With the scandal impacting the USA market in particular, VW sales there fell 7.6 percent in 2016, while across South America the company shipped nearly 27 percent fewer vehicles. The automaker installed emissions software to meet the parameters set by the U.S. Environmental Protection Agency.
The second VW executive to be arrested: Oliver Schmidt.
According to The New York Times, Oliver Schmidt, head of VW's regulatory compliance office from 2014 to early 2015, was taken into custody on Sunday.
His arrest comes after the NY attorney general's office filed a lawsuit against VW claiming the company fooled emission regulators for more than a decade.
If the meeting did not go well, the team assessed that one possible outcome was "indictment".
"Volkswagen continues to cooperate with the Department of Justice as we work to resolve remaining matters in the United States", Volkswagen told CNNMoney, without identifying the suspect.
The scandal has affected many best-known Volkswagen and Audi models, including the Audi A3, Volkswagen Beetle, Golf, Jetta, and Passat diesel cars.
Meanwhile, Volkswagen might pay a penalty of more than three billion dollars to settle the DOJ's criminal and civil investigations.
Prosecutors alleged Monday that the scheme went on for almost a decade.
Volkswagen said with the addition of the fine, the automaker's diesel costs are now set to exceed the almost 18.2 billion euros ($19.2 billion) it has set aside to handle the problem.
In fact, as we now know, engineers had purposely added a device that detected when exhaust fumes were being tested (in essence, when the vehicle was being run but wasn't moving) and reduced emissions in response.
According to prosecutors, Schmidt emailed a group of VW executives after learning of the research.
"It should first be decided whether we are honest", Mr Schmidt wrote in a note to a colleague.
The complaint does not name company executives, other than Schmidt, who were present at key meetings.
Schmidt, 48, is a resident of Germany but was in Florida when the feds arrested and charged him with conspiracy, wire fraud and violations of the U.S. Clean Air Act. Volkswagen had already deducted 18.2 billion euros ($19.2 billion) from earnings to account for the expected costs of fines, settlements and recalls.
Jacqueline Young, head of group litigation at Slater and Gordon, said: "VW has shown utter contempt, not just for the rights and health of their United Kingdom consumers but also for the environment".