scandal Archives - Compliance Culture

Regulatory and compliance omissions in the Volkswagen emissions scandal

The Volkswagen emissions scandal, also known as “Emissionsgate,” kicked off in 2015 when the US Environmental Protection Agency (EPA) notified the carmaker that it was in violation of the Clean Air Act. With the altered engine emissions controls, the programming misrepresented nitrogen dioxide output so that it appeared to meet US market standards. In reality, however, the real performance of the vehicles on the road without the altered programming for the testing environment resulted in output that exceeded the regulatory limit by up to 40 times. For a basic overview of the Volkswagen emissions scandal as it unfolded since 2015, check out this primer from the BBC: Volkswagen: The scandal explained.

The altered emissions results were ultimately exposed due to re-testing. The International Council on Clean Transportation accumulated research from a variety of sources which upon study showed additional emissions in road tests from those recorded in the regulatory testing environment. Once these non-conforming results were provided to the California Air Resources Board in 2014, they were ultimately escalated to the EPA, resulting in the investigation and enforcement action which led to the Clean Air Act notice of violation. The investigation conducted by the EPA demonstrated that from 2008 to 2015, Volkswagen had intentionally modified many diesel engines in its vehicles to fraudulently “pass” regulatory testing.

In the aftermath of the EPA notice, Volkswagen was subjected to investigations in various countries. The fix for the emissions issues to bring them into true compliance with the regulatory standard may cost the company as much as $15 billion or more, with fines so far in the US alone of almost $3 billion and several executives facing personal criminal charges for their role in the fraud.

One of the striking aspects of this particular corporate scandal is that as the corporate misconduct was exposed, it showed that Volkswagen took advantage of the regulatory testing by exploiting design and engineering knowledge in making engine construction choices expressly in order to deceive it. In many cases of consumer safety or standard violation recalls, the manufacturer merely fails to make required changes or delays doing so, resulting in unsafe conditions or violation of regulatory and legal requirements. Similarly, defeat devices which “trick” regulatory testing systems (actually codes programmed into the vehicles’ computerized control panels) are nothing new in the automotive industry, as explained in this Ars Technica piece.

In the Volkswagen’s case, however, as explained in this Investor’s Business Daily article, the carmaker made redesign choices to its emissions system that were not practical for business purposes but directly enabled the testing manipulation. Then, when faced with a need to demonstrate compliance in order to access the market, instead of altering planned performance or gas economy standards, the company opted to game the system with installing defeat devices on the very system it installed knowing it would need to be defeated and would enable doing so.

So why would a company make all of these conscious choices to dupe the system and spend money on deceptive systems instead of making the same amount of effort to establish real compliance and avoid the dishonesty? At its root is most commonly what was referred to in lawsuits against Volkswagen by several states as a business culture of “corporate arrogance.” As this NPR article explains in a nutshell, Volskwagen thought it could get away with the fraud because others in the industry did it too and because it was Volkswagen. The company rigged its vehicles after going to great lengths to determine that it was definitely illegal to do so, against clear legal advice and in light of full knowledge of the consequences, and in a culture of non-compliance which rewarded cheating and did not take responsibility or model appropriate conduct.

Nowhere is this values deficiency in the Volkswagen corporate culture more evident than in the reaction by the CEO, Matthias Mueller, to the public outcry in response to the fraud. This interview with NPR shows how problematic the tone and conduct at the top was in the public handling of the scandal. Rather than modelling accountability and transparency, Mueller instead insisted that there were no ethical issues at Volkswagen and that rather the emissions fraud was due to a technical problem in the company’s interpretation of US law. Mueller repeatedly asserted that the company did not lie or deceive but instead misunderstood US legal requirements, a disingenuous and unconvincing defense for a major global corporation which must contend with a complicated fabric of regulatory and legal frameworks all over the world to meet its duties in doing business.

The gap created by this purported legal misinterpretation could and should have been filled by a values-based approach, where taking corporate social responsibility for environmental impact and making business decisions based upon best collective outcome rather than ease and expediency, with some enablement of future cheating as a side benefit. Demonstrating integrity is not as simple as apologizing once you get caught, and portraying violations as mistakes is not an example of ethical leadership or sustainable business values.

For more on EPA compliance, check back on Thursday, January 25, for a round-up on current rule-making and enforcement trends at the agency.

Fraud in sports: Doping scandals

This is the fifth and final post in a series of five posts on the topic of fraud in sports. The first post, from December 5, was about cheating in marathons and how incidences of it are exposed, investigated, and disclosed to the public. The second post, on December 12, was about fraud and falsification among thru-hikers within the long-distance hiking community. The third post, from December 19, was about fraud in sports from gambling and betting. Last week’s post focused on fraud in sports via game/match fixing. Today’s post will be about major doping scandals in different sports and will discuss the ways some very high-profile athletes cheated by doping, how their uses of performance enhancing drugs were supported or not identified by various institutions, and how individuals impacted for various reasons by doping have dealt with this in the aftermath.

Doping has been a controversial topic in the sports world for decades, as scandals over the use of performance-enhancing substances in various athletic programs have recurred unrelentingly. Revelations of doping by athletes, both on their own and as part of national athletic programs that have sponsored and aided them in taking drugs to artificially aid their performance, have been in the news constantly. Heroes from sports have been knocked off their public pedestals as the truth of their cheating and drug use has been revealed. Olympians and world champions have lost their medals and records, while state athletic systems have put the chances of future athletes, now innocent of any wrongdoing, of competing on the world state at risk because of prior systematic unethical decision-making. Athletes who competed “clean” have been robbed of their moments of glory and missed out on professional opportunities they would have had, if they had not been bested by other athletes competing unfairly while taking performance-enhancing drugs. Sponsors have invested in athletes based upon unreliable, misrepresented statistics. Above all, the integrity of the game for other participants as well as spectators has been impaired and thrown into great doubt and uncertainty.

The ways athletes dope are as varied as the sports and events in which the fraud takes place. The one reliable fact about the fraudulent use of performance-enhancing drugs in professional sports is that ongoing administrative efforts to test for it and oversee institutional protections against it are seriously lacking. Regulatory bodies, whether part of the athletic programs or connected to national programs or international organizations, are often inadequately supervised, incompetent for the task, or insufficiently resourced. Until major change takes place in the control frameworks and supervisory structures which exist to protect the integrity of sports from cheating and dishonesty, doping scandals will continue to undermine the credibility of athletic programs and events.

The Russia doping scandal has been in the news unrelentingly for several years, stemming from accusations of state-sponsored doping during the 2014 Winter Olympics in Sochi, Russia. Claims of systematic doping in Russia, supported by the state system there which for decades has been well-known as one of the most intense and involved national programs in the world, have dogged the state officials, the athletes both from past delegations and with future ambitions of competing, and the International Olympic Committee (IOC). After investigations which have been dogged every step of the way with unreliable information from state-sponsored anti-doping testing centers and repeated discrediting of various athletes from past Olympics, the IOC decided to ban Russia from sending an official delegation to the 2018 Winter Olympics in Pyeongchang, South Korea. Russian athletes will still be eligible to attend as neutral delegates, but pride of representing their country or the opportunity to stand on a medal podium for it will not be possible. This story will continue to unfold and promises to hold only further dishonor and disappointment on many sides: Russia doping scandal
For sure the continuing drama with Russia’s state sport system will go on right away, as Russia is hosting the 2018 World Cup. This creates an uncomfortable situation for FIFA. In the aftermath of the IOC banning Russia from the 2018 Winter Olympics under the cloud of doping suspicions, public outcry has grown for FIFA to consider banning or punishing Russia in the 2018 World Cup as well. This is a considerably more awkward proposition, as Russia is the host of the upcoming 2018 World Cup, and FIFA is no stranger to its own controversies from legal accusations of corruption and bribery by its officials in various countries. It is difficult for FIFA to ignore that the current controversy around Russia stems from when Russia hosted the Olympics in 2014. Russia hosting the World Cup in 2018, then, is fraught with concerns about integrity of game play if the host country fields a team. Barring the Russian delegation from competing in an event their country is hosting is hard to imagine, but may be just the sort of consequence that could make necessary change begin to take root: After IOC Bans Russia From Winter Olympics, FIFA Has To Decide About World Cup
Despite his once-storied history as a cyclist, cancer survivor, and inspiring public figure, Lance Armstrong is best-known now for something much less honorable. His enduring legacy as of now is of having doped for years, evaded being caught by any testing efforts, denied it constantly and extremely publicly, and then faded from the public eye upon convincingly being exposed as a cheater and a liar. While much has been written about the puzzling and complex psychology of someone who would pull off such a brazen and persistent fraud while holding himself out as the paragon of honesty and motivation for achievement, one of the more interesting questions has always been how he got away with it for so long. It was definitely a team effort, and subsequent reports have shown that indeed Armstrong and those who supported him and benefited from his ongoing performance created a wide-spread doping program in which they studied and exploited weaknesses in the anti-doping system and brazenly avoided detection and testers: Report Describes How Armstrong and His Team Eluded Doping Tests

Years after his precipitous fall from grace, Armstrong is seeking to rehabilitate himself in the public eye by doing a podcast and seeking a return to his position as the foremost expert in Tour de France inside knowingly and cycling expertise. With his race victories erased by the disclosure of his doping that got him to them, Armstrong is seeking both a platform and an identity, and wants to connect both to the sport in which he was once an idol. However, the dishonesty of his eminence in the Tour de France while he was cheating to sustain his achievements make it difficult to imagine redemption or even revisionist acceptance of his actions to bring visibility to the sport of cycling: Lance Armstrong: ‘A man with no platform is a lost man’

Chris Fromme is a successor to Lance Armstrong in the world of professional cycling. For years, cycling has been tormented by disclosures of doping and the impact of drug abuse on the sport. Athletes have been discredited and records vacated seemingly without end. Fromme is one of the stars of a cycling squad, Team Sky, which is very vocal about their zero-tolerance policy for doping and their commitment to clean racing. So, if his drug test results that indicate he’s doped are upheld, he could be subject to a yearlong ban and major reputational risk for both himself and his team. Fromme is arguably the biggest superstar in cycling since Armstrong, so if he ends up discredited too, then professional cycling will have a major existential crisis on its hands. An overhaul of cycling’s doping rules and enforcement practices to improve and simplify doping regulations could both improve credibility and ensure more transparency and clarity in the system in the future: The Only Solution To The Chris Froome Problem Is The One Cycling Will Never Accept
Like cycling, track and field is another sport which has been oppressively troubled by allegations of doping and dishonesty. Athletes in track and field were disproportionately impacted by the Russian doping scandal as it unfolded during the 2016 Summer Olympics in Rio, Brazil and showed that the world records, qualification times, and even prior medal-winning races lacked integrity due to the participation of athletes who were on drugs. Many track and field stars, including some whose own careers had been negatively impacted by dopers who won medals and impacted sponsorship and professional chances they should have had, thought this was the moment for reform in anti-doping supervision and regulation. However, this change has not come, and the opinion of athletes in the sport is unanimously that current drug testing schemes and rules are inconsistent and insufficient, do not work or represent the interests of athletes, and are therefore not fair to anyone: We Asked Veteran Track & Field Athletes How To Possibly Fix The Doping Problem

One possible solution which has been bandied about is a reset of the annual records in track and field events to reflect only those from after 2005, which is when new anti-doping standards in track and field were implemented. This may be an attempt at radical fairness, but it may be too much about optics and not enough about substance, and therefore not the right move to truly address and promote credibility in the sport: Track And Field May Scrap Its Records Because Of Doping Scandals. Is That A Good Idea? Newer testing technologies, re-testing of old results to catch and bring to justice prior cheaters, and cultural encouragement of whistleblowers could all be better to improve the odds of catching sports dopers or discouraging them from cheating at all: Sports Doping Cheats Fear Whistle-Blowers and Retests

If you enjoyed this series, look back to the ethical leadership in sports coaching series from last year. Check out the last post in that series, which includes links to all the previous in the set. In March, a new series on sports and ethics will begin, this time focused on integrity in game play and discussing topics such as the ethics of tanking, referee bias, penalty embellishment, and much more.

Fraud in sports: Game fixing

This is the fourth in a series of five posts on the topic of fraud in sports. The first post, from December 5, was about marathon cheaters and how the frauds they perpetrate are discovered, investigated, and reported. The second post, on December 12, was about fraud and falsification in the thru-hiking community. December 19’s post was about fraud in sports gambling and betting. Today’s post will focus on fraud in sports both in history and current-day worldwide via game fixing. The fifth and final post in the series, on January 9, will be about major doping scandals in different sports and will focus on the ways athletes cheated by doping and how their use of performance enhancing drugs were supported or not identified by various institutions.

Game fixing is when a match is played to a final result which is partially or totally pre-determined. Players, on their own or in conspiracy with others, may do this in an ongoing conspiracy in order to make money for and from gamblers. Coaches and team administrations may also orchestrate losses for various reasons, including to impact their odds for the next season, including in draft position as well as for a friendlier schedule or playoff access. For purposes of this post, game fixing also includes institutional operations to spy and cheat by teams personnel and coaches, with or without the cooperation of referees and/or players.