I actually doubt that it was known high up the chain. I wonder if it was just one engineering team for that specific engine that realized they made an absolutely massive oversight and realized that they weren't going to meet the emissions standards so they created this quick fix. That seems much more plausible to me than an entire chain of command agreeing to this.
If you realized your team dropped the ball that badly when you were already probably way past the point of no return, you either cheat or probably end up losing your job as well as getting everyone else on your team fired as well. Might even be black balled.
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