Author: Devesh Raj
To the Point
The Volkswagen emissions scandal, or “Dieselgate,” represents a landmark case of corporate deception. The central issue was Volkswagen deliberate installation of illegal “defeat device” software in approximately 11 million of its diesel vehicles worldwide between 2009 and 2015. This software was engineered to detect when a vehicle was undergoing official emissions testing and to activate full pollution controls only during those tests.
Under normal, real-world driving conditions, the software would disable or reduce the effectiveness of these controls. As a result, the vehicles emitted nitrogen oxides (NO2), a harmful pollutant linked to respiratory diseases and environmental damage, at levels up to 40 times higher than the legal standards in the United States. The deception was not a minor infraction but a systematic, long-term strategy to gain an unfair market advantage by falsely advertising its diesel cars as “clean” and high-performing while secretly violating environmental laws in numerous countries.
The fraud was uncovered not by internal whistleblowers or regulators initially, but by independent research conducted by the International Council on Clean Transportation (ICCT) and West Virginia University. Their findings prompted investigations by the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), which eventually led to public admission of Volkswagen in September 2015. The fallout was immense, triggering global recalls, multi-billion, dollar fines, criminal prosecutions of executives, and a profound loss of consumer trust that reshaped the automotive industry and regulatory enforcement worldwide.
Use of Legal Jargon
- Defeat Device: Any element of design, software, or hardware that senses temperature, vehicle speed, engine RPM, or other parameters to activate, modulate, delay, or deactivate the operation of any part of the emission control system. Its use is illegal under the U.S. Clean Air Act and EU regulations as it circumvents emissions standards.
- Conspiracy to Defraud the United States: An agreement between two or more persons to commit an offense against the U.S. or to defraud it. In this case, executives and engineers conspired to deceive the EPA, a U.S. government agency.
- Obstruction of Justice: An act that will fully hinders or obstructs the administration of justice. VW executives were charged with this for destroying documents and providing false information to investigators after the probe began.
- Clean Air Act (CAA): A comprehensive U.S. federal law that regulates all sources of air emissions. The EPA issued a notice of violation against VW for breaching the CAA by importing and selling non-compliant vehicles.
- Class Action Lawsuit: A legal proceeding in which one or several plaintiffs bring a lawsuit on behalf of a larger group, or “class,” of individuals who have a common interest. Numerous class-action suits were filed against VW by vehicle owners seeking compensation for the diminished value and non-conformity of their cars.
The Proof
The evidence of Volkswagen’s emissions fraud is extensive and well-documented, built upon independent scientific testing, regulatory investigations, internal documents, and own admissions of Volkswagen.
Initial Scientific Discovery
The scheme began to unravel in 2013 when the International Council on Clean Transportation (ICCT), a non-profit organization, commissioned a study to investigate discrepancies between European and U.S. diesel vehicle emissions. The ICCT hired a research team from the Centre for Alternative Fuels, Engines and Emissions (CAFEE) at West Virginia University (WVU). The WVU team conducted on-road emissions tests on three diesel cars, including a VW Jetta and a VW Passat, using Portable Emissions Measurement Systems (PEMS). The results were startling: while the cars passed laboratory tests, their real-world NOx emissions were astronomically higher. The Jetta emitted NOx at levels 15 to 35 times the U.S. legal limit, and the Passat was 5 to 20 times over the limit. The researchers were so surprised by the data that they initially suspected their equipment was faulty, but repeated tests confirmed the findings.
In May 2014, the ICCT and WVU presented their findings to the EPA and the California Air Resources Board (CARB). These regulatory bodies launched their own investigations. For over a year, Volkswagen officials offered misleading explanations and technical fixes that failed to resolve the emissions discrepancies, claiming the issues were due to technical glitches.
The “Defeat Device” Uncovered
The core of the proof lies in the software code itself. Investigators discovered that Volkswagen had programmed its engine control unit (ECU) with a sophisticated algorithm that functioned as a defeat device. This software monitored parameters such as the position of the steering wheel, vehicle speed, duration of engine operation, and barometric pressure. When the combination of these inputs matched the conditions of a standard emissions test (e.g., the front wheels spinning on a dynamometer while the rear wheels remained stationary), the software would activate the vehicle’s full emissions control system, reducing NOx output to legal levels. Once the car was back on the road, the software reverted to a different calibration that prioritized fuel economy and performance, deactivating the primary emissions controls and causing the spike in NOx pollution.
Corporate Admission and Scale of the Fraud
Faced with irrefutable evidence from regulators and the threat of not having its 2016 models certified for sale, Volkswagen finally admitted to the deception on September 3, 2015. On September 18, 2015, the EPA issued a public notice of violation. Volkswagen then confessed that this “defeat device” was installed in approximately 11 million vehicles worldwide, including models from Audi, Porsche, SEAT, and Skoda, equipped with Type EA 189 diesel engines. The company later admitted that similar devices were also present in its 3.0-liter diesel engines.
Internal Knowledge and Obstruction of Justice
The investigation proved that the fraud was not the work of a few rogue engineers but was known at senior levels of the company. A subsequent U.S. Department of Justice investigation revealed a decade-long conspiracy. Evidence showed that Volkswagen executives were aware of the defeat device and actively participated in concealing it. Internal documents and testimony revealed that the supplier Bosch had warned Volkswagen in 2007 that using the software in production vehicles would be illegal. Furthermore, after the investigation began, Volkswagen employees were instructed to destroy documents and obstruct the inquiry of government, leading to charges of obstruction of justice against several executives. The guilty pleas from Volkswagen itself and from high-ranking officials like Oliver Schmidt and engineer James Liang, who admitted to knowingly misleading regulators, served as definitive legal proof of the conspiracy. This detailed evidence trail, from independent science to regulatory confirmation, corporate admission, and criminal convictions, provides an undeniable account of the fraud.
Abstract
The Volkswagen emissions scandal, known as “Dieselgate,” stands as one of the most significant cases of corporate fraud in the 21st century. This project details the systematic deception perpetrated by Volkswagen AG, which involved installing illegal “defeat device” software in approximately 11 million diesel vehicles globally from 2009 to 2015. The software was engineered to recognize when a vehicle was undergoing regulatory emissions testing and to activate its full pollution control systems only under these laboratory conditions. In real-world driving, the controls were deactivated, causing the vehicles to emit nitrogen oxides (NOx) at levels up to 40 times higher than permitted legal standards, particularly in the United States. This act of fraud allowed Volkswagen to market its vehicles as “clean diesel”, environmentally friendly and fuel-efficient, thereby gaining a substantial competitive advantage while knowingly violating environmental laws and endangering public health.
The deception was first exposed not by internal controls or regulatory oversight, but by independent research from the International Council on Clean Transportation (ICCT) and West Virginia University. Their findings prompted investigations by the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB), which confirmed the deliberate manipulation. In September 2015, Volkswagen admitted to the scheme, triggering a global crisis for the company.
The legal and financial repercussions were severe and far-reaching. By 2020, the scandal had cost Volkswagen over $33 billion in fines, penalties, vehicle buybacks, and settlements. The company pleaded guilty to criminal charges in the U.S., including conspiracy to defraud the United States, obstruction of justice, and violating the Clean Air Act. Numerous high-level executives were indicted, and some were convicted and sentenced to prison in both the U.S. and Germany. The scandal prompted a wave of civil litigation, including class-action lawsuits from consumers and investors worldwide. Case law established in jurisdictions like the U.S. and the European Union affirmed rights of consumers to compensation and held the company accountable for its fraudulent misrepresentations. The case serves as a powerful illustration of the interplay between corporate ethics, regulatory enforcement, and legal accountability on a global scale. It exposed critical weaknesses in emissions testing protocols and corporate governance, leading to industry-wide reforms, including the adoption of more stringent, real-world emissions tests.
Case Laws
1.United States v. Volkswagen AG (2017): This was the primary criminal case against the corporation in the United States. Volkswagen pleaded guilty to three felony counts: conspiracy to defraud the U.S., obstruction of justice, and importation of goods by false statements. As part of the plea agreement, Volkswagen agreed to pay a $2.8 billion criminal penalty. The case was monumental because it established corporate-level criminal culpability for the environmental fraud. The detailed statement of facts signed by Volkswagen laid bare the decade-long conspiracy, confirming that the deception was a deliberate strategy, not an accident. This case set a precedent for the severity of penalties for corporate environmental crimes.
2.The U.S. Civil Settlement (2016): In parallel to the criminal case, the U.S. Department of Justice, on behalf of the EPA, filed a civil complaint against Volkswagen. This resulted in a landmark $14.7 billion settlement6. Of this amount, $10 billion was allocated to a buyback program for affected 2.0-liter vehicles, offering owners compensation and the option to have Volkswagen repurchase their car. Another $2.7 billion was placed in an environmental mitigation trust to fund projects to reduce NOx emissions, and $2 billion was invested in zero-emission vehicle infrastructure6. This case is significant for its focus on direct consumer restitution and environmental remediation on a massive scale.
3.Case C-693/18 (CLCV and Others): This ruling by the European Court of Justice (ECJ) was pivotal for consumers in the European Union. The ECJ declared that software that reduces the effectiveness of emission control systems under normal driving conditions constitutes an illegal “defeat device” under EU law. It rejected argument of Volkswagen that the device was necessary to protect the engine. The ruling affirmed that national courts must uphold the rights of consumers to seek compensation from the manufacturer for vehicles equipped with such devices. This decision harmonized the legal interpretation across the EU and empowered consumers to pursue claims in their home countries.
4.United States v. Oliver Schmidt (2017): The prosecution of Oliver Schmidt, a high-ranking Volkswagen executive who led the company’s environmental and engineering office in the U.S., demonstrated individual accountability. Schmidt pleaded guilty to conspiracy and violating the Clean Air Act. He was sentenced to seven years in prison and a $400,000 fine for his role in concealing the emissions cheating from regulators. The judge called him a “key conspirator.” This case was crucial in showing that U.S. authorities would pursue not just the corporation but the individuals responsible for the wrongdoing, sending a strong deterrent message to corporate executives.
5.National Green Tribunal (NGT) of India Ruling (2019): This case highlights the global reach of the scandal’s legal consequences. India’s NGT investigated the impact of Volkswagen non-compliant vehicles sold in the country. The tribunal found that the cars violated India’s BS-IV emission norms and, based on the principle of “polluter pays,” imposed a fine of ₹500 crore (approximately $67 million) on Volkswagen India for the environmental damage caused9. This case is important because it shows how a non-U.S./EU jurisdiction applied its own environmental laws to hold a multinational corporation accountable for the local health and environmental impacts of a global fraud.
Conclusion
The Volkswagen emissions scandal is a definitive case study in corporate malfeasance, demonstrating a calculated, systematic fraud that spanned a decade and crossed international borders. The “Dieselgate” affair was not a mere regulatory oversight but a deliberate conspiracy to deceive regulators, mislead consumers, and gain an illicit competitive advantage at the expense of public health and environmental integrity. The proof of this deception, rooted in scientific data, internal documents, and eventual corporate and executive confessions, is irrefutable.
The legal repercussions have been transformative. The combination of multi-billion, dollar criminal and civil penalties, forced consumer buyback programs, and the imprisonment of key executives has set a new benchmark for corporate accountability. Landmark rulings in the United States, the European Union, and beyond have reinforced the illegality of “defeat devices” and strengthened consumer rights to compensation for fraudulent products. The scandal exposed profound weaknesses in existing emissions testing regimes, compelling regulators worldwide to implement more stringent, real-world testing protocols to prevent future manipulation.
Beyond the financial and legal costs, the scandal inflicted deep and lasting damage on Volkswagen’s reputation and eroded public trust in the automotive industry as a whole. It served as a harsh lesson in the catastrophic risks of a corporate culture that prioritizes profits over ethics and compliance. In its wake, Dieselgate has catalysed a necessary shift toward greater transparency, stronger governance, and a more rapid transition to electric vehicle technology. The scandal’s legacy is a stark reminder that in a globalized world, corporate wrongdoing will ultimately be exposed, and the consequences can be severe enough to reshape an entire industry.
FAQs
1.What exactly was the “defeat device” used by Volkswagen?
It was a sophisticated piece of software code embedded in the vehicle’s engine control unit. It detected when the car was being tested in a lab by monitoring factors like steering wheel movement, speed, and engine operation time. During tests, it would activate full emissions controls to meet legal NOx standards. In normal road driving, it deactivated these controls, causing emissions to be up to 40 times higher than the legal limit.
2.How many vehicles were affected and which models?
Approximately 11 million vehicles worldwide were equipped with the defeat device. This included various models sold between 2009 and 2015 under the Volkswagen, Audi, Porsche, SEAT, and Skoda brands, primarily those with 2.0-liter and 3.0-liter TDI diesel engines.
3.What has been the long-term impact on the auto industry?
The scandal had a profound impact. It led to a sharp decline in the popularity and sales of diesel cars, particularly in Europe. It forced regulators worldwide to adopt much stricter and more realistic emissions testing procedures, such as Real Driving Emissions (RDE) tests. It also accelerated the automotive industry’s shift toward investing in and developing electric vehicles as a more sustainable alternative11.
