September 2, 2019 / 10:52 AM / 15 days ago

UPDATE 1-VW retains access to U.S. public sector contracts, agrees to second monitor at HQ

(Retops with confirmation from the company)

FRANKFURT, Sept 2 (Reuters) - Volkswagen will not be excluded from public sector contracts in the United States following its emissions scandal but will install a second U.S. monitor at its German headquarters, a spokesman for the carmaker said on Monday.

The conditions are part of the latest agreement reached between the German carmaker and the U.S. Environmental Protection Agency (EPA) about Volkswagen's business in the United States after the company in 2015 admitted using illegal software to cheat U.S. pollution tests.

The scandal, which became known as Dieselgate, triggered a global backlash against diesel vehicles that has so far cost Volkswagen 30 billion euros ($33 billion) in fines, penalties and buyback costs.

German business daily Handelsblatt was first to report VW's latest agreement with the EPA on Monday.

Volkswagen said the agreement entails the prequalification of VW for public sector contracts, in exchange for installing a new monitor for up to three years in a process due to begin this autumn.

"This deal recognises the comprehensive measures that our company has been taking since 2015 to strengthen our compliance and risk management. It allows our subsidiaries to continue to do business with U.S. authorities," Volkwagen said in an internal statement to managers, made available to Reuters.

The agreement is important for VW's MAN Energy Solutions subsidiary which produces big diesel engines, some of which are used by the U.S. Navy and coastguard, while the group's general activities in the U.S. public sector are small, the spokesman said.

Since 2017, VW has been disclosing legal violations around the test manipulations to an external compliance monitor, Larry Thompson, a former deputy U.S. attorney general, and taking steps to change compliance and conduct. Thompson employed up to 100 specialists at one stage.

The second monitoring process, to be led by John Hanson of Artifice Forensic Financial Services, would be smaller in reach, less staff-intensive and less comprehensive than Thompson's.

Hanson could take Thompson's findings as a basis, the VW spokesman said. Both are former employees of the U.S. Federal Bureau of Investigation (FBI) which Thompson used to serve as director in an earlier role. ($1 = 0.8973 euros) (Reporting by Jan Schwartz and Vera Eckert; Editing by Louise Heavens and Susan Fenton)

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