United States v. Palma, No. 21-1782 (6th Cir. 2023)
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Palma worked for FCA starting in 2013 and allegedly participated in a scheme that manipulated FCA's new diesel engine’s function during testing to produce artificially impressive results with respect to features that FCA was targeting to customers, including fuel economy greater than 30 mpg and a frequency of fluid changes similar to that of gasoline-powered cars. When the vehicles were tested for emissions, the program activated Exhaust Gas Recirculation, sacrificing fuel economy. When the vehicles were tested for fuel economy, Recirculation was lowered, increasing emissions. Palma knew that these results were critical to receiving the “best-in-class” fuel economy ratings and that the vehicles did not meet EPA requirements. A sticker affixed to the cars stated they complied with regulations and provided detailed emissions information, as influenced by Palma's scheme. FCA sold more than 100,000 of these vehicles. Customers who purchased the vehicles said that the misleading representations were material to their purchase decisions.
Palma was charged with 13 counts, including conspiracy to commit wire fraud, 18 U.S.C. 1349. The district court held that there was an insufficient causal nexus between Palma’s conduct and customers being induced to purchase vehicles and that Palma’s conduct was less a deprivation of consumer property and more a deception of regulators. The Seventh Circuit reversed the dismissal of that count, reasoning that Palma was only charged with conspiracy, not wire fraud itself, and the indictment alleges adequate facts tying Palma to a fraudulent scheme.
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