Introduction
Fraud is a serious unethical and illegal problem that some individuals or companies have propagated to acquire an edging advantage in the market by avoiding the set legal standards and regulations. In the United States (US), the Clean Air Act empowers the Environmental Protection Agency (EPA) to regulate and set standards for vehicle emissions (Beene, 2016). The regulations and standards are tough for many vehicle manufacturers to comply with. Beene’s (2016) article provides a good case of the violation of the legislation due to the fraud scandal involving an automotive Germany manufacturer. Volkswagen (VW) engineers manipulated vehicle engines to cheat the US on the emission levels of the company vehicles, a move that was revealed, and proper legal action taken to impact the stakeholders and the company as a whole.
The Fraud Scandal, its Cause, and the Culprits
The Violated Law and Underlying Cause of the Scandal
The fraud scandal was done intentionally to violate the EPA regulations and American environmental law. According to Beene (2016), engineer James Robert Liang together with his team deliberately planned to violate the American Clean Air Act. The fraudulent actions further violated the EPA vehicle fuel emission standards and regulations since the authority and the country as a whole were deceived.
The strict and harsh American laws and regulations together with the uncompromising EPA compelled the engineers to think of and implement this illegal and unethical strategy. Liang and his team of engineers realized that the company would not meet the strict US limits on the emission of nitrogen oxide that were implemented since 2007 while increasing the customer demand for the vehicles (Beene, 2016). Consequently, they developed and installed software that could cheat on the emission tests so as to comply with the environmental laws. Mouawad and Jensen (2015) explain that upon testing the car engine emission levels, this software could sense and activate installed equipment to reduce emissions. However, the software could turn the installed equipment down when driving, resulting in high emission rates that surpass the legal limits (Mouawad & Jensen, 2015). This strategy was the only feasible way to ‘complying with the strict laws in the mind of Liang and his engineer colleagues.
The Culprits
Liang, who had worked with the automotive company begun the fraudulent process years early before it was noticed. From the beginning of 2006 to September 2009, this engineer and his colleagues deliberately agreed to defraud the American government, the company customers, and most importantly, violate the Clean Air Act together with deceiving the agencies that enhance its implementation (Beene, 2016). All the victims were deceived about the vehicle complies with the US emission standards. The EA189 2.0-liter diesel was at the center of this case, and Liang was in the team that manufactured it at the diesel engine department in Wolfsburg, the company headquarters (Beene, 2016). This shows that Liang and the team he led were responsible for the fraud involving the EA189 engine.
Liang then moved to the US to launch and start selling the faulty cars with the manipulated engine. Beene (2016) reports that this engineer moved to the US in 2008 to launch the ‘clean diesel’ engine. He attended meetings that comprised personnel from the automotive company, officials from the EPA among others to sell the engine in the US market. In these meetings, the company personnel claimed that the engine complied with the American emission standards and hid the presence of the defeat software that could cheat on emission tests. In fact, Liang and other company personnel met EPA officials in March 2007 and explained the software functions of the engine that affected emission controls without revealing the cheat software (Beene, 2016). These actions defrauded the US because the cheat device was never noticed at this moment.
Scandal Revelation
The cheat device software and its functions were revealed by researchers before EPA confirmed the crisis. In 2015, West Virginia University researchers tested fuel emission from two of the university cars from VW and found that when tested on the road, the cars emitted around 40 times more than the EPA set limits (Mouawad & Jensen, 2015). The research prompted EPA to start investigations for justifying the study findings. The authority found the truth before announcing that VW had cheated the entire nation by distorting emission test results (Mouawad & Jensen, 2015). The revelation put the company into problems.
Consequences of the Scandal
The revelation of the scandal led to legal authorities taking action to punish the offense. Liang was named in a jury indictment in the American District Court of Detroit where he pleaded guilty to have defrauded the US by violating the Clean Air Act (Beene, 2016). Some of the evidence to reveal the deliberate actions to violate the law came from the narration of the engineer and mail communications among the company engineers (Beene, 2016). The court allowed Liang to cooperate with the US government in the ongoing investigation of the scandal involving VW. This would put pressure on company management.
This scandal further affected the company management, customers, and company sales. The scandal made customers lose trust in the company vehicles, which was associated with reduced sales both in the US and other parts of the country. In South America, the sales dropped by 27.6% while Russia experienced a 16.3% decline (Saarinen, 2016). The sales in the US dropped by 5.7% while North America registered a decrease of 2.1% (Saarinen, 2016). The management further committed itself to find a solution through its suggestions. For instance, the company decided to buy back all of its cars from US customers or fix the software problems and offer some compensation (Mouawad & Jensen, 2015). Many engineer suspects were suspended, and the company chief executive officer resigned (Mouawad & Jensen, 2015). Therefore, the scandal affected many stakeholders in different ways.
Conclusion
The unethical and illegal VW’s fuel emission scandal had substantial repercussions to the company, the American judicial and environmental regulatory agencies, the company management and engineers, and most importantly, the customers. The engineering department led by Liang deliberately planned to cheat on the US emission tests by installing a defeat device software. The revelation of the scandal compelled the company to respond by addressing the problem. Furthermore, the losses were incurred mainly because of the poor reputation in customers. The culprit was taken to court and pleaded guilty of the offense in addition to promising cooperation with the US investigative agencies.
References
Mouawad, J. & Jensen C. (2015). The wrath of Volkswagen’s drivers. The New York Times. Web.
Saarinen, M. (2016). VW emissions scandal: everything you need to know. Auto Express. Web.
Beene, R. (2016). VW engineer pleads guilty in U.S. court to a role in the emissions cheating scandal. Automotive News. Web.