Schmidt, who led the automaker’s U.S. environmental regulatory compliance office from 2012 to 2015, allegedly conspired with other VW employees to defraud the federal government –- and American consumers -– by concealing the installation of a device designed to cheat emissions tests.
He is the second VW employee arrested in the alleged conspiracy. (Engineer James Liang pleaded guilty to his role in the scandal last fall.)
The defeat device software, installed on around half a million diesel cars sold in this country between 2009 and 2015, could detect when the car was undergoing emissions evaluations and decrease its nitrogen oxide emissions to comply with American standards.
When the software recognized the car was on the road, however, it would allow emissions up to 40 times higher than standards permit.
Based on the testimony of Liang, along with two anonymous VW employees who made a deal with the government to evade prosecution if they complied with the investigation, as well as two California Air Resources Board employees and several emails sent by Schmidt himself, the complaint alleges Schmidt knew about the devices and attempted to conceal their existence, waving off the testing results as “irregularities” or “abnormalities.”
“It should first be decided whether we are honest. If we are not honest, everything stays as it is,” he allegedly said in an email to his colleagues concerning a study commissioned by the International Counsel on Clean Transportation, which noted discrepancies between the vehicles’ day-to-day NOx output and emissions during testing. “ICCT has stupidly just published measurements of NAR diesel off-cycle, not good.”
“Difference between street and test stand must be explained … intent = penalty!” Schmidt allegedly noted in a later email to VW America’s then-CEO.
The arrest comes on the heels of a $15 billion settlement in which Volkswagen agreed to buy back or repair defective vehicles in the U.S. and put billions into environmental remediation.
Schmidt’s lawyers did not immediately respond to ABC News’ request for comment. He has a hearing scheduled for Thursday in Miami.
In a statement, Volkswagen said the company “continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States. It would not be appropriate to comment on any ongoing investigations or to discuss personnel matters.”
ABC News' Mike Levine and Daniel Steinberger contributed to this report.