Professionalism/Volkswagen's Emissions Scandal
Between 2014 and 2018, German automaker Volkswagen was implicated in scandals resulting from attempts to mislead consumers and regulators about diesel emissions. Vehicles were designed to systematically cheat emissions tests, and studies were designed and conducted on monkeys and humans to show that diesel emissions were not harmful to health. Volkswagen's actions raise concerns about the role of ethics in corporate culture and the ethics of privately funded research.
In 2014, researchers at West Virginia University released findings that two Volkswagen AG (VW) diesel models emitted nitrogen oxides (NOx) at levels up to 40 times above the legal limit set by the Environmental Protection Agency (EPA). In 2015, the EPA issued a Notice of Violation of the Clean Air Act to VW, claiming that VW installed defeat devices in its model year 2009-2015 2.0 liter diesel cars that circumvent EPA emissions testing. The devices sensed whether vehicles were being tested based on "the position of the steering wheel, vehicle speed, the duration of the engine's operation, and barometric pressure," and only fully activated emission control systems if testing conditions were present. These devices allowed Volkswagen to meet emissions regulations while keeping rated fuel efficiency, power, and torque of their vehicles at a high standard.
In March, 1974, Volkswagen paid a $120,000 fine to the EPA for installing devices in vehicles that would disable pollution control systems, similar to the devices discovered in 2015. In response to the fine, Volkswagen stated that it made managerial changes to improve future relations with the EPA. In 2008, several Volkswagen executives were found to have taken bribes and used company money for prostitutes and shopping sprees.
Discovery of VW's Defeat DevicesEdit
Led by Dan Carder, a research team at West Virginia University (WVU) received a grant from the International Council on Clean Transportation (ICCT) in 2014 to conduct a study on the emissions of diesel vehicles in "diverse driving conditions pertinent to major United States population centers located in the state of California." This is in contrast to the static laboratory conditions that are used during standard EPA emissions testing. The original purpose of the study was test two different NOx after-treatment technologies, and to show that auto companies are capable of making diesel vehicles that can comply with more stringent regulations. Carder's team tested two VW models and one BMW model. They found that while the BMW emitted "at, or below, the certification emissions levels," the VW models they tested did not, emitting up to 40 times the NOx permitted by the EPA.
In December, 2014, VW issued a voluntary recall of some of its diesel models to address the discrepancies brought to light by the WVU team, claiming that its engineers had a straightforward solution. Following the recall, the EPA and the California Air Resources Board (CARB) conducted tests on the emissions discrepancies, and found only a limited benefit to VW's fixes. Due to the continued findings of anomalous emissions, CARB and the EPA refused to approve certificates of conformity for VW's 2016 diesel models until VW could ensure that they would not experience similar issues. VW then admitted to designing and installing defeat devices to deliberately circumvent emissions regulations. In a September 18, 2015 Notice of Violation of the Clean Air Act to VW, the EPA stated that the defeat devices were designed to "track the parameters of the federal test procedure and cause emission control systems to underperform when the software determined that the vehicle was not undergoing the federal test procedure." This notice alleged the use of defeat devices in 2.0 liter diesel cars with model years between 2009 and 2015. On November 2, 2015 the EPA issued a second Notice of Violation of the Clean Air Act to VW, this time for 3.0 liter cars and SUVs with model years between 2014 and 2016. In total, an estimated 590,000 VWs were affected in the US.
The EPA resolved a civil enforcement case lodged with the United States District Court for the District of Northern California against VW in the form of three partial settlements. The first settlement, involving affected 2.0 liter models, requires VW to either remove from commerce or modify at least 85 percent of affected vehicles by June 2019, or face monetary penalties. In addition, this settlement requires a $2 billion investment in charging infrastructure and promotion of zero emissions vehicles and the creation of a $2.7 billion mitigation trust fund to pay for projects that reduce NOx emissions. The estimated total cost to VW is about $14.7 billion. The second partial settlement, involving 3.0 liter models, requires VW to either remove from commerce or modify at least 85 percent of affected vehicles (required completion dates differ depending on the technology of the vehicle), with fines for noncompliance. VW must contribute an additional $225 million to the mitigation trust fund. Under the third partial settlement, VW must pay a $1.45 billion civil penalty, pay a $2.8 billion criminal penalty, and ensure that emissions tests on their vehicles are performed by employees outside of vehicles design teams.
In January, 2017, at the same time as VW's criminal settlement, six VW executives and employees were indicted for their roles in the scandal. One of those executives, Oliver Schmidt, pleaded guilty. James Liang, a former VW engineer who was not named in the January, 2017 indictment, was sentenced in August, 2017 to 40 months in prison for his role in the scandal. On March 14, 2018, Martin Winterkorn, 70, the former CEO of VW, was indicted "with conspiracy and wire fraud in connection with VW’s long-running scheme to cheat U.S. diesel vehicle emissions requirements."
EPA Emissions RegulationsEdit
Since the 1970s, when Volkswagen first had issues complying with EPA regulations, the EPA has been progressive in implementing strict requirements for diesel car emissions. In 2004, the EPA introduced their Tier 4 emissions standards, which cut allowable nitrogen oxide emissions by 94 percent from the previous standards. Mazda, Honda, and Nissan, which were planning on entering the US diesel market, had difficulty adjusting to the new regulation and never moved forward with their plans. Volkswagen, therefore, become the dominant player in the American diesel car industry by using defeat devices.
Outdated Emissions TestsEdit
When testing the emissions of a vehicle, the EPA follows the ISO 8178 standards, which are static, laboratory testing procedures. Despite knowing about the shortcomings of these testing standards, the EPA uses the ISO 8178 testing standards for the majority of vehicle testing. Dan Carder stated that for car manufacturers, the use of this style of testing is "like knowing the questions that are going to be on the test before you take it." Christopher Grundler, the director of the EPA's Office of Transportation and Air Quality, admitted the EPA "needs to avoid being too predictable in our compliance oversight." Grundler responded to Carder's criticism by stating that "we want to discourage manufacturers from simple designing to the tests."
Following the scandal, the EPA stated that it has started to use on-road testing for passenger cars, and that on-road testing has always been used for heavy-duty diesel trucks, which account for 99.9% of NOx emissions in the US.
In 2008 VW executives were accused of using a slush fund for bribery, shopping-sprees, and hiring prostitutes. During the resulting trial, then-CEO Ferdinand Piëch called the alleged payments mere "irregularities," and criticized a lawyer for pronouncing "lamborghini" incorrectly, stating "those who can't afford one should say it properly." Two VW executives were sentenced following the trial.
Eddie Alterman, editor-in-chief of Car and Driver magazine, commented on VW's attitude towards EPA emissions restrictions, stating "there's a pervasive mentality that these restrictions are ridiculous and we're [VW] going to do what we want," said Alterman. "There's always been a kind of disdain for America at Volkswagen."
VW stated that, despite the emissions fraud scandal, the US is still an important market to explore.
Michael Horn, CEO of Volkswagen America from 2014 until 2016, testified before the House Committee on Energy and Commerce on October 8, 2015. Regarding VW's use of defeat devices, he alleged that "this was a couple of software engineers who put this in for whatever reason. This was not a corporate decision. There was no board meeting that approved this.”
Oliver Schmidt, a VW executive in charge of emissions testing, was charged in January 2017 for fraud. Following the charges, he claimed to be a "minor player" in the emissions scandal, and that he "relied on on explanations given by diesel experts." He was sentenced to seven years in prison following a guilty plea.
Despite these initial claims of ignorance, there was speculation that VW executives were well aware of the fraud while it was taking place. Der Spiegal, a German media source, claims Martin Winterkorn, the CEO of VW during the time the scandal was taking place, knew of the fraud before it went public. This was later substantiated by the US Department of Justice, which, in a March 14, 2018 indictment, "alleges that Volkswagen’s scheme to cheat its legal requirements went all the way to the top of the company."
After Winterkorn's resignation in 2015, his replacement, Matthias Müller, spoke on the perspective of executives at Volkswagen with NPR. When asked about the defeat devices were a technical or an ethical problem, Müller stated "it was a technical problem." He went on to say that VW "had a ... not the right interpretation of the American law. And we had some targets for our technical engineers, and they solved this problem and reached targets with some software solutions which haven't been compatible to the American law." Following continued blows to VW's reputation since the emissions scandal, Müller stepped down as CEO in April, 2018.
Ferdinand Piëch, former CEO and chairman of the VW board, sold his stake in the company in April 2017 due to disagreements with Matthias Müller, Martin Winterkorn, and other executives. Initial reports claimed that Piëch was forced out, but Der Spiegal and other German media outlets claim that Piëch's departure from Volkswagen was due to allegations that Winterkorn and other executives were knowledgeable about the scandal before it was revealed.
In an interview with the Association of Certified Fraud Examiners, Andrew Fastow, former Enron CFO convicted of fraud in Enron's own scandal, stated that "culture starts at the top, but it doesn't start at the top with pretty statements. Employees will see through empty rhetoric and will emulate the nature of top-management decision making... A robust 'code of conduct' can be emasculated by one action of the CEO or CFO. Decisions may may be the product of culture. But culture is the product of decisions."
VW's apparent dismissal of rules as trivialities showcases the cavalier attitude with which many Volkswagen executives approached American regulations. As Müller's 2018 resignation shows, VW has yet to fully rebuild the trust that it lost following the emissions scandal. Paired with their 2008 scandal, VW's actions hint at a deep-seeded corporate culture that values profit over all else.
Daniel Donovan, a former employee of Volkswagen, filed a lawsuit against Volkswagen in March, 2016 accusing the company of wrongful termination due to his opposition to the illegal deletion of electronic data. Donovan claims that IT workers at Volkswagen were deleting data after the EPA issued their notice of violation regarding defeat devices. According to his lawsuit, Donovan attempted to stop the deletion of data, was rebuffed, and was then fired "because he was about to report the obstruction of justice and spoliation of evidence to the EPA, the Department of Justice, the FBI, or other public body." The lawsuit alleges that the CIO of the VW offices in Auburn Hills, Michigan "replied to Mr. Donovan’s telephone call with an obscenity" and "wanted to know why a lower-ranking employee was telling him what to do." VW claims that Donovan's termination was unrelated to their emissions scandal. Donovan dismissed his lawsuit in June, 2016. Neither VW nor Donovan's lawyer released comments on whether VW paid Donovan a settlement to drop the suit, with Donovan's lawyer stating that "he has now voluntarily dismissed the complaint and has agreed to cooperate fully with the company's internal investigations."
As a part of VW's third partial civil settlement, they are required to establish a whistleblower system to prevent future violations. Employees will be surveyed by an independent auditor to assess VW's compliance.
On January 25, 2018, the New York Times reported that VW had funded a study to measure the health effects of diesel emissions on monkeys. The study, which began in 2014, continued to conduct tests after the defeat device scandal was made public. Tests were conducted by the Lovelace Respiratory Research Institute in Albuquerque, New Mexico, which was hired by the Europäische Forschungsvereinigung für Umwelt und Gesundheit im Transportsektor (EUGT). EUGT, a research institute funded by VW, BMW, and Daimler that dissolved in 2017, hired research groups, such as Lovelace, to run studies. In the tests reported on by the Times, ten crab-eating macaques were placed in chambers and exposed to exhaust fumes from a VW Beetle.
Sources of ConcernEdit
Unbeknownst to researchers, defeat devices were present in the VW used during testing. Thus, the fumes inhaled by the monkeys contained drastically less NOx than fumes that would have been emitted from the same vehicle driven on the road.
Conflicts of InterestEdit
The World Health Organization (WHO) declared diesel exhaust fumes carcinogenic in 2012, just two years before EUGT commissioned the monkey study. As such, studies contradicting the WHO conclusion could benefit VW and other diesel vehicle manufacturers by reassuring consumers about diesel's safety. Even after the revelation that defeat devices were present, which should have invalidated the study's results, pressures from EUGT may have motivated publication attempts. VW lawyer Michael Steinberg revealed that $71,000 of payment was contingent on publication. Lovelace researcher Jake McDonald contested that this impacted decisions, stating that work continued at the "choice of the client."
Privately funded animal studies are subject to less regulatory scrutiny than publicly funded ones. In the United States, The Animal Welfare Act requires that all animal studies be vetted by an Institutional Care and Animal Use Committee (IACUC), consisting of at least three people, for the "purpose of evaluating the care, treatment, housing, and use of animals." Public studies, such as those funded by the National Institute of Health (NIH) or the National Science Foundation (NSF), face additional oversight and must justify the use of animals on the grounds of scientific merit. For instance, NIH's Office of Laboratory Animal Welfare (OLAW) requires that "scientists must provide thorough, written justification for animal use" which are peer reviewed by other scientists who can evaluate the "scientific value of a particular animal model." While the Lovelace study met the IACUC standards, the study was not required to prove scientific merit before taking place.
The EUGT commissioned human trials at the University of Aachen in Germany concurrent to, but independent of, the aforementioned monkey trials. In the trials, twenty-five participants breathed in nitrogen dioxide (NO2) fumes at varied concentrations for three hours at a time. Participants had one study session per week for four consecutive weeks. The participants were intentionally homogeneous: overwhelmingly male, and all were young and healthy. The study's conclusions showed that the fume exposures "elicited no significant effects on lung function and cellular or biochemical effect markers," and therefore, there is not a "considerable acute adverse response to NO2 inhalation."
Frank Kelly, professor of environmental health at King's College London, commented to BBC that, provided the study was funded by the automakers, it "would not be satisfactory, it would not be independent and, if it involved humans, it would not be ethical." The concern around the human trials was not necessarily the potential harm done to the subjects, as tests like these are conducted regularly. Rather, the reservations held by observers like Kelly focus on the funding structure of the study itself: an automaker is paying for a study that may support one of its claims about its products. As the study was being conducted during the emissions scandal, it is also questionable that the study was continued despite revelations of defeat devices.
Reactions to NO2 inhalation are widely documented, with the study itself citing over thirty examples of similar studies. According to the EPA, NO2 inhalation has particularly harmful effects on the elderly, children, and those with a history of respiratory illness. Selecting a homogeneous group of subjects that are healthy seems to pervert the generalized claims made by the study, as the University of Aachen did not address dangers to the most affected groups. All of this feeds into Kelly's claim that a study like this is unethical, as it may appear to be a sponsored advertisement for a product. While the homogeneity of the group is called into question, the authors did intend for this to be the case, since having a homogeneous group creates fewer variables, which they assert makes their results more reliable.
Since diesel engines produce several different pollutants, including NO2, the EUGT may have been seeking clarity on the effects of their products. The study does mention in the introduction that, though there is a considerable amount of research on the subject, existing studies do not explain the effects of long-term, low-concentration exposure to nitrogen dioxide. The authors go as far as to call the existing research "controversial," and thus feel compelled to conduct a new study.
Executives from Volkswagen denounced the study, distancing themselves from the research team while saying they themselves did not make any of the decisions on the studies nor the methods.
Conflicts of Interest in ResearchEdit
Private funding allows industry to leverage scientific research to support agendas, just as VW sought to change perceptions that diesel emissions are harmful to health with the animal and human studies. The monkey study also exemplifies how privately funded science can be prone to biased results and poor research practices due to conflicts of interest and less regulatory oversight. Beyond these examples, industry support for academic research is widespread. A survey of faculty at medical departments across 33 American universities found that 66% of clinical department faculty had received funding from industry. Furthermore, 8% reported explicit instructions to publish research favorable to the sponsor, and 54% had firsthand knowledge of research that had been compromised by industry.
There is no single solution to the problem of industry funding in academic research. Nor would it be beneficial to completely remove industry sponsorship from research. Sustainable solutions will support the continued interaction between industry and academia, while maintaining the scientific rigor that is expected of all modern research. This includes measures such as requiring upfront disclosure of all funding sources and conflicts of interest, removing any links between funding and results, and maintaining data and procedural transparency for all research. It may not be possible to entirely remove the influence of industry funding on academic research, but being aware of industry influence can help maintain the credibility and merit of results.
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