to punish a pesky German competitor, by throwing the book at them by the US government working together with the US auto lobby"
It's clear that I was responding to the silly suggestion of there being a conspiracy by the US against a "German" competitor since VW is also a US car manufacturer.
The level of emissions achieved by the "cheating" was perfectly legal only a few years ago, just for perspective.
And in the USA at least, there just aren't enough diesel cars to really make a difference. Almost all diesel vehicles here are heavy trucks and busses and they dwarf the emissions of the cars to the point of making them inconsequential.
I fail to see how higher NOx "endangers the whole planet" when under that mode of operation they were better on fuel economy (i.e. lower CO2 emissions, etc)
there ya go http://news.mit.edu/2017/volkswagen-emissions-premature-deat...
29000 people != the whole planet
I don't mean to say that it isn't terrible that any people die because of transport emissions ... but the alternative was to emit more CO2 ... we don't know the exact human cost of that ... but it is not zero.
VW ultimately paid less a lot less in settlement money than the law might have required if no settlement occurred. Furthermore, when negotiating legal settlements with the US government, the level cooperation is a critical factor. VW actively deceived regulators for several months after they started investigating the defeat devices. Domestic companies who cooperate fully frequently receive billion dollar fines, so the scale of the fine VW paid is not out of line.
I mean, compare VW's massive criminal conspiracy to cheat on pollution tests and poison the earth and willfully lie about it when confronted, to Apple negotiating a tax deal with Ireland, and tell me VW's similar payment is unfairly high.
Before the clean diesel lie was uncovered, environmental scientists were mystified as to why European cities had so much fine particulate pollution, which has led to thousands of deaths . So maybe we should be happy that this age of international corporate law enforcement has allowed locally influential multinationals to be held to account.
That’s not an excuse for not coercing execs guilty of fraud into jail. If the US government had been lighter on GM, that would have been unfair, but’s a separate issue. Justice is due, and it’s unfair to the lowly that just living abroad is enough to dodge responsibilities.
They have started the prosecution right after the scandal broke.
In 2014, the EPA was informed of the scandal, and the university doing the research, published that 6 major car manufacturers all used defeat devices, including GM, Ford, and VW.
Prosecution started in 2015, and only against VW.
That doesn't sound right.
West Virginia University's 2014 report to the ICCT only included 3 cars, 2 of which were VWs. There's a unpublished report by WVU with suspicions on Fiat-Chrysler, but that's been floating around this year. The EPA did reprimand 6 manufacturers including GM & Ford for defeat devices, but that was back in 1973.
There's a civil class action brewing against GM truck diesels and I understand that Germany has been recently looking into emissions of the Ford Mondeo, but neither of them are via the actions of the EPA.
>Prosecution started in 2015, and only against VW.
Why not? They were the ones that fraudulently claimed they could achieve low emissions without urea injection, used defeat devices, and impeded the investigation into their malfeasance.
Yes, I don't understand why only VW is being prosecuted when it was/is most car makers cheating tests.
This is like when the US went after the Swiss Banks which paid Billions in fines, yet none of the US banks got in trouble although they where all doing the same thing.
I dunno. Benefit of the doubt, let's go Stanley Milgram on this. He had people in authority telling him this was okay. Lawyers gave him the go-ahead. As stated in other comments, he didn't make a whole lot of money.
I feel like this guy could have been a lot of people we know. You get asked to cook some numbers, it comes in all official, legal even signs off on it, and now you're liable. Whistle blowing is not an easy thing to do. Not when you're in that deep.
I feel like the people at the top should be thrown in jail, but they can't because they're all in Germany. Meanwhile, is Germany going to let this guy rot, when really their government should offer to extradite one of the people at the top who had full knowledge and authorization over this, in exchange for commuting this patsy's sentence?
Let's go back to the Stanley Milgram experiments. Say Milgram was a sick fuck and those people did administer a lethal dosage to the guy in the other room. Who would go to jail?
These people committed the systematic, deliberate, and stealthy statistical murders of dozens of US citizens. They deserve no benefit of the doubt whatsoever. They knew exactly what they were doing. "Just following orders" was not a valid defense at the Nuremberg trials and it should not be here either.
Throw everyone we can get our hands on in jail pour encourager les autres. Once it becomes clear that anyone participating in such a scheme, at any level, faces years in prison, it will be less likely to happen again, and as a direct result hundreds of fewer Americans will not be murdered by illegal air pollution in the future.
> These people committed the systematic, deliberate, and stealthy statistical murders of dozens of US citizens.
Every car manufacturer currently does. Some even literally killed people by cheaping out on braking systems.
Yet no US car executive is in jail.
This is purely a political play.
VW actively deceived regulators in a coordinated manner for months after they started investigating and asking questions about the defeat devices. This is not normal behavior for a car manufacturer or any public company under investigation. They produced tons of fraudulent data, took regulators for fools, and went so far as to stage a recall they knew ahead of time wouldn't solve the problem, all while millions of cars continued spewing cancer-causing diesel fine particulates. It would be shocking if the hammer didn't come down hard in those circumstances.
This response is pure whataboutism. Any other people responsible for similar deliberate murder should also be similarly prosecuted.
Extraditing a German citizen to the United States? Not going to happen. Constitutionally forbidden.
By the way, Germany operates jails, as well. It's not like the United States have to prosecute everything on the planet themselves.
It seems rather reasonable for the United States to prosecute Germans for defrauding the US government and evading US air pollution law in order to sell their cars in the United States.
Kim Dotcom, a German citizen, is being extradited to a country he has never set foot in, for something that is not a crime in New Zealand.
Germany has not extradited Kim Dotcom.
> good to see justice served
I believe his participation in fraud should have repercussions, but I hardly feel like caging him up for 7 years is "justice". I'm not saying I know what the perfect justice would be, but I think it should be closer to restitution to those he harmed, rather than just punishment.
Ultimately, I think incarceration is a savage practice, and I hope for the day we're able to deliver justice without resorting to locking someone up. I think humanity will eventually look back at our practice of mass incarceration as quite primitive.
Unfortunately, I really believe that jail is the only deterrent for these people. Fines aren't going to do anything; they already have enough money that they never have to work, and you're never going to fine them enough for that to change.
If I kill someone and rob them of the next 50 years of their life, how long should I be in prison for?
This guy, statistically, was involved in a scheme that robbed a whole lot more people of a whole lot more years than that due to the effects if pollution on public health.
What do you propose to do with criminals that pose a direct risk to society? (e.g. serial killers)
And we also have to note that competitors may have been between the allowed bounds, but still
polluting. Everyone is guilty of pollution, VW is only guilty of cheating.
If a people and their state have decided that a million cars are beneficial enough to cost 100 statistical deaths through pollution, it isn’t up to executives at the manufacturer to decide that they really meant 200 deaths.
It’s the same with other faulty products on an individual scale. People make daily decisions based on vague ideas about the risks involved, not with the idea that they avoid all risk. For example you aren’t allowed to pack a parachute incorrectly on the basis that skydiving is dangerous anyway.
Kind of surprising that he returned to the USA (talk about cocky!)
I wonder if the USA would've gone through the diplomatic rigmarole to get him extradited. Anyone familiar with these sorts of cases have an opinion?
The article talks at length about how Germany refuses to extradite its own citizens, and even mentions an VW exec of Italian nationality arrested in Germany who is expected to be extradited.
> and even mentions an VW exec of Italian nationality arrested in Germany who is expected to be extradited.
That’s very unlikely, though.
The current legal consensus is that the German constitution bans any extradition of any person to a country that has death penalty (no matter if the person faces it or not)
Well, that's some egg on my face. Thanks for pointing it out!
> Curious to see what Germany does to the top execs there.
Around as much as the US doe to rich politically linked US execs. Practical example: remind me how much was GM fined, and how long did the exec serve for emission cheating ?
GM hasn't been found to have cheated yet. So far there is a class action lawsuit by a private firm that has tested one truck.
What about their ignition scandal - did anyone go to jail for that?
I'd argue there is a difference between making a faulty product and then failing to fix it, and intentionally making a device to circumvent the law.
GM also paid 900 million dollars to the government as a fine and set aside 600 million to pay victims of the car.
A report was commissioned which basically says GM failed to understand its own cars enough to understand why the failure was important. Another apparent compounding factor was the 2008 bankruptcy of GM.
Intent matters as far as the law is concerned. A lot.
"Curious to see what Germany does to the top execs there."
Most likely nothing from what I can see in the news.
That's why top executives' homes were raided? So that "nothing" will happen?
Do you really think one of the big guys will go to jail? Somebody like Winterkorn? Maybe some little guy will be made the fall guy and it will end up like banks in 2008.
Having been transferred back to Germany, he came to the United States for a vacation with his wife and was seized as he waited for a departing flight in Miami.
That was an expensive vacation.
Seriously, good to see justice served. Curious to see what Germany does to the top execs there.
I could see that. There is way less income disparity in Germany. An engineer that goes for $160k in Seattle or $200k in the Bay Area would only go for about 55k€ in Berlin.
It's also affordable to live there, and all their cities big and small have the rail infrastructure the US lost decades ago.
Well, for an european that is a pretty good salary. Remember, we don't have to pay for a lot of shit us-citizens needs to do.
I earn way less than that (like half and with no bonuses) and I still have the best salary of everyone I know at my age.
For example, my grandfather was flown by helicopter to the hospital, got a surgery and was in recovery for about 3 days and it cost him about $20.
Nevertheless, it's far less than actual top executives at VW are paid. In 2016, the CEO made €7.2 million, another member of the management board made over €10 million, and several other executives made over €3 million. Of that, about €1-1.5 million is fixed salary (aside from the huge outlier of Christine Hohmann-Dennhardt at €7.3 million). $130k (€110k) salary and especially total compensation at ~$170k (€144k) totally pales in comparison.
This guy was small fry in the VW management structure.
That engineer who got 3 years had a base salary of $250,000.
Liang was in his sixties and local responsible for Diesel. While he may have been an engineer 30 years ago, I think it's fair to call him an executive today.
Is that in the article? I don't see it -- maybe it was removed as inaccurate?
I believe it was in the article, but I'm not seeing it now either. Not seeing it in NewsDiff either: http://newsdiffs.org/article-history/https%3A/www.nytimes.co...
Perhaps the original link was http://www.detroitnews.com/story/business/autos/foreign/2017... and it was changed to the NYT story later? For some reason that article shows up in my history.
That article attributes the quote to the presiding District Judge:
> He had a base salary of $130,000, received bonuses of at least $40,000, and had a net worth over $1 million, Cox said Wednesday.
No. The CEO makes more than 10 million Euro.
Despite the down votes. Top executives at VW really make salaries in the million dollar range. The VW CEO was for a while the highest paid manager in Germany. A guy making 130k is just a middle manager.
> He had a base salary of $130,000, received bonuses of at least $40,000, and had a net worth over $1 million
That's executive pay at VW?
It doesn't seem he was a top executive based on his pay ($130k salary and ~$40k bonus).
It was my understanding that the investigation in Germany is ongoing and being quite thorough, which is why it feels like nothing is happening. It might just be taking some time.
And of course there is much more to investigate. Many more suspects in Germany, many more offices to raid, many more documents to read.
That the US trials were faster is no surprise.
It’s encouraging that it’s the second exec jailed, with significant duration (=not probation, not a few months, real years).
I don't buy this. Aren't top executives the ones most likely to be held accountable for company fuck ups? Could you provide some examples where a lower level person is punished when a higher level person should have been?
It seems like there is a presumed guilt of executives. That's unhealthy IMO.
> It seems like there is a presumed guilt of executives
It's not guilt as much as responsibility/accountability. As a senior manager you are responsible in the end, and it can often be shown that you either knew about the criminal activity (intent), or should have known about the criminal activity (negligence). It's hard to escape responsibility as a seinor manager and that is healthy.
Actually, if this is a lower level executive, then this would actually be a fine example. A VW top executive did get fired for this. And then hired by Porsche to replace their top executive that got hired by VW. (VW and Porsche are closely related companies and often cooperate.)
And executives are ultimately responsible for their company. They are supposed to set the standard for their company and ensure their company follows it. If their company commits crimes and they know about it, they should have stopped it and are culpable. If they didn't know about it, there's still the question whether they should have known.
For the VW scandal, top executives have been fired (with no real consequence) but not judicially punished.
I'm also reminded by all the $B fined the EU keep demanding from American companies for various crimes.
Good. Too often, top executives seem to be above the law. They need to be held accountable.
But I can't help but get the impression that many countries only seem to punish foreign companies. I don't think Germany is punishing German executives, are they? Nor the US punishing American executives?
It's estimated it's cost VW-corp $30bn which probably even they notice http://money.cnn.com/2017/09/29/investing/volkswagen-diesel-...
That would negatively impact all the employees that had no input or knowledge.
Punish the decision makers and the ones who knew about it.
All of them benefited from cheating exactly the same way they would be "punished" now.
If we don't punish institution itself, companies are motivated to hire and promote the people ok with small risk of jail in exchange of money and status. Which is exactly what is happening.
> Punish the decision makers and the ones who knew about it.
I agree. Though I think there is also a case to be made for punishing further up the 'chain of responsibility' - ultimately including the shareholders (who were punished by the market - and rightly so).
I'm thinking the only suitable punishment for something like this is to ban the company's products from sale for a long period of time. VW-corp isn't hurting from some executive or engineer being incarcerated.
OK, and how would it look if that weren't the case? If superiors hadn't pressured him?
It would look exactly the same.
Yes, but the probability of such a show of loyalty to, nothing really, except maybe the principle of not being a snitch, would be dropping very low.
What I'm saying is how do you know the guy isn't telling the truth? How do you know it wasn't his idea all along?
Because it doesn't make sense.
This is about the car-maker, the company, saving money.
Why would we have an idea about that without being either told and/or compensated for it?
He was worried that VW pays too much for proper emissions tech, even though it didn't concern him personally in any financial stake?
This is how the costa nostra works, its a very well proven working strategy.
So, a guy that takes the fall so that the superiors can get scratch free.
This can involve anything from some guarantees of financial security post-prison and favorable push for "early exit" from prison, to blackmail and threats for the person's family.
Nit: I don't like use of "official" for a non-governmental position. What public office does this person hold? Use "executive" instead.
> Having been transferred back to Germany, he came to the United States for a vacation with his wife and was seized as he waited for a departing flight in Miami. Why he risked arrest by traveling to the United States remains a mystery.
Because he presumed that he was untouchable?
According to this MIT study, the excess emissions will cause 60 premature deaths. If you commit 60 violent offenses you can expect well over 7 years in jail.
Edit: 60 in the US, many more globally.
>the excess emissions will cause 60 premature deaths.
That's probably true but that point seems to be used as a jab to sell newspapers, at the very least it's inflammatory. Meanwhile, two-stroke engines, older diesel engines, airplanes using leaded avgas may be as bad as the ten million slightly off tune VWs. And I say this as a person with a parent very ill with lung disease COPD and IPF.
I'm not saying the exec deserves to go free but seven years is excessive. Even manslaughter (in my country) gets you two years which means you go to prison, in the US I think that's called a felony.
> Meanwhile, two-stroke engines, older diesel engines, airplanes using leaded avgas may be as bad as the ten million slightly off tune VWs.
But these aren't illegal.
The point about the deaths is "it was specifically illegal and they did it anyway, with these quantifiable consequences".
As if illegal and right are connected in any way.
In this case they are. These air quality laws exist to prevent people of dying from preventable air pollution. These aren't ethically murky waters like victimless crime drug laws we're talking about here.
It’s amazing that murder gets someone 2 years only, don’t you think? I bet the worldwide average must be around 15 years discounted to 7. (Note that if he’s innoculated with AIDS in prison, 2 years is already gruesome).
Genuine question, how many lives were saved by the fuel efficiency? Does it cancel out? That is to say how does this compare to the number of lives worth of man hours saved in fuel costs?
It’s the same logical trade off of speed limits and cars in general, raising the speed limit costs lives but if it saves more man hours worth of lives than lives it costs it’s worth it.
It would be a far better deterrent to spread this 7 years over a few more people.
Imagine what humanity could be capable of achieving with just a small increase in morality in the executive class. The problem in the world is not capitalism, as so many think, but corruption. Saying you are doing one thing, but actually doing something else.
I hate these comparisons. You can't just sum up all the lost seconds and equate it to murdering 60 people. It may be the same amount of time, but that's not how humans think. Dying early is ~exponentially worse the younger you are.
American car companies cover up deaths all the time. I assume he has jail time because he is from Germany and doesn't have US politicians to protect him. This will lead to foreign car companies making donations to us politicians pet causes in exchange for protection.
[...] plead guilty to felony charges of illegally importing nearly 600,000 vehicles equipped with devices to circumvent emissions standards [...]
How many lives did this statistically end vs the average violent criminal, and over how many years did this have to be a conscious choice.
Impossible to say. But we all statistically end lives by doing many ordinary things, such as driving to work.
It satisfies the need revenge I guess.
Sure that makes sense if when I drive to work I say to myself "I know it's illegal to drive a car because it kills people, but I don't really care who I kill because I want to save a couple of bucks".
And then following that I say "also I'll sell my driving services to hundreds of thousands but lie to them about how I get them to work, because if they knew I was driving they'd balk because they don't want blood on their hands"
And then following that I say "also I'll invest in complex technology to hide my car from the police so that I will never be caught"
With those minor modifications your scenario is a totally reasonable analogy.
That seems like an argument to introduce incentive systems against driving to work, not an argument to remove incentive systems against other things that kill.
(It doesn't have to be jail time: it could involve expanding public transit, or promoting urbanism over suburbanism, or introducing congestion charges, or regulating car ownership heavily, or lowering speed limits, or lots of other things.)
That’s not comparable. A commute kills perhaps a millionth or a billionth of a person. It’s sensible to focus much more attention on individual decisions that kill hundreds or thousands.
I'd bet he also drove to work.
Far more people die in accidents than from emissions, but if people stopped driving it would indirectly cost lives in terms of econ stagnation, I suppose
How many lives and future lives are you killing by driving a gasoline vehicle? Probably quite a few when you consider your actions will have an impact for thousands of years.
Perhaps this is a silly way to look at things.
Or perhaps this is a very valid way to look at things and it will make you reconsider driving a gasoline vehicle if you can.
Personally I have the option to ride a bike and electric (nuclear+hydro) trains instead of driving a car, so that's what I do.
It probably net extended lives by allowing those benefitting from the better gas milage to enjoy a higher standard of living.
Life is a zero sum game?
google “dieselgate deaths” you will find some statistics about premature deaths caused by diesel. and number is in thousands. given the impact of his decision, I would say punishment is too little.
I agree, in the sense that virtually all sentences are inflated, and violent offenders should also be serving far less time.
Rather than pushing this guy less, I think violent offenders should be punished more.
But that's just my opinion
Why? Do you not understand that diesel emissions kill people? The governments of the world have been working diligently to try to balance the demands of continuing to use diesel engines with the costs of them killing people. Subverting those regulations is little different from poisoning the water supply or releasing malaria infected mosquitos into a city. By some studies the VW emissions cheating alone will result in thousands of premature deaths just within Europe, let alone globally. These are very serious crimes, and it is right and proper that they receive punishments sufficient to discourage any other automakers from considering the same type of scam.
This is at least as bad as any violent crime. Almost certainly far, far worse by any ethical metric. The only difference between this and normal violent crime is that this is the kind of horrifying malicious crime rich, powerful people commit while assault or mugging is the crime of choice for the poor and powerless. Compare this vs. a mugging. Intent was worse -- he intended to assault millions instead of just one and also profited off thousands of frauds as well as obstruction of justice (code to hide it from regulators). Consequences and damages were far worse than any violent crime, obviously.
But yes, sentences should be far shorter across the board.
This is at least as bad as any violent crime. Almost certainly far, far worse by any ethical metric.
Really? You'd say that cheating on emissions standards is worse than say beating someone over the head with a bat and robbing them?
Yes, obviously. Far worse. Are you seriously suggesting that intentionally poisoning thousands or millions is less bad than assaulting one? One death is a tragedy, a million is a statistic, right? That's literally Stalin discussing mass murder.
If someone has the power to poison a whole nation, with that power comes equal responsibility for their actions. If they act in good faith, we tend to forgive their mistakes, even if they have disastrous consequences. But there's no good faith here. We know he intended to poison them.
There is no serious ethical justification for considering a mugging to be worse. None has been presented here. We just naturally 'feel' that when the powerful commit crimes, these are mistakes (they are not). When the weak commit crimes, they need to be put in their place, because the weak and poor breaking the law is abhorrent to our neoliberal ideology -- the rich are supposed to assault the poor, this is just how things are. The opposite is unthinkable.
Bat and robbing - impact one person. Cheating on emissions  - impact 1200 people?
Not to mention willfully flouting the law. They need to set a precedent.
White collar crime scales better than violent crime.
mail fraud and wire fraud penalties are harsh though
exec fraud, such as insider trading, is much harder to punish and the sentences more lenient relative to the $ taken
From a statistical pov increased emissions translate directly to an increase in preventable deaths from outdoor pollution.
How much liability should companies and their executives shoulder when their decisions lead to the statistical increase of hundreds or thousands of premature deaths?
My comment likely will be auto shadow banned or never seen because of automated HN censorship.
Seems excessive to me. 7 years is more than many violent offenders get. Way more than necessary to make the point.
The executive had the authority to start or stop what engineers do. The moment of decision vests with the exec. The engineer did wrong things, and I suspect would own that they broke the 'engineers code' which is pretty much the apocryphal 'try to do no harm' thing doctors don't actually sign to. The exec on the other hand, had the 'earn shareholder money' mantra stamped into their DNA like a stick of rock candy. The morality play around what executive grades think, and do regarding societal expectations is pretty well understood: thats why its the mainstream of ongoing current fiction. If you want to look to fiction for instances of people saying scientists or engineers have to make moral decisions, you're going to C.P. Snow "the search" (1959) or Neville Shute "No Highway" (1948) while I can look down any bookshelf and find 'wolf of wall street' staring me in the eyes..
I was thinking it was interesting the engineer received jail time. I've not researched at all, but I could see someone performing a job and having management tell them that it's all good with some over-their-head legal explanation, even though it does not seem like it to the engineer.
It's neat to see jail time trickle down though, seems like a better deterrent than a financial cost. It seems to me that it would be easier to believe the financial cost would not hit you, that you could get out of it or not have the cash. Where a jail time potential would make me think twice about anything potentially shady.
I think if the engineer had an email from management telling them "it's all good" then the engineer would probably be off the hook.
Who orders should take more responsibility.
That part seems appropriate. Executives should be more accountable than employees.
It's interesting that the executive received more jail time than the engineer (7 years vs 40 months).
Not really; there's no federal parole, just good behavior time.
Federal time is usually ~ 80% time served and state/local ~ 20-30% before parole.
Is there a chance for early release? This 7 year sentence could become 10 months.
thank you for bringing this up; I wasn't aware exactly how high the costs of cheating really were.
but it's tremendously important: what would we say about a person who killed or contributed directly to the killing of 38,000 people?
your fact seems less "real" because it's a statistical individual, but they are morally equivalent.
It's worth bearing this statistic in mind as we discuss this:
38,000 people a year die early because of diesel emissions testing failures.
It sounds to me like a German name, is he from there? Then how is it possible that the US judges this single person directly in the US?
He should be sent back to Germany, trialed there, and the US can only sue the company. Everything else is a huge violation according to US thinking even.
Think about China would jail and trial a US citizen that is doing on business for Google in China.
7 years is not enough.
This is a global-scale fraud including long term environmental side-effects.
Those vehicles are still out there and will be circulating for at least 10 more years.
This guy should dry in jail.
Interesting, in US do white-collar criminals have separate prisons, or do they sit with murderers, rapists, mobsters, etc..?
Really glad consequences are being held for a person who also benefited from it before.
Nice. What about Equifax? Or only European enterprises are to be held accountable?
That's not how the law works; intent matters. It's not enough for the tests to pass or for some proof to hold. These things are artifacts of some underlying human objectives.
Was the intent though not to meet the requirements? There are lots of cases where things meet the word of the law but just and it’s fine; word of the law matters as well as intent.
If I understand correctly (and I might be wrong), the intent was to pass the test, despite failing in the real world conditions that the test is supposed to control for.
While the actions were certainly dishonest, I have misgivings about the actually illegalality of it.
Certainly the court disagrees with me, but in my mind it ran to standards within the requirements of the test, it meets the requirements. Seems like the test is flawed to me.
I do not understand how the second paragraph of your reply is related to the first. Computer programs (currently) do not respond to incentives, nor do they react to available resources in any way other than the way in which the resource provider explicitly changes them. So the idea of "deserving" does not apply, but it does apply to entities that respond to incentives or consume and make use of resources in complex/emergent ways.
If we had strong AI, then yes, certain strong AIs would be more deserving of resources from the commons than others - that's exactly what MIRI is working on.
And if you step back from "program" to "project" (meaning the whole system of code + the autonomous decisions of humans, including groups of humans working as companies, to continue developing the code), then yes, certain projects do deserve to be fixed more than others do. A particularly difficult crash in Python 3.6 is much more worth debugging than one in Python 2.4, which in turn is much more worth debugging than one in GW-BASIC, because the net benefit for humanity in exchange for the opportunity cost varies widely.
My point has to do with the notion of retributive justice i.e. that punishment should be inflicted because the criminal deserves it - in a quasi-religious sense i.e. he is evil or deserving of hell. This usually carries along notions of moral good and evil that are almost never grounded in measurements to give them real meanings.
Conversely, I think people should think about crime in a more reinforcement learning approach i.e. rehabilitative.
I view humans as machines essentially. If a machine breaks you fix it, but there is no emotional garbage attached.
That's the concept I was trying to get across.
I agree that punishment as retribution is a poor way to run a civilized society. But punishment as incentive structure fits the framework of "deserving" just fine - full participation in human society is a privilege, not a right, and extending that privilege to people who will hurt society is a poor use of resources. And credibly threatening not to extend that privilege will cause people to try to be the sort of person who "deserves" not to be punished.
Viewing humans as machines doesn't work precisely because humans have agency. A machine generally does not decide to break, and a machine generally can be properly fixed (or if it can't, it's obvious). Attempting to convince a machine that it will suffer some negative consequence for misbehavior is unlikely to have any results at all.
Meanwhile, especially for humans making decisions about corporate strategy (which means that they're in a culture that's pretty firmly incentivized towards "is this profitable"), credibly convincing them that they will suffer punishment is a great way to change their behavior and prevent them from deciding to do something unwanted. And one way to credibly convince people that they will suffer punishment for an action is to actually punish people who do the same thing.
It's very unlikely this executive will make the same mistake again, punishment or no punishment. Rehabilitation isn't the point. But we need to make an example of them, and I say that without the slightest shred of emotion.
Basically, I don't accept what you and most people accept - that humans have free will, we could have made a choice X instead of Y, etc, etc.
I know its not a popular opinion, and I don't expect to convince you of my views in a couple sentences, but generally speaking I think the notion of punishment should always be viewed in the context of societal functioning.
If we do as you suggest and punish an executive, does that actually lead to decreased occurances? If so by how much? What about the next time it occurs? Can we completely prevent another occurance? Can we decrease its probability? At what costs to the person and society? What caused it in the first place?
These are all much more important questions to mold a system of punishment than our current focus which almost completely lacks any measurements and analyses and is still steeped in vague moralities derived from historical accident and our own intuitions which are perforated with biases and flaws.
> Basically, I don't accept what you and most people accept - that humans have free will, we could have made a choice X instead of Y, etc, etc.
My argument does not rely on free will at all. (If you notice, I have made the argument that the same thing would apply to AIs, and I am certainly not arguing that AIs have free will.)
My argument simply relies on two assumptions: first, that the agent in question sorta-rationally responds to incentives, and second, that the agent in question believes that punishment applied to other, similar agents after certain actions also could apply to them, if they take the same action.
If a human believes that they can make a better outcome themselves by doing action A instead of not doing action A, they will likely do so. Concretely, if an employee believes that they will cause a better outcome for the company and get rewarded for it personally by taking an action, with little risk, they will likely do so. This is borne out by evidence almost as plenteous as evidence that humans require food to live; it needs no controlled study. This happens all the time and essentially all productivity under capitalism requires this to hold up.
If a human believes that action A brings significant risk to themselves, they will probably refrain from doing so. And the convincing threat of prison time does actually cause humans to refrain from actions. fThis is also borne out by everyday life; there are plenty of outright illegal things you can do to make your company significantly more profitable, like poisoning your competitors, that happen extremely rarely.
So I don't understand why you are questioning "Does punishment as deterrent work?" from first principles, as if it is not settled. Do you disagree with the arguments above? I have to say that if you do, I feel like I am arguing with someone who disagrees that food is required for humans to live. I certainly can defend that position logically, I would just feel ridiculous doing so.
Nothing about changing incentives requires free will - it is a simple if statement to say, if risk outweighs reward, refrain, else proceed. You do not need any free will to potentially act contrary to the if statement. I would think if you believe people don't have free will, it makes this argument easier.
(In terms of morality, I am the sort of Christian who believes that every prisoner should be set free and that Christ has redeemed every last human, regardless of what they did, and that if every last murderer and rapist went to heaven, I would join them in singing praises because I wouldn't deserve to be there one bit more than they would. If you go just a week or two back in my comments on this site, you'll find me asking if I am morally/religiously compelled to work for the end of prisons. But I am not making a moral argument in this thread, and I hope it's clear that the argument I'm making is wildly divorced from my morality - I am trying to acknowledge that it is rational to imprison people as punishment, even as I believe that it is immoral to do so.)
So I think we're just talking by one another and about different concepts entirely. I'm not questioning whether punishment as a deterrent works at all. Obviously it does. I guess my emphasis on the morality imperative implicitly led people to believe I was indeed questioning the notion of punishment as a deterrent. I think, given a better medium and more time, we could have cleared this up much better. At any rate now I'm actually interested in how you arrived at your prison views, since religious rationalizations puzzle me endlessly and I'm always out to see if a religous person who arrives at a good conclusion in my view has any insight to offer me in convincing other religious people to change their ideas as well.
> At any rate now I'm actually interested in how you arrived at your prison views
Three things (and, note, I currently hold this position weakly and welcome further thoughts that either oppose or support it):
1. There is no story in the Bible, to my knowledge, of prison being used by people the Bible calls good. There are a few places where someone is imprisoned and God uses the situation for good - Daniel in the lion's den, Paul and Silas in the prison of Phillipi, etc. - but you never see e.g. Moses or David or anyone say to build a prison or to put someone in confinement, as far as I recall.
2. Nothing in Mosaic law (again, that I know of) talks about prison as a means for punishment / correction. You put people to death for offenses that we wouldn't consider capital today, sure. You exile them. You certainly have them pay restitution. But there's no Biblical command that a moral society should even have a prison.
3. There are plenty of passages like Isaiah 61, "to proclaim liberty to the captives and the opening of the prison to those who are bound," Matthew 25, "I was in prison and you came to visit me," etc. that seem to have an underlying assumption that everyone who is in prison is there unjustly. Even if they're meant to be read metaphorically, the metaphor only works right if you think of prison as unequivocally bad. There's no sense that some people deserve the experience of being in prison, or that justice requires leaving some people in prison.
Therefore, I have trouble seeing a society that puts people in prison and calls it moral as in accordance with a Biblical view of morality. Of course the whole idea that Western civilization is built on "Judeo-Christian" morals is flimsy in many ways, but for prison in particular, there seems to be a particular lack of support.
Prison—as distinct from captivity that is primarily slavery for the benefit (economic or, for some high-status captives, prestige) of the captor—is a fairly modern thing, and economically unviable in ancient societies independent of its moral dimension.
Humans are not machines, so trying to look at them that way is going to be flawed.
Furthermore, there is no excuse for what they did. They knew it was wrong. They knew it was against the law. It was not an accident; it was a deliberate act. There's not really any rehabilitation that can take place here.
I honestly don't know what you're on about. This person willfully engaged in fraud; they instructed their engineers to engage in a project to deliberately mislead regulators, and throw much, much more pollution in the air than they told people they did. This is not a simple mistake.
The person you're responding to literally does not see any difference between a person and a program, from any philosophical, moral, or ethical viewpoints.
I don't know how you even respond to such an absurdity beyond calling it out for what it is: absurd.
The mods tend to ding me when I do that.
To my recollection there was a meaningful amount of evidence that this wasn’t a bug. Rather it was optimizing for the test in such a way that it essentially faked the results, and the company was aware it had been done.
So, yeah, where I sit this is a good thing. If it were simply a bug that the company was open and honest about, then lets fix it and move on. If they cover it up, then there’s a solid ethical case for severe consequences in my mind.
The sentence was severe for a non-violent crime in part because restitution is not practically possible.
The damage has been done to the environment. Lives were shortened in amounts that are fairly precisely quantifiable. Competitors were economically disadvantaged. The market for fuels was distorted by a criminal act. This was all done intentionally, to cheat a system that was supposed to improve air quality, throwing such efforts into doubt.
Its odd to me how many people in this thread are either for or against this decision, not based on a fixing a problem rationale but on moral grounds that this person deserved or didn't deserve the punishment.
Does your computer program deserve to be debugged, fixed, and recompiled when it has thrown an error? What would that even mean? Was it evil or bad because it didn't perform how we wanted it to?