Volkswagen AG [corporate website] has agreed to spend up to $14.7 billion to settle [consent decree, PDF] allegations of cheating emissions tests and deceiving customers in a settlement with US regulators announced Tuesday. The company will either to buy back or to terminate existing leases on model year 2009 to 2015 vehicles equipped with the company’s 2.0 liter diesel and held by US consumers. Under this program the company is prepared to spend almost $10.03 billion compensating consumers. Furthermore, the company will spend over $4.7 billion to mitigate pollution from these cars in response to cheating emissions tests. The settlement comes after allegations [complaint, PDF] from the Environmental Protection Agency (EPA) and California Attorney General‘s Office and the California Air Resources Board [official websites] relating to Volkswagen’s use of devices meant to cheat emission tests by using illegal software to alter engine functions when testing equipment was present. The settlements also resolve [FTC proposed order] claims [complaint, PDF] by the Federal Trade Commission (FTC) [official website] that Volkswagen’s advertising of the affected vehicles as “clean diesel” and “low emission” was deceptive and unfair. In all, these settlements require Volkswagen to offer a buyback program and meet an 85% recall rate, provide EPA-approved modification to their vehicle emissions systems, fund Emission Reduction programs, finance improvements to Zero Emissions Technology, and provide injunctive relief and compensation to those who they deceived with their advertising practices.

VW is facing legal difficulty around the world over the emissions scandal. A law firm in Germany filed a class action lawsuit [JURIST report] last month against VW on behalf of investors alleging a breach of duty to the capital market. Last year the Braunschweig public prosecutor’s office opened a criminal investigation [JURIST report] of former VW CEO Martin Winterkorn, following accusations that the company cheated on government emissions tests by manipulating exhaust valves. The investigation followed several criminal complaints, including one filed by VW, and came less than a week after Winterkorn stepped down as CEO of the company. In his statement he accepted “responsibility for the irregularities that have been found in diesel engines” and said that he was “clearing the way for this fresh start with [his] resignation.”