Volkswagen Could End Up Paying a Hefty Fine in Germany

July 11, 2016, 1:29 PM UTC
Volkswagen Announces Further Steps In Emissions Scandal Resolution
WOLFSBURG, GERMANY - DECEMBER 10: Volkswagen Group Chairman Matthias Mueller speaks to the media during an interview after a press conference to announce the latest update in the company's handling of the engine emissions scandal on December 10, 2015 in Wolfsburg, Germany. Volkswagen is continuing to grapple with the consequences after it admitted installing software that cheats during emissions tests into 11 million of its diesel cars sold worldwide. (Photo by Carsten Koall/Getty Images)
Photograph by Carsten Koall — Getty Images

German prosecutors will grant Volkswagen no mitigation for a record vehicle emissions settlement it faces in the United States and want VW to pay them a separate fine, a spokesman said.

Prosecutors in Braunschweig, near Volkswagen’s (VW) Wolfsburg headquarters, are demanding VW be fined based on the level of the profits it made from selling about 11 million cars equipped with illicit engine software.

VW (VLKAY) last month agreed with the U.S. government and regulators to pay $15.3 billion to get about half a million emissions-cheating diesel cars off U.S. roads.

But the scale of U.S. penalties is no reason to exercise leniency on VW’s regulatory offense, a spokesman for the Braunschweig prosecutor’s office said on Monday.

“We cannot pay heed to what VW may have to pay in other countries when we go about setting the fine,” he said. “We cannot say: ‘VW is already requested to pay a lot in the U.S., so let’s not be so strict.’ That’s not possible.”

Under Germany’s law on regulatory offenses, prosecutors are assessing the “economic advantage” VW enjoyed from using cheating software, rather than expensive exhaust filter systems, to manipulate pollution tests, the spokesman said, adding it will be difficult to determine the level of profits VW has reaped from its wrongdoing.

Industry observers in Germany estimate this could result in a fine of several hundreds of millions of euros.

Braunschweig prosecutors, which last month started probing former VW Chief Executive Martin Winterkorn and VW brand chief Herbert Diess over suspicion of market manipulation, declined comment.

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Europe’s largest automaker confirmed on Monday it has been notified by prosecutors about the latest probe but declined further comment.

The proposed U.S. settlement would move VW close to the 16.2 billion euros ($18 billion) it has set aside to cover the costs of the scandal.

VW still faces criminal probes in the United States, Germany, and South Korea as well as lawsuits from investors around the world suing the carmaker for what they describe as losses incurred after the manipulations were disclosed in September.