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In September 2015, the US Environmental Protection Agency revealed that Volkswagen AG had installed defeat device software in approximately 11 million diesel vehicles worldwide, enabling the vehicles to detect emissions tests and artificially reduce pollutant output during testing while emitting up to 40 times regulatory limits under normal driving conditions. Total costs to Volkswagen exceeded $30 billion; criminal charges were brought against executives across multiple jurisdictions. This paper examines the Dieselgate scandal as a case study in collective decision traps — specifically, the interaction of groupthink, loss aversion, and moral licensing in hierarchical organizations under sustained competitive pressure. Drawing on Janis's groupthink framework, Kahneman's prospect theory, and Ariely's research on moral licensing, we argue that the defeat device decision was not the product of individual malice but of an organizational decision architecture that systematically suppressed dissent, amplified commitment to failing strategies, and provided ethical cover through an identity of technical excellence.