Volkswagen Dieselgate (2015-2017): The Emissions Scandal and Settlements

Case at a Glance

Volkswagen Dieselgate Case Brief: The Emissions Scandal, the Defeat Device, and the Settlements Explained

The Volkswagen emissions scandal, widely known as Dieselgate, broke open in September 2015 when U.S. regulators revealed that Volkswagen had installed illegal software in roughly 11 million diesel vehicles worldwide to cheat emissions tests. The scandal, sometimes searched as vw emissions test scandal or simply dieselgate, cost Volkswagen more than $25 billion in fines, buybacks, and settlements in the United States alone and led to criminal charges against several executives.

This case brief covers what was the volkswagen scandal, how the defeat device worked, the full legal and financial fallout, and what happened to the people responsible. It also covers the diesel crisis that followed across the broader auto industry.

What Was the Volkswagen Scandal?

The Volkswagen scandal, also called Dieselgate or the vw emissions scandal, involved the company secretly installing software in diesel vehicles that could detect when a car was being tested and temporarily reduce emissions to pass regulatory limits. During normal driving, the same vehicles emitted nitrogen oxide, commonly abbreviated NOx, at levels up to 40 times higher than what U.S. law allowed.

The volkswagen emissions scandal case study is now widely taught in business ethics and engineering courses as one of the clearest examples of deliberate corporate fraud built directly into a physical product.

What Is a Defeat Device?

A defeat device, sometimes searched as vw defeat device or volkswagen defeat device, is software or hardware designed to detect vehicle emissions testing conditions and alter engine performance specifically to pass the test, even though the vehicle does not meet emissions standards during normal driving. The Clean Air Act explicitly prohibits the use of any such defeat device in vehicles sold in the United States.

Volkswagen's defeat device software could recognize the specific conditions of a laboratory emissions test, such as the position of the steering wheel and the pattern of the accelerator pedal, and activate full pollution controls only during that test. Once the car returned to normal road conditions, the software scaled back those controls, allowing the engine to run more efficiently at the cost of dramatically higher pollution output.

How Did Volkswagen Get Caught?

Volkswagen was caught after researchers at West Virginia University conducted independent road tests in May 2014 that found real-world emissions from certain VW diesel vehicles far exceeded the results recorded during official laboratory testing. The researchers, working with the International Council on Clean Transportation, had originally set out to demonstrate that clean diesel technology performed well outside the lab, expecting to confirm Volkswagen's marketing claims.

Instead, their results showed a massive gap between lab and road emissions, prompting further investigation by the Environmental Protection Agency and the California Air Resources Board. Volkswagen initially blamed the discrepancy on technical issues, but a company engineer formally admitted the existence of the defeat device to regulators on September 3, 2015. The EPA and CARB made Volkswagen's confession public on September 18, 2015, and Volkswagen publicly admitted installing the software in about 11 million diesel vehicles worldwide on September 22, 2015. Volkswagen CEO Martin Winterkorn resigned the following day, on September 23, 2015, while maintaining that he was unaware of the deception.

The Volkswagen Emissions Scandal Timeline

The volkswagen dieselgate scandal unfolded across several key dates between 2014 and 2017. The following timeline covers the vw scandal 2015 and its aftermath.

Volkswagen Emissions: How Many Vehicles Were Affected?

Approximately 11 million Volkswagen, Audi, and Porsche diesel vehicles worldwide were equipped with defeat device software, including roughly 580,000 to 590,000 vehicles sold in the United States. Affected models included the Jetta, Golf, Beetle, and Passat with 2.0-liter TDI diesel engines sold between 2009 and 2015, along with certain 3.0-liter diesel Audi, Porsche, and Volkswagen SUVs and sedans sold between 2014 and 2016.

How Much Did Volkswagen Pay? The Volkswagen Settlements

Volkswagen agreed to pay more than $25 billion in combined fines, buybacks, and settlements in the United States alone, making it the largest automotive fraud settlement in history at the time. The company's total global cost, including settlements in other countries, exceeded €31 billion.

On June 28, 2016, Volkswagen agreed to pay $14.7 billion to settle claims tied to its 2.0-liter diesel vehicles, covering vehicle buybacks, owner compensation, and environmental remediation funding. This settlement, approved by a federal judge, offered nearly 500,000 U.S. owners the choice of a buyback, an approved emissions fix, or cash compensation.

On January 11, 2017, Volkswagen pleaded guilty to three U.S. criminal charges, including conspiracy to defraud the United States and obstruction of justice, and agreed to pay an additional $4.3 billion in civil and criminal fines. As part of the plea deal, Volkswagen signed a statement of facts admitting the emissions cheating dated back to 2006.

Volkswagen also reached a $157 million settlement with ten U.S. states in 2017 over related environmental and consumer protection claims, and separately faced billions of dollars more in shareholder lawsuits filed in Germany.

Volkswagen Executives: Who Was Charged?

Several Volkswagen executives and engineers faced criminal charges in the United States and Germany in connection with the emissions scandal. Engineer James Liang pleaded guilty in September 2016 to one count of conspiracy and became the first individual convicted in the U.S. investigation. Oliver Schmidt, a former Volkswagen emissions compliance manager, was sentenced to seven years in a U.S. federal prison in 2017. Former CEO Martin Winterkorn was indicted in the United States in 2018 on charges of conspiracy and wire fraud, though he has remained in Germany and has not stood trial in the U.S. Audi CEO Rupert Stadler was arrested in Germany in June 2018 on fraud charges connected to the scandal.

Did Volkswagen Executives Go to Jail?

Yes, at least one Volkswagen executive went to prison in the United States: Oliver Schmidt received a seven-year federal sentence in 2017 after pleading guilty to conspiracy and Clean Air Act violations. Engineer James Liang also received prison time following his guilty plea. Other executives, including Martin Winterkorn, have faced criminal charges in Germany or the United States but have largely avoided U.S. incarceration due to jurisdictional and extradition issues, since Germany generally does not extradite its own citizens.

The Diesel Crisis: Wider Industry Fallout

Volkswagen's emissions scandal triggered a broader diesel crisis across the automotive industry, as regulators in multiple countries launched investigations into other manufacturers' diesel emissions claims. Fiat Chrysler agreed to a $515 million U.S. settlement in 2019 over similar defeat device allegations. German regulators fined Audi, Porsche, and Daimler hundreds of millions of euros each for related emissions violations. The diesel crisis contributed to a sharp, sustained decline in diesel vehicle sales across Europe, with diesel's share of the European car market falling from more than half of new sales in 2015 to well under a fifth within less than a decade.

Was Dieselgate a Case of Greenwashing?

Yes, the Federal Trade Commission specifically accused Volkswagen of greenwashing, arguing that the company deceived American consumers with a marketing campaign promoting its diesel vehicles as environmentally friendly "clean diesel" cars that met emissions standards, when in fact they did not. This greenwashing claim became a separate legal basis for consumer compensation, layered on top of the underlying Clean Air Act violations, since regulators treated the false environmental marketing itself as a distinct form of consumer harm.

Legal Significance of the Volkswagen Dieselgate Case

The Volkswagen Dieselgate case remains one of the most significant examples of corporate environmental fraud and reshaped how regulators approach vehicle emissions testing worldwide. Several legal principles stand out.

Clean Air Act Enforcement

The case demonstrated the scale of civil and criminal penalties available under the Clean Air Act for defeat device violations, and it prompted the EPA to expand real-world emissions testing protocols rather than relying solely on controlled laboratory tests.

Corporate Criminal Liability

Volkswagen's guilty plea to conspiracy and obstruction charges illustrates how corporations, not just individual employees, can face direct criminal liability in the United States for coordinated fraud carried out on their behalf.

Consumer Protection and False Advertising

The Federal Trade Commission's greenwashing claims against Volkswagen established an important precedent for treating misleading environmental marketing claims as an independently actionable form of consumer deception, separate from the underlying regulatory violation.

Cross-Border Accountability Limits

The difficulty prosecuting German executives like Martin Winterkorn in U.S. courts, due to extradition limitations, highlighted the practical challenges of holding foreign corporate leadership personally accountable for fraud committed by multinational companies.

Common Search Terms for the Volkswagen Dieselgate Case

People search for and refer to this case using many different phrasings, spellings, and word orders. Variations combining the company and word "scandal" include volkswagen scandal dieselgate, scandal of volkswagen, scandal volkswagen, volkswagen diesel scandal, vw diesel scandal, vw dieselgate scandal, dieselgate volkswagen, dieselgate vw, volkswagen emission scandal, dieselgate scandal volkswagen, volkswagon scandal, volkswagon emissions scandal, wolkswagen scandal, volkswagen's diesel emissions scandal, vw diesel emissions scandal, and volkswagen diesel emissions scandal. Variations referencing the year include volkswagen scandal 2015, volkswagen emissions scandal 2015, 2015 volkswagen emissions scandal, and volkswagen 2015 emissions scandal, while an unrelated foreign-language variant, scandalul volkswagen, also points back to this same case. Variations using "diesel gate" as two words include diesel gate, diesel gate vw, vw diesel gate, and volkswagen diesel gate, along with the misspelling vw diselgate. Question-based and summary-style searches include what was the vw scandal, what was the volkswagen scandal, what is the volkswagen scandal, what is the vw emissions scandal, what is the volkswagen emissions scandal, what was the volkswagen emissions scandal, vw scandal summary, volkswagen scandal summary, summary of volkswagen scandal, volkswagen emissions scandal summary, and vw emissions scandal summary. Case-study and academic phrasings include volkswagen emissions scandal case study, volkswagen scandal case study, and case study on volkswagen emission scandal, alongside broader terms like volkswagen white collar crime, volkswagen emission standards, emissions volkswagen scandal, volkswagen and emissions scandal, volkswagen controversy, vw controversy, dieselgate emissions scandal, volkswagen recall scandal, and vw recall scandal. Searches connected to the "clean diesel" marketing claims include volkswagen clean diesel scandal, vw clean diesel scandal, volkswagen clean diesel, and volkswagen greenwashing, the last of which reflects the Federal Trade Commission's specific deception claims against the company's environmental marketing.

Frequently Asked Questions

What was the Volkswagen emissions scandal?

The Volkswagen emissions scandal, known as Dieselgate, involved the company installing illegal software in millions of diesel vehicles to cheat emissions tests, revealed publicly in September 2015.

What is Dieselgate?

Dieselgate is the popular name for the Volkswagen emissions scandal, in which the company used defeat device software to make diesel vehicles appear compliant with pollution standards during testing.

What is a VW defeat device?

A VW defeat device is software that detected emissions testing conditions and temporarily reduced pollution output to pass the test, while allowing much higher emissions during normal driving.

How did Volkswagen get caught?

Volkswagen got caught after West Virginia University researchers found a major gap between lab and real-world emissions in 2014, leading to a formal EPA investigation and Volkswagen's eventual confession in September 2015.

How much did Volkswagen pay for the emissions scandal?

Volkswagen paid more than $25 billion in combined U.S. fines, settlements, and vehicle buybacks, including a $14.7 billion settlement in 2016 and $4.3 billion in criminal and civil fines in 2017.

Did Volkswagen go to jail for the emissions scandal?

Yes, at least one Volkswagen executive, Oliver Schmidt, was sentenced to seven years in a U.S. federal prison in 2017, and engineer James Liang also received prison time after pleading guilty.

What cars were affected by the Volkswagen emissions scandal?

Volkswagen, Audi, and Porsche diesel vehicles with 2.0-liter and 3.0-liter TDI engines sold between 2009 and 2016 were affected, including popular models like the Jetta, Golf, and Passat.

Who was CEO of Volkswagen during the emissions scandal?

Martin Winterkorn was CEO of Volkswagen when the emissions scandal broke and resigned on September 23, 2015, just days after the company's public admission.

What is the Volkswagen emissions scandal summary?

In summary, Volkswagen secretly installed defeat device software in about 11 million diesel vehicles worldwide to cheat emissions tests, was caught in 2015, and paid more than $25 billion in U.S. penalties as a result.

What is the diesel crisis?

The diesel crisis refers to the broader industry fallout from Dieselgate, including declining diesel vehicle sales, tighter emissions regulations, and investigations into other automakers' diesel emissions claims.

Was Volkswagen accused of greenwashing?

Yes, the Federal Trade Commission accused Volkswagen of greenwashing for marketing its diesel vehicles as environmentally friendly "clean diesel" cars despite their illegal emissions levels.

How many Volkswagen vehicles were part of the scandal worldwide?

Approximately 11 million Volkswagen, Audi, and Porsche vehicles worldwide were equipped with defeat device software, with about 580,000 to 590,000 of those vehicles sold in the United States.

What criminal charges did Volkswagen face?

Volkswagen pleaded guilty in January 2017 to three U.S. criminal charges, including conspiracy to defraud the United States, obstruction of justice, and importing vehicles through false statements.

What changed in emissions regulation after Dieselgate?

After Dieselgate, regulators expanded real-world, on-road emissions testing requirements rather than relying solely on controlled laboratory tests, to make future defeat devices harder to conceal.

Is the Volkswagen emissions scandal still relevant today?

Yes, the case remains a widely cited example in business ethics, environmental law, and corporate compliance courses, and it continues to influence how regulators design vehicle emissions testing protocols.

Final Takeaway

The Volkswagen emissions scandal began quietly with a 2014 university research project and exploded into public view in September 2015, when Volkswagen admitted installing defeat device software in roughly 11 million diesel vehicles worldwide. The company ultimately paid more than $25 billion in U.S. fines, buybacks, and settlements, pleaded guilty to federal criminal charges in 2017, and saw at least one executive sentenced to federal prison. Dieselgate reshaped global emissions regulation and triggered a lasting decline in diesel vehicle sales across the automotive industry.