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BACKFIRED: When VW Lied to America tells the inside story of the VW scandal as it unravels beginning at West Virginia University in 2013 where a group of unsuspecting students accidentally discover the defeat device while doing rare on-road testing. They immediately share their stunning discovery with CARB (California Air Resources Board) that verifies the findings and engages with the EPA and DOJ to plot carefully filing suit against VW's top executives. VW is slapped with the largest fine in US auto history: $15 billion in what's now known as 'Dieselgate.' And, it gets worse. Most recently, it was discovered that VW secretly tested emissions from defeat devices on innocent monkeys at a lab in New Mexico.
From West Virginia to California, to Washington DC, to Germany and Paris, we hear from those who broke the case and sought justice. BACKFIRED will leave viewers with new insight into the role of regulators, the power of money, and the willingness of major corporations knowingly to endanger the health of millions and to increase carbon emissions dramatically. Most important, it will inspire viewers to think about our obligation to our children and to continue the fight for clean air and a livable planet.
'Sustainable business and technology are a critical movement for our planet. The VW scandal warns us to be vigilant to the outright deception that some companies will stoop to in order to appear green. Backfired reminds us that those in powerful management positions will face pressures to engage in illegal and immoral actions. It also puts the VW scandal into the context of history, showing us all that came before to create a cleaner environment and how this scandal may serve as a pivotal event for continuing that path through ever greater efforts at sustainable business and technology.' Andy Hoffman, Professor of Environment and Sustainability, Professor of Sustainable Enterprise, Professor of Management and Organizations, University of Michigan, Co-author, Flourishing: A Frank Conversation about Sustainability
'Backfired is much more than a study of colossal corporate malfeasance. It is also a morality play about the state and federal regulators who uncovered the cheating and fought for just settlements, as well as the need for the automobile industry to utilize renewable energy sources. Although this gripping documentary presents the depressing story of the cultural and managerial factors at VW that produced the Dieselgate scandal, it also includes an inspiring vision of progress toward environmental sustainability.' John R. Boatright, Professor Emeritus of Business Ethics, Loyola University Chicago, Author, Ethics and the Conduct of Business and Ethics in Finance
'Terrific...captures the outrageous dissembling and theft of health committed by VW.' Dr. Dick Jackson, Professor Emeritus, UCLA Fielding School of Public Health
'An amazing job. None of the other reports I've seen including my own put the Volkswagen scandal into the context of the whole clean air movement. There is a lot of fascinating detail and I learned a lot.' Jack Ewing, New York Times, Author, Faster, Higher, Farther: The Volkswagen Scandal
'In this struggle where failure is not an option, we must either win each battle or learn from our losses what we need to win the next one. The environment was the loser for over a decade due to VW's cheating. This film can help us learn from that defeat in terms of what we need to move ahead in the classroom, boardroom, and regulatory policy making arenas.' William Newman, Professor of Management, Miami University
'Volkswagen's lies and deceitful behavior rival the villainous exploits of both Enron and Bernie Madoff! VW knowingly produced 11 million cars with software that falsely altered their pollution exhaust rate. This case needs to be carefully studied by all students of business and business ethics.' Al Gini, Professor of Business Ethics, Loyola University Chicago
'An important story. As a researcher of behavioral ethics, I have found many anecdotes of goals and incentives increasing unethical behavior of individuals within organizations. The VW scandal is even more abhorrent - they purposely concealed test results to increase sales and profits. Backfired highlights the impact of the VW goal of becoming the top automobile company in the world. Well, they achieved their goal - but at what cost?' Dr. Lisa Ordonez, Professor of Management and Organizations, Professor of Marketing, University of Arizona
'If you care about the air you breathe and want to know what some companies are doing to make your air worse, while claiming to make it better, Backfire, which tells the story of what US regulators are doing to call those companies to account and give us the clean air we deserve, is for you.' Alan Morrison, Associate Dean for Public Interest Law, George Washington University
'An engaging introduction to one of the most shocking acts of corporate deception since Enron. A 'must' case to discuss for anyone teaching ethics, for any business leader trying to run an ethical organization, or for any community interested in creating a more honest and open society.' Nicholas Epley, Professor of Behavior Science, University of Chicago
Bell, Dale (film writer)
Bell, Dale (film producer)
Bell, Dale (film director)
Bell, Dale (editor of moving image work)
Friedman, Margie (film producer)
Olney, Warren (narrator)
Camera, story editor: Dale Bell; editor: Ralph Herman.
Distributor subjectsActivism; Business Practices; Capitalism; Clean Air; Climate Change/Global Warming; Energy; Environment; Environmental Engineering; Ethics; Government; Health; History; Law; Marketing and Advertising; Political Science; Pollution; Science, Technology, Society; Toxic Chemicals; Transportation; Urban Studies; Western US
Speaker 1: At the 1900, Paris World's Fair, the inventor Rudolf Diesel wows the world with his brand new engine, run on of all things, peanut oil, not gasoline, an early activist for cleaner air, the disruptor who wants to reduce carbon. Now, more than 100 years later. His name smeared by the scandal known around the globe as diesel gate.
John Cruden: They were arrogant enough to think, we're better, we're smarter, we're not going to get caught.
Cynthia Giles: They instructed people to destroy documents.
Speaker 1: Lethal pollution of the air.
Juergen Resch: They have no problem to poison people.
Speaker 1: Eleven million consumers deceived by Volkswagen, thinking they were going green with clean diesel.
Hauper Baumner: People paid for something that was not correct.
Speaker 1: The largest auto scandal in the world.
Mary Nichols: This wasn't an accident, it was deliberate.
Speaker 1: Uncovered and prosecuted by a relentless team of investigators.
Cynthia Giles: We were on to them, they were doubling down and cheat.
John Cruden: We're going to take another step in litigation that you won't like.
Speaker 1: California in the forefront.
Gray Davis: We became a leader out of necessity.
Arnold S.: We said, they're going to take you to court to prove to you that it is a pollutant.
Jerry Brown: No matter where you live, you're under the atmosphere.
Speaker 1: Taking a lead with Governor Jerry Brown to fight for the survival of our planet and stop man made global warming.
Jerry Brown: There's nothing we can accomplish.
Speaker 1: Each determined to confront Volkswagen's greedy, deliberate, fraudulent scheme that endangers global health for profit and world domination and backfires.
Elizabeth C.: You break something, you have to fix it.
Speaker 1: Rudolf Diesel's engine, first invented in Germany in 1893, promise to disrupt transportation technology than powered by horses and steam. Compared to gasoline, some diesel motors can generate more driving force and fuel efficiency, exactly why they energize heavy transport, trucks, rail, ships and equipment today.
Mary Nichols: There are many engineers who sincerely believe that diesel is a better solution for engines.
Speaker 1: Volkswagen, one of the largest global companies was more attracted to diesel than its competitors.
David Kiley: They're really not a big player at all in electric or in hydrogen or in hybrids.
Speaker 1: But, in the valuable US market where VW's were the darlings of the 1960s and 70s, VW sales fell far behind other automakers at the end of the 20th century.
David Kiley: They've got big markets in Mexico and in Latin America and China. In the US, it's not happening.
Speaker 1: What to do to become number one automaker?
Martin W.: Our goal is to put Volkswagen baked among the very best in this key market.
Speaker 1: 2008, Martin Winterkorn, VW's new CEO reveals a bold and simple plan. His company would adapt diesel technology from the heavy duty transport to the smaller engines used in cars, then sell the new concept as environmentally clean.
Female: I'll prove it to you. Look what she's doing. See, how clean it is?
Speaker 1: Accelerate past VW's competition to dominate the global market in a few short years, most importantly, in the US.
David Kiley: Volkswagen set a goal, a million cars a year to increase sales by 750,000 a year would have been nothing short of a miracle.
Speaker 1: VW would first miniaturize its diesel technology to meet European emission standards then modify further for the more stringent US Environmental Protection Agency requirements. European regulators permit all automakers to test and certify their own cars for emissions in a laboratory setting only. One acclaimed engineer, Axel Friedrich in Berlin has monitored automakers for decades. He tests clean diesels under road conditions, big differences in emissions between the lab and real world driving appeared. Nitrous oxide or NOX generated on the road exceeds European limits, he notifies a US regulator.
Speaker 1: In Washington DC, the International Council on Clean Transportation, the ICCT notes the discrepancies, curious it requests proposals to study diesel in the US. The environmental group offers just $70,000 for this new research contract in 2013.
Dan Carder: Yeah.
Speaker 1: That's enough for Dan Carter, chief engineer at the West Virginia University Center for Alternative Fuels, Engines and Emissions. He needs funds to support his small grad student team. They respond and win the routine contract to research diesel emissions from some European vehicles. They love diesel.
Dan Carder: We're always looking for work and we thought it would be a good way to promote, pass new car diesel in the US and then we could probably generate a few papers that would be interesting.
Speaker 1: Diesel engines produced from the massive German engineering culture born after World War II are now scrutinized on a campus in West Virginia where eager, inquisitive grad students innocently prepare for their diagnosis. They have been trained in a laboratory criteria that conform to California standards, their benchmark but the real question is how do they do on the road? To verify the quality of the vehicle systems, Dan needs a trusted partner with more resources than his tiny lab. He calls a colleague now working in California. The California Air Resources Board Deputy Executive Officer Dr. Alberto Ayala, responds.
Alberto Ayala: We got a phone call and they said, "We want to understand these issues, we would love to have CARB collaborate with us."
Speaker 1: Together, they agreed to test more diesels in the CARB lab and on some West Coast roads, as in Berlin results from the road differ.
Dan Carder: It was a natural fit when we were able to start identifying vehicles in the LA area.
Alberto Ayala: We typically test hundreds of vehicles a year and the more we test the better because our business is data.
Speaker 1: Their findings, the same standard measuring device registers excessive and potentially lethal NOX particles.
Jack Ewing: Sometimes 40 times as high as they were supposed to be and they were like, "What's going on?"
Speaker 1: The grad student team reports their suspicion in May 2013. What's wrong with the diesels? Could it be a software glitch.
Arvind T.: We were thinking, it's a ... design flaw is part and parcel of the automotive industry. We put out a vehicle that could be multiple flaws that are found only during real world operations so we thought it could be something in that direction.
Dan Carder: Our role was the same objective role as it's always been. Satisfy our sponsor who was ICCT, write a report, get the data in the public domain and figure out what the next steps are.
Speaker 1: Still the questions about the high NOX emission levels remain.
Alberto Ayala: The things that we were seeing did not make sense.
Mary Nichols: Alberto decided that this was really a big deal and that he was going to spend time and investigate this thing in depth.
Alberto Ayala: At the very beginning, it was always engineers working with other engineers on a common solution. We kept going back to the company imposing some straight up technical questions.
Jack Ewing: Volkswagen really went into full cover up mode, engineering explanations that on closer examination didn't make any sense.
David Kiley: Cadre of engineers, trying to cover their butts.
Mary Nichols: There was suspicions that there might be problems with the diesel engines but we weren't even sure that it was just Volkswagen.
Alberto Ayala: That went on for 12, 15 months.
Speaker 1: CARB updates the environmental protection agency on the growing discrepancies about Volkswagen. EPA and CARB meet with VW.
Cynthia Giles: We view this as a direct assault on the integrity of our vehicle emission standards.
Mary Nichols: We are in communication with them about a bunch of issues all the time. It was very easy once we thought we really knew what was going on to just say, "Hey, this is bigger than you think."
Cynthia Giles: It was very important to us that companies that are supposed to, meet their requirements under this law that are designed to protect people's health.
Mary Nichols: Took testing multiple vehicles both in the laboratory, on the dynamometer and in the field and each one of those cars has to be obtained. We don't just have a fleet of them ourselves and we don't get to go out and say, "Hey, you buddy, pull over, we're taking your car back to the lab to test."
Speaker 1: VW does announce a recall of their so called clean diesels but the move is a decoy that does not stop CARB from conducting more lab tests with vehicles that still fall below standards.
Male: What if I told you that every time a Volkswagen hits 100,000 miles, a German engineer gets his wings.
Speaker 1: The accelerating investigation does not block the virtuous angels of VW from growing wings during the 2014 Super Bowl. The VW marketing strategy soars, like the Love Bug be reborn.
Male: I hate these wingy thingies.
Speaker 1: November 2014, Motor Trend Magazine awards the VW Golf as the car of the year. VW's ambitious goal of being the largest automaker in the world is within reach but troubling data stacks up. Car that EPA find more evidence of serious problems, they apply pressure, VW tries to hide. Finally, the agency has notified VW that they cannot sell or unload new cars. In September of 2015, after being publicly accused by EPA and CARB, VW executives admit, they have equipped their vehicles with a defeat device to bypass emission control.
Michael Horn: Let's be clear about this, our company was dishonest, we've totally screwed up.
Speaker 1: In this paper ads, they offer their apology. A $500 gift card to owners, a mask that for almost 10 years disguised the largest scandal in automotive history is ripped away by Dan Carder and his family of grad students.
Dan Carder: I was here in the lab. My phone was charging and noticed I've missed a number of phone calls. The numbers weren't recognizable, as I set the phone down, started to walk away, it rang again. Picked the phone up and it was a reporter saying, they would like to speak to me but the reporter said, "Do you have any idea what I wanted to speak to you about?" I said, "I have no idea."
Female: The fall out over Volkswagen ...
Male: The Department of Justice is opening a criminal investigation ...
Female: Because they've been cheating for years.
John Cruden: My first inclination was not, "Oh, this is a terrible company." It was just the opposite, I was shocked. Absolutely shocked.
Mary Nichols: I can't tell you what my immediate reaction was because it's not printable or usable on screen.
Dan Neil: They had nowhere to hide, no cover at all. They were caught red-handed. Now, that is important because there is no dimension in this discussion, where you can think, well, they were trying to do their best, people were hurried, mistakes were made. No, this was clearly a sin of commission.
Astrid Doemer: I think many Germans have a sense of almost pride that Volkswagen build this reliable good cars and so for that company, to come out and admit that they have installed defeat devices and have been doing that for years, I'm so shocked, I think many Germans were shocked to hear that.
Nancy Sutley: It is really mind-boggling and that a corporation that big and that's been around for decades and decades would resort to that. We tried to get away with that. It's really kind of dumbfounding.
Speaker 1: More than half a million cars in the US are affected. Globally, the figure reaches 11 million vehicles. Volkswagen brands have been disgorging as much as 40 times the legal limits of noxious fumes and pollution into the atmosphere for almost a decade and it is being discovered Volkswagen may not be the only fraudulent automaker. Still Volkswagen is rank first in sales ahead of Toyota in 2016 but California's relentless investigation has set the stage for holding VW accountable.
David Kiley: I own a Volkswagen diesel and for about two years, I noticed that the rear bumper, kept getting filled with black soot.
Barry Capello: Every VW diesel passed the smog check. Now, you can't have 100% pass rate without somebody going, there's got to be something fishy here.
Dan Neil: Anybody with the background in engineering could look at those numbers and go, "Wow are you kidding me?"
Elizabeth C.: We don't know why they thought they could get away with it. We know why they did it. It was a monetary decision. We now know how they did it through the defeat device.
Gray Davis: Cheating regulators and cheating the government of the United, you are basically making more difficult for young people to grow up healthy.
Astrid Doemer: This case has shown that we need regulators. I mean, we have regulators and still a company managed to cheat.
Mary Nichols: People were really angry and upset because they felt, they had been duped.
Dan Neil: To have a green car and then they find that it's not that at all, it's exactly the opposite.
Cynthia Giles: We were determined that we're going to make this right.
Speaker 1: California in the 1960s, VW is everywhere.
Felipe Munoz: Ever since I was a teenager, I've been loving these cars, they're easy to work on, they're fun to work on.
Tristan H.: It puts a smile on everybody's face, no matter what kind of car they're driving.
Gil Lyon: Once you drive a VW, it's completely different type of car.
Speaker 1: Who's surfboards on buses, a carefree life, everyone has bugs they love and caress.
Perry Howard: I was just hatched the second I got it, because they're so different from anything.
Mary Nichols: I wasn't ever one of the people who rode around the country in a flower decorated VW bus. I had a motorcycle.
Speaker 1: Every single automotive engine including Volkswagen's was dirty. Southern California is the original capital of smog, more people, more cars, more trucks, more toxins, more pollutions, the dirtiest air in the nation. The first environmental report card is issued in 1592, Juan Rodríguez Cabrillo, commanding a small Spanish armada on the coast, notices an inversion layer, trapping smokes from campfires. He calls it Bahía de los Fumos or Bay of Smokes. He gives it an F. California, you have a problem.
Male: Los Angeles suffers the worst blanket of smog in its history.
Speaker 1: 1940s, factories and oil refineries are guilty, after World War II mix in auto emissions.
Gray Davis: In those days, there were no regulations on cars, on factories, to speak of.
Speaker 1: To combat the build up of statewide smog, officials push for local districts to identify, monitor and control the growing crisis. It is a first tiny step in regulation.
Gray Davis: The air was orange. I don't mean light orange, I mean like burnt orange.
Mary Nichols: As somebody who came here from Northeast, certainly the first thing that I noticed about Los Angeles was smog and how awful it was.
Speaker 1: In 1967, Governor Ronald Reagan signs a bill creating the California Air Resources Board or CARB. It's mandate is to reduce air pollution and protect public health by regulating all sources of mobile and stationary emissions and to enforce new laws.
Nancy Sutley: People in Los Angeles didn't know there are mountains surrounding the city 30 years ago.
Speaker 1: California's new environmental and air pollution strategies might be butting in 1968 but those cubed VW bugs embraced by Hollywood seductive storytelling entice lovers and buyers as part of a very clever marketing campaign. A year later when policies and enforcement are in their infancy throughout the state, a devastating oil spill off of Santa Barbara Coast sparks a national wake up call. Oil and air kill people and wildlife. The outcry from the west coast echoes nationally. The Silent Spring written earlier that decade by Rachel Carson generates overnight a very vocal manifesto to protect the earth.
Male: Lift up on Apollo 11.
Speaker 1: Center of 1969, mankind take the giant step to see our earth from the moon, live on television. Brightly flowered Volkswagens flock to the Woodstock festival as their mecca. Both views of the planet inspire the first Earth Day in 1970. Within two years, congress creates the Environmental Protection Agency, the EPA. There federal research, standards and enforcement can be activated to protect every citizen's civil right to clean air and public health.
Jim Newton: Citizens now suddenly had ... and municipalities had real tools. I think it's at that point that there became a heightened environmental consciousness in California, an aggressiveness with respect to air pollution.
John Walke: The first prosecution of automakers for violating the Clean Air Act happened in 1973. Who is the culprit? VW.
Speaker 1: Still smog accelerates its buildup in the most popular state. CARB asked the federal government to issue a waiver for California to create emission controls, more strict than the national standards. It is granted. Soon, citizens and environmental organizations anywhere can leverage the court as they can with civil rights issues to tighten their pollution standards. Enter Mary Nichols, a recent law school graduate whose family had encouraged her civil rights activism at the I Had A Dream speech. She joins the Center for Law in the Public Interest in 1972. As a new resident of Los Angeles, she files suit against the US EPA, demanding that the state of California create a stronger plan to reduce smog.
Mary Nichols: Until I got hooked up with the Center for Law in the Public Interest and began my career as an actual practicing lawyer that smog became my topic. At that point, it was easy to be an expert because nobody else knew anymore about this than I did.
Speaker 1: The cities that Mary represents win their lawsuit. Jerry Brown who wins the election for governor in 1974, takes notice. Governor Brown appoints Mary to the board at CARB, even before he takes office.
Jim Newton: Yeah, if I were the governor of California and she had just brought a lawsuit against the state of California, I think I might rather have her working with me than against me.
Willie Brown: When Jerry Brown replaced Reagan, you'd have to say, in California, that was the beginning of a real significant environmental movement.
Speaker 1: Four years later, Governor Brown names Mary Nichols, CARB chair. California builds its future led by Chair Mary Nichols, CARB begins to merge science, technology and policy, under the microscope of one agency. As California population explodes, its air quality implodes. Though newer engines are cleaner, there are more of them. CARB must adapt tougher standards to reduce deadly pollution everywhere including vulnerable communities.
Nancy Sutley: CARB as a regulator is really the eyes and ears for the public and they have really over a generation more develop amazing technical capability to understand how we can use technology to reduce air pollution.
Gray Davis: Legislature feels it's fine to defer the nuts and bolts to CARB.
Kevin DeLeon: It's CARB's legal responsibility to set in motion our ideas and our policies and CARB has a huge role in California and they play even a bigger role outside of the state of California.
Nancy Sutley: The automakers said, they can't do it, it's too expensive, people will never be able to buy another car. None of that was true.
Speaker 1: By the mid 1990s, sky is clear, mountains re-appear. CARB's tailpipe rules and regulations maybe reducing smog levels but California remains home to some of the nation's polluted cities. In 1998 CARB cites health studies that show how heavy duty diesel exhaust soot and NOX are becoming the most dangerous pollutants. Diesel exhaust from autos generated primarily by VW and other European manufacturers is found to be more lethal than fumes from gasoline engines. The CARB study is a primer for what is to come.
Richard Jackson: The soot that you can see usually is filtered out by your nose and your upper airways. The really tiny ones, we call them PM 2.5 can move right into the lungs, can actually cross into the blood itself.
Bonnie Holmes: They cause a number of illnesses and they lead to premature deaths, they can cause lung cancer. They impact the growth and development of children.
Male: Per pound of body weight, children breathe three times as much air as an adult does and when exercising 20 times, because their lungs are still developing, they are even more susceptible.
Speaker 1: In Germany, Volkswagen and other automakers meet to steer around the less stringent, European emissions regulations. Volkswagen starts work on but it will sell later as clean diesel. Meanwhile, back in Sacramento, a new governor, Gray Davis, eagerly grabs the environmental baton from Governor Brown in 1999, looming public health hazards of global warming and greenhouse gases now demands stronger action.
Willie Brown: He had been Jerry Brown's pupil staff so he had been a part of all the thing and so the environmental protection programs and that agency that was created, and that unit of government that had come about during the Brown administration and ultimately, it became a key in Gray Davis' administration.
Speaker 1: Assemblywoman Fran Pavley sponsors assembly bill, 1493 signed by Governor Davis to reduce automotive greenhouse gases by almost one third.
Fran Pavley: These are the goals, this is putting it in statute. These are the policies in general and allow agencies such as the resources board to figure out exactly how they do that.
Kevin DeLeon: Policymakers have sent a very clear market signals that we want the technology to start here because we're unafraid. We're unafraid and we're willing to push the envelope.
Jim Newton: Governor to governor, it has really crossed some of the typical ideological lines of governor. This is a very environmentally conscious state.
Speaker 1: Governor Davis is recalled in 2003, replaced by Arnold Schwarzenegger.
Jim Newton: Schwarzenegger was I think a fairly moderate figure and one of the ways he demonstrated that was a real belief in environmental protection.
Speaker 1: With a surprisingly pro environment agenda, he re-launches California's request the EPA for a waiver that will give the state the right to regulate carbon dioxide emissions from tailpipes but under President George W. Bush, EPA denies arguing that CO2 is not a pollutant nor a cause of global warming. CARB appeals to the Supreme Court.
Arnold S.: We said, we're going to take it to court to prove to you that it is a pollutant. If it wouldn't have up to me, we would have just hooked up a few of those politicians who said no to the exhaust pipe of a car.
Speaker 1: Next, Schwarzenegger issues an executive order that sets new targets to reduce emissions. Again, Fran Pavley responds this time with Assembly Bill 32, the First Global Warming Solutions Act to address greenhouse gas emissions from all sources.
Gray Davis: AB 32 was much broader. It tried to reduce emissions from industry as well as the transportation sector.
Speaker 1: Her law also establishes the first cap and trade system at CARB. Cap and trade is a market based approach to controlling pollutions through economic incentives. It sparks innovation in the state's green economy. Another win in April 2007 when the US Supreme Court rules against EPA. California can now enforce its own regulations on CO2.
Arnold S.: What the, I mean, how much brainpower does that take to figure out?
Speaker 1: The state clinches world leadership in climate change policy and regulation. To cap his momentum, Schwarzenegger reaches across the political aisle to appoint Mary Nichols to CARB. It is her second term as chair.
Kevin DeLeon: Governor Arnold Schwarzenegger, Speaker Emeritus Fabian Nunez, Senator Fran Pavley, it was an incredible troika of three leaders that really worked together in a very bipartisan manner.
Speaker 1: Within a year, Volkswagen engineers and Wilsberg with long time partner Bosch are busy implementing their scheme to install defeat devices across their product line. The EPA will later call their action collusion. In 2010, twice governor of California Jerry Brown runs for office a third time and wins. Volkswagen's driving obsession to dominate the auto market on a global scale takes two more strange terms, even while they are under the scrutiny of CARB's technical team, VW proudly unveils what they call their most sophisticated testing facility showcasing their "clean" diesel technology. Here, technicians analyze defeat devices on diesels made on the US that are shipped to Europe where regulations are more lenient.
Speaker 1: The top secret facility is in Southern California, Mary Nichols' backyard. At another US laboratory, this one in New Mexico, VW joined by BMW and Daimler pays for new respiratory test in the name of science. To produce research results, that make diesel emissions more acceptable, lab technicians forced 10 Java monkeys sealed in glass chambers to inhale lethal diesel fumes from a 2014 VW Beetle. While car tunes entertain and researchers collect the results, monkeys inhale for hours. The results of this study are never published, why? VW lies again as they have done to millions of customers.
Speaker 1: They do not tell the researchers that the diesel engine is rigged with a defeat device, the test were manipulated. After years of this kind of monkey business, VW's lack of moral compass is confronted by the United States in 2015. Finally, in September of that year, in Washington DC, the EPA confronts Volkswagen's ruthless assault on the nation's public health.
Cynthia Giles: We were astonished and furious that they had taken these actions to put the health of Americans in jeopardy and to undermine the integrity of these important standards.
Speaker 1: Inside the US Department of Justice officials from EPA, CARB and justice face an array of Volkswagen executives. Cynthia Giles and her team with CARB's Mary Nichols present their proposal for a civil settlement.
Cynthia Giles: First part was get those polluting vehicles off the road. Second was they got to make right the pollution that they caused and the third part was, as incredible it may seem, the company had been marketing these vehicles as green. You got to fix that.
Speaker 1: Five hundred thousand vehicles in the US are involved. Across the US, owners of VW diesel feel betrayed and cheated. The promise of clean emissions was nothing but a corporate smokescreen.
Mary Nichols: They were dealing with a group of very experienced, knowledgeable and determined air regulators who were going to force them to acknowledge what they had done and to pay the price for it.
John Cruden: Our first priority was in fact, to protect the American public, keep people from being sick and get those cars either off the road or fixed.
Speaker 1: Across the US, owners of VW diesels feel betrayed and cheated. The promise of clean emissions was nothing but a smokescreen.
Jonathan Perloe: It made me really mad. Here's a company that not only is sort of selling a fraud but they're trying to market as being environmentally friendly by calling it clean diesel.
Speaker 1: In the United States, owners can go to court and fight. Government agencies defend the right of citizens. Consumers are not alone. In Europe defense is not so reliable. Regulation, protection and enforcement in the auto market need more teeth. Berlin in 2016, heart of the European auto industry, hands some people charge where competition among the big five auto makers appears non-existent. The Christmas spirit may decorate trees and churches may welcome visiting celebrants of Germany's glorious heritage but here, where people ponder their legacies, many thoughts of diesel gate cannot be far away with its consequences across the local town squares dominated by automotive symbols.
Speaker 1: Though huge fines on automakers are paid off as mere parking tickets, beneath the twinkling lights some people say, citizens aren't outraged and almost impotent.
Jack Ewing: Fifty percent of the cars on the road are diesels. Almost all the manufacturers were emitting more pollutants on the road than the test were showing.
Speaker 1: For 20 years, Juergen Resch has led a prominent German Environmental Organization fighting against all automakers for cleaner air.
Juergen Resch: Thousands of people every year in Germany are killed by NO2 and hundred thousands are suffering.
Speaker 1: With no legal ability to mount a class action suit as in the United States, attorneys have to argue for the rights of their clients one by one.
Christopher R.: If in German, we would have class action and pre-trial discovery, we wouldn't be talking about 15 billion US dollars. We would talk about an amount which is far beyond 100 billion Euros.
Speaker 1: Lawyers and citizens wish their legal teeth were sharper more like what can happen every day in the US.
Christopher R.: It is both legally and morally unjustified to differentiate between customers in the United States and customers in Europe.
Speaker 1: What prevents Germans and other Europeans from mobilizing? Government built-in legal protections for VW and all automakers as well.
Christopher R.: The German Motor Authorities has tried to protect Volkswagen against civil claims to make sure that Volkswagen will not compensate its customers.
Hauper Baumner: I'm a former judge in Germany and I think it's absolutely necessary that we in Germany have the same rights as people clients in the United States have, for experiences, I didn't know. I think that is a little bit ... it's not mafia but it's a little bit, as we have in such organizations.
Speaker 1: Decades ago, the whistle blowing engineer Axel Friedrich saw this so called mafia like collusion looming down the road. He helped to create the international council on clean transportation, to stop cheating in Germany's biggest industry. The ICCT had contracted with the West Virginia grad students.
Axel Friedrich: The problem is of course, in Europe because of the high share of these cars and Volkswagen is not the only one because everybody cheated.
Speaker 1: The personality cult that dominates Volkswagen's history sparked this scandal first.
David Kiley: The culture in the company is one that's been driven by fear.
Mark Schneider: That goes back to Heinrich Nordhoff who was CEO for two decades after World War II. He wanted to make the decisions and I think later manages like Winterkorn and Piech.
David Kiley: The architect of this culture is Dr. Ferdinand Piëch.
Jack Ewing: People didn't feel that they could discuss problems openly but they could say, this isn't working, what do we do about it? They felt, you had two options, you either have to make it work or you had to be prepared to lose your job.
Mark Schneider: Because they wanted to be successful and they are harming society, they harming shareholders, they are harming the workforce and they are harming the company.
Jack Ewing: The way that enforcement works in Europe, the auto companies go to higher private labs and there was nobody looking over the shoulders of the private labs.
Speaker 1: When Angela Merkel first met Mary Nichols, she asked, "What are you doing to my automobiles?"
Jack Ewing: You have to understand just how important the auto industry is in Germany. I mean, it's really like the state of Michigan or a country because you have Volkswagen, BMW, Mercedes, the biggest export product from Germany are cars. This was something very much on Angela Merkel's mind when she spoke to Mary Nichols.
Speaker 1: Well, the close bond between the auto industry and government remains tight as ever, citizens and government drift apart. Many Germans now wonder if their government can be trusted to enforce environmental regulations and protect public health.
Juergen Resch: Volkswagen up to now didn't get any fine, even 5,000 Euro, nothing for their cheating of millions of people.
Astrid Doemer: It's disappointing that a big company of your country has become target of so many reportings and so much criticism. As a German, it's painful.
Hauper Baumner: They don't care, that doesn't play any role for them.
Jack Ewing: They are right in the beginning said, "We made a big mistake, we have this defeat device. We're really sorry, we'll pay a fine, we'll fix the cars." I don't think any of us would be sitting here ...
Speaker 1: Volkswagen did not apologize in 2014 as Jack Ewing suggest. Instead they continued their lying and their cover up. The principal enforcers, the EPA, the DOJ and CARB protecting public health were prepared and united.
Mary Nichols: We were invited in from the beginning because both the federal government and Volkswagen were very anxious to have California be part of any settlement that they would reach with the federal government. They knew that if we weren't at the table and part of the initial discussions, that there was a danger that we might decide that we didn't agree with whatever the deal was.
Cynthia Giles: Director Muller was the CEO. He came in to meet with the administrator Gina McCarthy. It was just a small of us.
Mary Nichols: All of the discussions that we had that led to the settlement that was incorporated in the consent decree to place in the offices of the Department of Justice.
Cynthia Giles: I can say that it did not appear to me that the German folks who were there for the meeting were used to the kind of tough talk they were getting from EPA.
Mary Nichols: Within this company, it appeared as though there was an attitude of indifference or even defiance of what the rules are.
John Cruden: When you're making demands for billions of dollars, when you're trying to change the entire culture of the company, those are very tense negotiations and difficult for Volkswagen.
Mary Nichols: Senior people from Germany, board members of Volkswagen and people from Volkswagen United States, several different law firms.
Cynthia Giles: I was the principal for EPA and Mary was the principal for California.
Mary Nichols: They are not used to dealing with a regulatory regime where you have government agencies that actually have the power to prevent you from selling cars or to impose fines which they are willing and able to collect.
Cynthia Giles: After EPA and CARB told this company, "You will not get approval to sell any new cars in the United States until we get answers to this discrepancy between what we're finding and what you're saying." That's when they knew that we were on to them and that's what motivated them eventually to come forward and tell us.
John Cruden: We were estimating then that the number of cars that were involved in all that, we're somewhere in the neighborhood of 580,000 to 590,000. Within 24 hours, Volkswagen corrected that to say, no, that I was wrong. It was more like 11 million.
Cynthia Giles: They instructed people to destroy documents then we later found out over 40 people did delete documents before they came to us to admit that there was this defeat device.
John Cruden: We knew from Volkswagen that this was going to affect Korea, Canada, Australia.
Mary Nichols: The people that we were dealing with weren't trying to poo-poo the seriousness of the offense probably because they knew they were dealing with people who take air quality seriously.
John Cruden: Very often I was able to tell my counterpart in Volkswagen, either you're going to agree or we're going to take another step in litigation that you won't like.
Cynthia Giles: They told us we're going to fix this. We're going to handle this pollution problem by addressing the software issue.
Mary Nichols: They never challenged us on the impact of the excess emissions on air quality.
Cynthia Giles: Instead of fixing it, what they did was, they made the defeat device work better so that there was more pollution. They were doubling down on the cheat.
Mary Nichols: To this day, the company has never really explained how the decision was made to use the defeat device and to put the company at such risk.
Cynthia Giles: What the investigation ultimately revealed was that it was back in about 2006, that the company made this choice to cheat rather than comply.
John Cruden: There was an element of arrogance that went on there where they were confident that they would not be caught.
Cynthia Giles: There is some internal documents where senior folks said, the choice that we have to make now is whether to be honest. They wrote this down.
Mary Nichols: The settlement that we reached for the environmental violations involved money for mitigation, meaning to actually reduce emissions of nitrogen oxides to help make up for the excess emissions that Volkswagen caused.
Speaker 1: The US courthouse in San Francisco where Senior US District Court Judge Charles Breyer presides. Three parallel settlements were reached here in October 2016. The first, to protect public health with CARB, the EPA, the US DOJ and the California Attorney General's Office. The second with the Federal Trade Commissions. The third is a class action suit representing owners of almost 500,000 cars. Settlement at the largest auto scandal in US history totaled 14.7 billion dollars. Nearly five billion will reduce emissions and promote zero emissions vehicles. Lawyers representing car owners nationally consolidated their grievances against VW's cheating in the massive civil class action.
Speaker 1: One lawyer, Barry Capello in Santa Barbara represented dozens of owners. His lawsuit joined the larger group of VW consumers converted into accomplices who unwittingly polluted the air they were trying to protect. Elizabeth Cabraser, appointed by Judge Breyer was lead counsel for the fraud at VW owners.
Elizabeth C.: We know what a corporation does. We see what it does but what does a corporation know? Who were the people in that corporation, who are responsible, who is making the decisions, who is accountable for that? You can't put an entire corporation in jail. What just one might wish to, some people are philosophical about it and call it the moral hazard theory. Who's responsible when nobody is responsible. The why question is the question that never gets answered in these cases because when you look at them retrospectively it makes no sense, right? Why are they spending billions and billions and billions of dollars now when they could have invested a little more then and it would have worked.
Mary Nichols: It's time to go. Ready?
Kamala Harris: I am ready.
Mary Nichols: I am too.
Kamala Harris: I am ready.
Speaker 1: The announcement of the coordinated settlement against Volkswagen occurred simultaneously in Washington DC and in Sacramento with California Attorney General Kamala Harris and CARB Chair Mary Nichols.
Kamala Harris: It is the largest settlement ever with an automaker. A 14.7 billion dollar agreement, VW cheated on the test and they got to collect.
Speaker 1: As one door closes, others open.
Cynthia Giles: There were three components to addressing the pollution, the cars on the road, offsetting the pollution, the zero emission vehicle infrastructure. That was the civil case.
Speaker 1: First the settlement.
Cynthia Giles: Get those polluting vehicles off the road so they had to offer every consumer to either buy back the car or fix it if an appropriate fix could be approved by EPA and CARB.
Speaker 1: Getting the cars off the road is not easy.
Elizabeth C.: When you try to unscramble an egg, it's a complicated process. Buying back a car and promising never to sell it unless it's been fixed, is not the same as going into a dealer and trading in a car or selling the car to a private party. It requires a big infrastructure of enforcement, it requires a lot of monitoring, it requires a court with jurisdiction and it requires regulators that are willing and able to watch, to make sure that what was promised actually gets done.
Speaker 1: The settlement requires a mitigation fund to minimize loss or harm.
Cynthia Giles: They got to make right the pollution that they caused. They needed to put a substantial amount of money in a fund to ... that could be used to reduce pollution around the country to offset the pollution that they had caused.
Mary Nichols: One of the priorities for spending money from the mitigation fund has been to make sure that we do projects that address hearts of our state and of the country that have the worst pollution burden and that generally also corresponds with low income communities. Communities of color.
Male: Welcome to Fars Watts Herber electric vehicle invent.
Speaker 1: The primary goal of the fund is to level the playing field.
Female: [foreign language 00:48:48]
Speaker 1: Invulnerable communities throughout the country and the state.
William F.: The time has come for Watts to thrive.
Kevin DeLeon: This is an equity issue, this is an environmental justice issue and those who are disproportionately impacted are those at the lowest economic strata.
Martha Arguello: Communities of color have born the brunt of the burden of our fossil fuel infrastructure. They bear the brunt with the health impacts.
Ophelia Owens: My baby he's been on this since he's been born. A little baby with a big old man's challenge just trying to breathe. What can I do, I wish, I can take his place.
Michael Chattom: The problem is our health. No good health, how can you prosper? No good health, how can you smile at your children and feel that there's a better tomorrow, that is the key and that is the issue.
Anthony Iton: How we live shapes how long we live and we tell people in our county, give me your address, I'll tell you how long you'll live.
Kevin DeLeon: We have to do everything possible to make sure that we democratize our climate change policies so they benefits all individuals.
Speaker 1: Part of the Volkswagen penalty is to support new technologies.
Cynthia Giles: The third part of the agreement was for investment in zero emission vehicle infrastructure. We don't have that kind of robust infrastructure for zero emission vehicles in this country and it been holding back development of that market.
Speaker 1: The California Museum in Sacramento, October 2016, an opportunity to celebrate accomplishments. CARB methodology and technology led primarily by Mary Nichols have driven California's leadership in the VW investigation and in climate change policy for the US and the world. State historian Kevin Starr.
Kevin Starr: Today's a very satisfying day because it shows California, demonstrates California in leadership on something that is totally vital to the entire planet and that it's compatible with being the 5th largest GMP on the planet. There's no contradiction between jobs and responsible environmentalism.
Fran Pavley: Thank you very much.
Speaker 1: A year after the announcement of the VW Scandal, Now state senator Fran Pavley working with Kevin DeLeon, senate president pro tem and other legislators sponsors new climate change legislation. The law now called Senate Bill 32, extends California's initial climate change reduction goals to 2030 and it's hailed as historic.
Jerry Brown: This is not about the Republican Party or the Democratic Party. It's about human existence, it's about survival. It's about the next generation and the next 10 generations so this is a big idea.
Male: One, two, three.
All: Team Marine.
Speaker 1: Concerned students grasp and incubated renewable technologies far ahead of some manufacturers. Shared responsibility and accountability are life values taught at Santa Monica High School in California.
Benjamin Kay: We could actually make this car being that it's so light go over 200 miles on a single charge.
Male: When we build this car, it wasn't about trying to get everybody in town to convert their vehicles to electric vehicles. If we can get young people engage in environmental, in electrical engineering and plug them in to what's going on around the world, politically, they'll be the ones to drive to change toward the solutions that will get us out of the deep end which we're in right now.
Speaker 1: The unintended consequences of Volkswagen's cheating backfire everywhere. Their corporate implosion has thrown a global monkey wrench into the future of transport technology.
Mary Nichols: I think the whole Volkswagen experience has really done more to change thinking about what the technologies are that people should be looking at. It has shifted the debate at the policy level, about where we should be headed with our transportation system.
Adrienne Alvord: The biggest change in the state is the electrification of the transportation system and that electricity needs to come from zero carbon sources, renewable energy basically.
Fran Pavley: I think our responsibility has been not only reaching out to other states and nation but trying to be incubator, if you will, of good ideas showing that we can reduce emissions and also have a healthy economy.
Kevin DeLeon: That's why a lot of technologies are being created here in California. Energy storage which is the next big thing.
Astrid Doemer: I think the Volkswagen Scandal, when we look back at it, it will be seen as a accelerator of a massive transformation of the auto industry.
Mary Nichols: That's what's driving us in the direction of electric drive zero emission vehicles, whether it's battery electrics or fuel cell or advanced hybrid cars, that that's where we have to be going.
Elizabeth C.: We have choices to make about are we going to re-carbonize or are we going to decarbonize? Are we going to emit more or are we going to emit less? There are things that each of us can do, often very small things but in the aggregate they're huge to pollute a little less each day.
Adrienne Alvord: In a funny way, VW helped raised people's consciousness.
Speaker 1: December 2015 in Paris, two months after announcing the VW settlement, Mary Nichols joins Governor Brown and the California delegation to share their agenda at the Global Climate Change talks. Remember Paris also happens to be the birth place of the German inventor Rudolf Diesel, the pioneer who wanted peanut oil, not gasoline in his new engine, may have been the first decarbonizer. His vision was honored at the 1900 Paris World Fair but VW's German engineer a century later plotted diesel gate, ruining his place in history. To reduce deadly pollution from diesel engines, Paris is among the many European cities that must limit driving in the city center.
Speaker 1: Paris, the city of lights where provocative ideas still stack up on the street and polar bears fear their fate. Surrounded by iceberg fragments imported from Greenland.
Jens Galschiot: Paris is in the most important season in the world now.
Speaker 1: Paris host the 2015 United Nations Conference of the parties. The giant leap for mankind in climate change and global warming, COP 21. Mr. Diesel might have been honored.
Male: Let's get to work.
Speaker 1: The after effects of the VW scandal and diesel gate, spotlighted just two months earlier make California's interaction with global accountability more urgent. The delegation is recognized as the policy leader in de-carbonization.
Arnold S.: Governor Brown who is here today, let's give him a big hand. It was fantastic working together with him because it is like one mind in two bodies.
Speaker 1: One hundred ninety six nations negotiate. The social contract for communal responsibility is on everyone's mind.
Female: It's important to save the world, to save our planet.
Jerry Brown: The world is facing the challenge that its own activity is undermining future prospects.
Speaker 1: Whether Governor Brown can convince others at his existential life long commitment to the survival of our planet, is at stake.
Jerry Brown: We're on the front lines in the battle to combat climate change.
Speaker 1: His goals are de-carbonization and harmonization. His call to arms, we're still in.
Jim Newton: I think de-carbonization is survival. I mean, I think that Jerry Brown more than any person I know is able to really think and speak about the possibility of the world coming to an end for people.
Mary Nichols: The big change is that as Asia but also Europe become increasingly aware of the problem with particles in the air, the health problems of the soot and smog in their cities, they're starting to realize that you can't just trade off pollution of one kind for the pollution that's harming the atmosphere. You've got to come up with solutions that address both of these problems.
Elizabeth C.: If you break something, whether it's consumer trust or the environment or a product, you have to fix it. Examples should be made of Volkswagen so that the message is sent not only to corporate actors but to individuals. What you do has consequences and some of those consequences maybe irremediable and so don't do it in the first place.
Jim Newton: From watching Governor Brown over the years, I believe that he has recognized this threat for a long time. His grappling with the future of humanity. He spent 40 years trying to alert people to the threat out there and to do what he can.
Speaker 1: What of Rudolf Diesel, the disruptor, can Governor Jerry Brown succeed in his footsteps?
Male: I was elected to represent the citizens of Pittsburgh, not Paris. The United States will withdraw from the Paris Climate Accord so we're getting out.
Elizabeth C.: The VW scandal actually presents a tremendous opportunity because it's a morality play. It is an example, where the public is outraged because a company went out of its way on purpose to pollute the air. We don't like it when someone on purpose decides to make something worse, not only will we teach Volkswagen a lesson but we will teach ourselves and each other a longer term lesson about the responsibility that we all have toward our Earth.