The US Environmental Protection Agency (EPA) has filed a lawsuit with a court in Detroit over clean air violations which could cost it billions of dollars.
Documents filed with a court in Detroit yesterday allege VW and its subsidiaries "violated" clean air laws by selling vehicles that weren't as described to the EPA.
"Nearly 600,000 diesel engine vehicles had illegal defeat devices installed that impair their emission control systems and cause emissions to exceed EPA's standards, resulting in harmful air pollution," it alleges.
Reuters reported that VW could be hit with a fine of $37,500 (£25,493) per vehicle - or as much as $90bn in total.
"We're alleging that they knew what they were doing, they intentionally violated the law and that the consequences were significant to health," Reuters quoted a senior Justice Department official saying.
VW has been embroiled in a scandal over the emissions of its diesel vehicles since mid-September.
In November sales at the manufacturer fell 2.4 per cent, with sales in the US slumping 15.3 per cent.