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Richard Bistrong on VW’s Oliver Schmidt: From ‘diesel therapy’ to deportation

Earlier this month, Oliver Schmidt, 48, a German citizen and the former general manager of Volkswagen AG’s U.S. Environment and Engineering Office, was sentenced to 84 months in prison for helping VW cheat on diesel emissions tests and covering up the scheme.

Because Schmidt is  a non-U.S. citizen, his days in federal prison are going to be in a much harsher environment than his fellow U.S. offenders. 

At the start, if Schmidt had been a U.S. citizen, once he was under investigation, the DOJ might have contacted him, through his counsel, and asked if he wanted to come in and proffer, affording him limited immunity to tell what happened, including what he did, and what he observed. I proffered to two DOJ offices and the SEC in 2007. It’s a unique and counter-intuitive experience, where the more one shares about their criminal activity, the more they will be viewed as credible to those prosecutors and FBI agents on the other side of the table.

Those conversations can ultimately lead to a plea agreement. (If you lie or conceal in a proffer, well, that’s another story, and it’s best not to proffer at all). But under a normal proffer scenario, there is no formal arrest or even temporary incarceration.

Even when the DOJ decides not to give a defendant an opportunity to proffer, and when the individual is arrested, a U.S. citizen’s lawyer can generally start working on often used and accepted release conditions to present to a judge or magistrate at arraignment. For most white-collar U.S. citizens, even under restrictive “pre-trial” conditions, they go home after that initial appearance.

Oliver Schmidt, however, didn’t have any of those opportunities. Instead he was arrested while on holiday in Miami, as he prepared to return to Germany. His request, thereafter, to be released on bond, was denied. As reported by CNN, “His attorneys had offered to post most of Schmidt’s and his wife’s savings as collateral, to have his client wear a tracking monitor while subject to house arrest, and for him to surrender his passport and agree not to waive a right to contest extradition.” 

But as Paul Pelletier shared in our interview, the DOJ likely convinced a federal judge not to let Schmidt “fugitate” — as in not showing up for trial. That Germany doesn’t allow extradition of German citizens to other countries probably weighed heavily in the judge’s decision.

Between his arrest in Miami and appearance in U.S. District Court in Michigan, Schmidt had to be transported. That journey is known as “diesel therapy.” (For Schmidt, there is a lot of sad irony in the term.) During diesel therapy, the prisoner is transported via the U.S. Marshall Service, chained and shackled, spending nights in Metropolitan Detention Centers, local jails, and perhaps even flown via “Con Air.” In Schmidt’s case, his routing from Miami to Michigan would have taken him through Oklahoma City, the air-hub for federal inmates.

During his diesel therapy, Schmidt would have been with inmates and detainees from all security levels, including those sentenced, or awaiting sentence, for the most heinous of crimes, such as terrorism, murder, pedophilia, and the like.

While all of that detention time will be deducted as time served from Schmidt’s seven-year sentence, he won’t be going to a Federal Prison Camp, which is a minimum security institution, as classified by the Bureau of Prisons. As I’ve written, even in a Federal Prison Camp, there are risks to one’s health and safety. But there is relative freedom of movement, no high walls with security towers, and you are housed with other non-violent offenders, most of them doing time for drug conspiracies.

But Schmidt, as a foreigner, is probably not going to qualify for Camp status. That means he’ll go to a secured facility. Even if it’s “low” security under the Bureau of Prisons classification, he’ll be in a cell with limited freedom of movement. The prison will be surrounded by a razor wire fence. And some other inmates will likely have a history of violent offenses.

At the end of a federal prison sentence, most U.S. citizens are released to a half-way house or home-confinement prior to sentence completion. Schmidt has agreed to deportation.

That means he may be turned over to U.S. Immigration and Customs the day his federal sentence is completed, and the process to deport him will begin. That process can take months or even years, and it all occurs under detention. For Schmidt, then, finishing his seven years might be the end of one sentence and the start of another.

I asked Walt Pavlo, the CEO of Prisonology, an expert consulting firm on Bureau of Prison matters and whose advice to me was critical in preparing for my prison sentence, what his thoughts were on Schmidt’s case. He said, “There are so many more obstacles for non-U.S. citizens when it comes to their incarceration in the U.S. It can be pretty difficult prison time as compared to someone who did a similar crime but was a U.S. citizen.”

I struggled writing this post. It’s not a defense of Oliver Schmidt, the nature of his crimes, or the severity of his sentence. Even today I agree with my own sentencing Judge, Richard Leon, who disregarded the DOJ’s recommendation of home confinement to promote “criminal deterrence.” But because I have some idea what life will be like for Schmidt over the next half decade or more, I decided to share my thoughts.


Richard Bistrong is a contributing editor of the FCPA Blog and CEO of Front-Line Anti-Bribery LLCIn 2010 he pleaded guilty to a conspiracy to violate the FCPA and served fourteen-and-a-half months at a U.S. federal prison camp. He was named to Compliance Week’s list of Top Minds in 2017 and was one of Ethisphere’s 100 Most Influential in Business Ethics in 2015. 

His popular real-life compliance training video, Behind the Bribe, produced in cooperation with Mastercard, was released in June.

To request a demo of the full eleven-minute video or a licensing fee schedule, please click here.

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