Last September VW admitted that 11m cars contained the software, sparking investigations and lawsuits across the world that have cost the carmaker billions of dollars and tarnished its reputation.
On Friday Mr Liang, 62, pleaded guilty to a charge of conspiracy to commit wire fraud and violate the Clean Air Act. His involvement raises the possibility that criminal charges may be brought against other employees at the German carmaker.
VW, which is also under criminal investigation but has not yet faced charges, said: “Volkswagen is continuing to co-operate with the US Department of Justice. We cannot comment on this indictment.”
Since the scandal emerged a year ago, questions over whether senior executives knew of the deception have gone unanswered.
A plea agreement with prosecutors stated that, even as VW billed its cars as “clean diesel”, Mr Liang and other company employees “knew that these representations to US customers were false and that VW’s diesel vehicles were not clean”.
Mr Liang personally participated in a VW conspiracy to outwit US emissions rules governing 500,000 VW diesel 2.0 litre passenger cars, according to his plea agreement, which describes meetings attended by company officials and US environmental officials in 2007.
During those sessions, “Liang participated as his co-conspirators misrepresented that VW diesel vehicles complied with US” emissions rules, the document stated.
Mr Liang was a key part of VW’s efforts to quell regulators’ concerns about the vehicles following a 2014 study that identified discrepancies between the cars’ emissions in lab tests compared with their actual road performance.
He was part of the original engineering team that built the EA 189 engine in Germany, but he was also in the US when California regulators began asking detailed questions about emissions. “He was in the wrong place twice,” a person familiar with Mr Liang’s case said.