Volkswagen Corporate Fraud: Emission Test Cheating Report

This report provides a comprehensive analysis of the Volkswagen emissions scandal, a significant case of corporate fraud. It begins with an introduction highlighting the prevalence of corporate fraud and its impact on companies, employees, and the economy. The report then delves into the specific details of the Volkswagen case, where the company was found to have cheated on emission tests to deceive the Environmental Protection Agency (EPA). It examines the type of fraud committed, which involved manipulating emission test results to make their diesel cars appear environmentally friendly. The report explains how the fraud was exposed by an NGO, IICT, which conducted rigorous tests and uncovered the discrepancies. Furthermore, it discusses the failure of regulatory capture and suggests preventative measures, such as independent emission committees and governmental agency involvement in laboratory tests, to ensure ethical corporate conduct and prevent future fraud. The report concludes by emphasizing the importance of maintaining ethical principles and proper governance within corporations to protect the environment and public health.

Contents
Introduction...............................................................................................2
Type of Fraud...........................................................................................2
How the fraud was exposed......................................................................3
Prevention.................................................................................................4
Reference..................................................................................................5

Introduction
Corporate fraud cases have become commonplace now with big and small companies
alike indulging in unfair practices and committing corporate frauds. Corporate frauds lead to
financial instability in the companies, the result if which, the employees suffer as well as the
economy is hampered (Wells 2017). Corporate frauds start on s small scale and with time they
assume great momentum and harm the company as well as the employees. Volkswagen is an
automotive company of international repute. Volkswagen has come under the scanner for duping
the Environment Protect Agency and making them believe that all it hunky dory with the
company. With the rising concern of environmental degradation and harm, it is important for
every company to maintain a strong protection of environmental and maintain all policies that
preserve and protect the nature (Khanna, Kim and Lu 2015). Most vehicles have been found to
be emitting nitrogen oxide which is extremely harmful for the environmental and the
Environment Protection Agency has been very actively in trying to curb the emission of
dangerous and fatal gases. Nitrogen oxide has been found in the exhaust of most cars and the
EPA has recommended strong guidelines that need to be followed by all automotive companies
(Comer 2017).
Type of Fraud
In the year 2015, Volkswagen was found to be in breach of the emission test requirement. The
emission test which was mandatory for every company to pass was duped by Volkswagen.
Volkswagen wanted to make the Environment Protection Agency to believe that Volkswagen is
following all the standards and to deceive the EPA into believing the same conducted all the
research in the lab. This is a prime case of how a big company has tried to shape the ethical and

moral principles to suit their own needs and growth (Rhodes 2016). The problem that arose in
the case can be contributed to the autocratic rule of the directors and the private governance of
the company without any symmetry in the distribution of information. Volkswagen tried to
promote their diesel cars as the most environmentally safe and nature friendly car. The fraud
committed by Volkswagen has gone down in history as the most outrageous act of stupidity in
the car industry (Strittmatter and Lechner 2017).
How the fraud was exposed
Volkswagen has been emitting harmful gases above the prescribed limit and has affected
the health of thousands of people whilst duping the government into believing that they are
following perfect protocol. The fraud was exposed with the help of IICT, an NGO who
uncovered the entire propaganda of the world’s largest automotive company. With the help of
John German, the scandal was busted because he could understand that the strict compliances of
the Environmental Protection Agency have been surpassed in passing the emission test. The
NGO planned to test the safety precaution system of Volkswagen and realized that it was
emitting harmful gases which had the potential to kill people and harm the environment. It was
because of these rigorous tests that the NGO came to the conclusion that Volkswagen has
cheated the emission test and also the company had no explanation behind fooling the Agency in
such outrageous terms (Griffin and Lont 2016). The reports generated were from the lab and
therefore all the results were fabricated and misleading. That Volkswagen was cheating in the
emission tests became clear when it became apparent that the company was acting in
contravention of the laid down terms by the management.

Prevention
There has been a failure of regulatory capture in the corporation and that occurs when
one party with the intention of furthering their goals act in their own interest. To ensure that a
company functions up to its potential and also maintains the ethical principles of the corporation,
it is imperative that set up a committee to examine the emissions of cars independently. To make
sure that a proper relation exists between regulators and stakeholders, it is important to construct
a contract design that will specify the roles and duties of the agents and the directors and any act
in contravention of those contract terms will attract penalty. The Environmental Protection
Agency has to maintain proper documents and monitor the activities of these big companies. No
laboratory tests should be allowed because there is no fairness in individual’s reports and the
involvement of a governmental agency is a must. These problems could have been prevented by
setting up a committee to look after the functioning of the management and there has to be
institutional check and balances that will specify the duties of the employees and also ensure a
proper professional conduct in a corporate.

Reference
Comer, M.J., 2017. Corporate fraud. Routledge.
Griffin, P.A. and Lont, D.H., 2016. Game Changer? The Impact of the VW Emission Cheating
Scandal on the Co-Integration of Large Automakers’ Securities.
Khanna, V., Kim, E.H. and Lu, Y., 2015. CEO connectedness and corporate fraud. The Journal
of Finance, 70(3), pp.1203-1252.
Rhodes, C., 2016. Democratic business ethics: Volkswagen’s emissions scandal and the
disruption of corporate sovereignty. Organization Studies, 37(10), pp.1501-1518.
Strittmatter, A. and Lechner, M., 2017. Sorting on the Used-Car Market After the Volkswagen
Emission Scandal.
Wells, J.T., 2017. Corporate fraud handbook: Prevention and detection. John Wiley & Sons.