Veridian Dyanmics is being sued for a women's perfume it designed that attracted hornets.  The whole company is forced to give dispositions and everyone seems to be doing a good job of not admitting any knowledge of the side effect prior to product launch... until Linda.  Linda claims she knew and even emailed Ted about it, who claims to have never received it.

After realizing her rock, Ted, is capable of lying, she gives up her morals and agrees to be a scapegoat and claim she was on drugs and not to listen to her disposition.  However, thanks to Veronica, Ted learns that he did get the email but it was actually deleted during his infamous boink session with Veronica.  He tells Linda and the company lets her keep her morals intact by blaming it all on Dr. Bamba, the company's go to scapegoat.

Meanwhile, Phil admitted during his disposition that he never went to MIT and has lied to the company, and more importantly Lem, for the last ten years.  Lem, who first bonded with Phil over their shared Alma Mater, eventually forgives Lem when he admits to lying to him for the last ten years... by wearing non-perscription glasses just to look smarter.

Better Off Ted
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Better Off Ted Season 1 Episode 10 Quotes

Linda: You realize that if this project goes forward, all the aborigines in Australia will lose their sense of smell.
Ted: Which is why I'm going to kill it. That's just too high a price to pay for fabric softener.
Linda: If those aborigines were here, they'd smell a good man

Lem: I will not let you go. Come on, this is just like the virtual climbing wall at MIT.
Phil: It wasn't there when I was there.
Lem: It's virtual. Technically it was never there