By Maria Armental

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 19, 2018).

Volkswagen AG supplier IAV GmbH has agreed to plead guilty and pay a $35 million fine for its role in the German auto giant's emissions-cheating scheme, the U.S. Justice Department said Tuesday.

The Berlin-based engineering company, half-owned by Volkswagen and with U.S. operations in Michigan, designed the software that allowed Volkswagen to cheat on vehicle-emissions tests, according to federal prosecutors.

The Wall Street Journal reported in January that IAV was in talks to resolve a criminal case, citing people familiar with the matter.

By 2008, federal prosecutors said, an IAV manager knew the purpose of the defeat device software and instructed IAV employees to continue working on the project.

"IAV put its corporate success over public health and unfairly disadvantaged its competitors," said Jean E. Williams, deputy assistant attorney general, in a statement.

Under the terms of the agreement, subject to approval in Detroit federal court, IAV agreed to plead guilty to a felony count of conspiracy for helping Volkswagen to rig diesel-powered vehicles with illegal software that allowed them to pass U.S. government emissions tests.

An independent monitor would audit IAV's compliance practices for two years as part of the agreement.

The company has also agreed to cooperate in the federal investigation and prosecution of individuals in connection with the emissions cheating.

IAV officials declined to comment through a representative on whether any employees had resigned, been fired or were otherwise disciplined in connection with their actions in the emissions fraud.

A plea hearing has been scheduled for Jan. 18.

"The misconduct identified does not reflect who we are as a company," IAV President Kai-Stefan Linnenkohl said in a statement.

IAV, whose largest customer is Volkswagen, generated EUR798 million ($907 million) in revenue in 2017.

IAV's U.S. subsidiary, IAV Automotive Engineering Inc., isn't a part of the agreement and wasn't involved in the violation, IAV said.

Volkswagen pleaded guilty last year to criminal charges related to the emissions fraud and agreed to pay more than $20 billion in U.S. penalties, including a $2.8 billion criminal fine, to settle cases with the government, regulators, state attorneys general and customers.

Volkswagen's final U.S. legal tab will depend on how many customers accept the auto maker's offers to repurchase vehicles that had the software.

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

December 19, 2018 02:47 ET (07:47 GMT)

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