Big Frauds

Volkswagen’s Dieselgate

Debacle highlights basic ethics



On Sept. 18, 2015, the U.S. Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act to German automaker Volkswagen Group. The EPA contended that Volkswagen had intentionally programmed diesel engines to activate certain emissions controls only during laboratory emissions testing. The programming changed the vehicles’ nitrogen oxide (NOx) output to meet U.S. standards during regulatory testing but released up to 40 times more NOx in real-world driving. Volkswagen installed this programming in approximately 11 million cars worldwide and in 500,000 cars in the U.S. from 2009 through 2015. (See Volkswagen Says 11 Million Cars Worldwide Are Affected in Diesel Deception, by Jack Ewing , The New York Times, Sept. 22, 2015.)

Volkswagen immediately became the target of regulatory investigations in more than a dozen countries, and Volkswagen’s stock price fell in value by a third shortly after the news broke. Within days, the powerful Volkswagen Group CEO Martin Winterkorn resigned, and the company suspended three senior managers. Volkswagen then announced plans to spend $7.3 billion on rectifying the emissions issues and planned to refit the affected vehicles as part of a recall campaign. The scandal raised awareness over potential cheating at a variety of car manufacturers. (See Volkswagen CEO Resigns as Car Maker Races to Stem Emissions Scandal, by William Boston, The Wall Street Journal, Sept. 23, 2015.)

On April 21, 2016, the U.S. District Court for the Northern District of California (which the U.S. Department of Justice appointed in December 2015 to oversee almost all U.S. litigation, including all claims filed by vehicle owners and state governments) announced that Volkswagen will offer its U.S. customers “substantial compensation” and car buyback offers for nearly 500,000 vehicles, as part of a settlement aiming to resolve the emissions scandal in North America, according to Volkswagen Reaches Deal in U.S. Over Emissions Scandal, by Jack Ewing, The New York Times, April 21, 2016.



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