A Volkswagen engineer has pleaded guilty to conspiring to defraud regulators and car owners, in the first criminal charges stemming from the American investigation into the German carmaker's emissions deception.

The New York Times (NYT) said the plea by the engineer, James Robert Liang, a Volkswagen veteran, suggested the US Justice Department was trying to build a larger criminal case and pursue charges against other higher-level executives at the carmaker.

Its report said Liang was central in the development of software that Volkswagen used to cheat pollution tests in the United States, which the company admitted last year to installing in more than 11m diesels vehicles worldwide. He was also part of the cover-up, lying to regulators when they started asking questions about discrepancies in emissions.

Liang's admissions, made in the United States District Court for the Eastern District of Michigan, portray a broader conspiracy by executives, the NYT said, making Liang a potentially valuable resource for the developing criminal investigation. The Justice Department said Liang, who faces a maximum sentence of five years in prison, would cooperate.

Liang was also named as a main suspect in a suit filed against Volkswagen on Thursday by William Sorrell, the attorney general of Vermont, the report said.

Three state attorneys general have also claimed that Volkswagen's fraud reached deep into the company's boardroom, all the way to its former chief executive, Martin Winterkorn. One suit, filed in New York, suggested that Matthias Müller, Volkswagen's current chief executive, was aware that some vehicles had inadequate pollution control systems.

Volkswagen has maintained that the deception was limited to a small group of people and that top management was not aware of the cheating software. Volkswagen has denied that Müller was aware of any wrongdoing.

The company would not comment on Liang's case, saying that it would continue to cooperate with the investigation.

Liang's lawyer, Daniel Nixon, told the NYT Liang was accepting responsibility for his actions.

"He is one of many at Volkswagen who got caught up in the emissions scandal, and he is very remorseful for what took place."

He said Laing remained employed by Volkswagen.

Liang's knowledge of the deception, laid out in the plea agreement, could provide important building blocks for the investigation, the NYT said.

Liang, who has worked for Volkswagen since 1983, was among one of the company's most prominent and respected engine developers. He is credited as the inventor in at least one European patent related to motor technology.

As Volkswagen moved aggressively to capture a bigger share of the American market, Liang was part of a team of engineers at the company's headquarters in Wolfsburg, Germany, tapped in 2006 to develop a new diesel engine. The engine needed to comply with stricter emissions standards in the United States, which would take force the next year, the paper's report said.

But the team faced a dilemma. To meet the new rules, it would have to compromise on fuel economy and design, a potentially costly change.

Rather than take that risk, Liang and his team found another option: software that would trick the tests.

The paper said Liang moved to California in 2008 to help with the introduction of Volkswagen's new 'clean diesel' vehicles in the US. When Liang and other engineers met with regulators to certify the vehicles, they misrepresented the cars, according to the plea agreement. Hiding the existence of the defeat device, they said the cars were fully compliant with federal and state laws.

By 2014, independent testing found discrepancies with Volkswagen's emissions. But Liang and others kept lying as they scrambled to find explanations that would appease regulators, the NYT said.

In an email dated 2 July, 2015, an unnamed Volkswagen employee sought advice on how to respond to questions from regulators, according to the indictment. Later that month, a Volkswagen employee warned, in a calendar invitation sent to Liang and other team members, that regulators are "still waiting for Answers. We still have no good explanations!!!!!"

"This is just the first shoe to drop in the Volkswagen criminal case," David Uhlmann, a former chief of the Justice Department's Environmental Crimes Section and a law professor at the University of Michigan, told the New York Times.

"The facts make it a stronger case for individual accountability because the defeat device can't be installed in a car by accident," he added. "There just appears to have been so much deception involved."