By David Shepardson and Joel Schectman
WASHINGTON (Reuters) - Volkswagen AG and the U.S. Justice Department are nearing an agreement to resolve the government's civil and criminal investigations that would require the German automaker to pay a penalty of more than $3 billion, sources briefed on the talks said on Friday.
The agreement is not final and could top $4 billion or fall apart but a deal could be announced as early as next week, said the sources on condition of anonymity because the talks are confidential.
Volkswagen is also expected to face oversight by an outside monitor and agree to other significant reforms in connection with its diesel cheating scandal as part of a potential deferred prosecution agreement or guilty plea to criminal charges, the sources said.
VW has previously agreed to pay up to $17.5 billion to resolve claims by U.S. owners, federal and state regulators and dealers and admitted it had misled regulators for years about illicit software.
A VW spokesman in Germany declined to comment, saying the automaker was in discussions with authorities.
Volkswagen and the Justice Department have held intensive talks this week aimed at resolving the case before President Barack Obama leaves office on Jan. 20. If a deal is not reached before then it could significantly delay an agreement, the sources said.
VW admitted in September 2015 to installing secret software known as "defeat devices" in 475,000 U.S. 2.0-liter diesel cars to cheat exhaust emissions tests and make them appear cleaner in testing. In reality, the vehicles emitted up to 40 times the legally allowable pollution levels.
The company later admitted to also using "defeat devices" in 3.0-liter vehicles. The 80,000 3.0-liter U.S. vehicles had an undeclared auxiliary emissions system that allowed them to emit up to nine times allowable limits.
The scandal hurt VW's global business and reputation, and led to the ouster of longtime Chief Executive Martin Winterkorn. VW has been barred from selling any new diesel cars in the United States since late 2015.
A settlement could help VW largely move past the scandal, though it still faces lawsuits from U.S. investors and some U.S. states.
The automaker will spend years fixing or buying back vehicles and making investments to boost zero emission vehicle infrastructure and must deposit nearly $3 billion in a trust to offset excess diesel emissions. It has also agreed to boost the number of electric vehicles it offers in California.
To date, only one VW employee has been criminally charged in the United States. He has pleaded guilty and is cooperating with prosecutors.
(Additional reporting by Jan Schwartz in Hamburg)