I am reasonably sure the criminal investigation involving Toyota Motor Corp. for its sudden acceleration problems, which led to a $1.2 billion fine, has gotten the attention of the bosses and several engineers at General Motors (GM). Many believe the Toyota case will be a model for prosecutors scrutinizing GM’s recall of more than 2.6 million cars with the faulty ignition switches. Experts believe the government will take a more aggressive stance against GM to encourage greater disclosure of safety problems from the auto industry. Based on what we have learned, both in the Toyota and GM litigation, I share that belief. It’s high time to start getting tougher with wrongdoers.
As has been widely reported, GM is facing a U.S. Department of Justice criminal investigation into whether the automaker waited too long to recall 2.6 million vehicles for the ignition switch problem linked to as many as 303 deaths. GM also has been the subject of inquiries from the U.S. Attorney’s Office for the Southern District of New York. Additionally, several other agencies are also looking into GM’s safety problems and cover-ups of known defects.
It has been revealed that General Motors instructed engineers to avoid using terms such as “defect” and “safety-related.” The National Highway Traffic Safety Administration (NHTSA), in the consent order, required GM to retrain their employees. NHTSA specifically took aim at General Motors’ process of training employees to avoid using “judgmental” language when discussing safety issues. Terms such as “death-trap,” “defective” and “fail,” among dozens of others, were not to be used by GM’s employees. The regulatory agency’s consent order requires GM to implement training policies that “express the disavow statements diluting the safety message” in internal communications. It is incomprehensible that an automaker would not only hide known defects, but make sure that its employees wouldn’t use any language that would tip off either the public or NHTSA about the defect the hazard it created for owners and passengers in GM vehicles.
Because both the Toyota and GM situations involve claims of improperly reporting safety information to the NHTSA and failing to take appropriate actions to address safety problems, Toyota’s criminal case is a template for prosecutors investigating GM’s recall. It was reported that a team of lawyers and investigators in the Southern District of New York involved in the Toyota case is looking into the GM matter. That is most significant according to Carl Tobias, a professor at University of Richmond School of Law, who told Law360:
Prosecutors are going to build on the past work they did with Toyota in going forward with the GM investigation. I think GM has to be concerned with what might come from the investigation, given the scrutiny and quality of work by the Southern District of New York in the Toyota case and the substantial settlement that Toyota reached.
The GM litigation is just another example of an automaker putting the public at risk by selling vehicles to be put on the road with a known defect and then engaging in a massive and lengthy cover-up. Because of Toyota, I believe the Justice Department will have to take a much more forceful stance in the GM case. Prosecutors may be interested in reaching a deferred prosecution agreement similar to the one entered in the Toyota case, according to Professor Tobias. Under that agreement, Toyota admitted to making misleading statements about the safety issues.
The prosecutors in that case agreed to drop the wire fraud charge after three years if Toyota complies with all of the terms of the settlement, including appointing an independent monitor. Since GM is not the first company to engage in outright fraud and cover-up, the company may be hit much harder than Toyota was. A number of individuals may have plenty to worry about and I suspect some will have secured their own individual lawyers to represent them. The admissions made by GM to NHTSA resulting in the $35 million civil fine have to be considered in the criminal investigation.
The government, in the GM matter, has an opportunity to send an even more powerful message to the entire automobile industry. There will be more information developed in the GM defect inquiry, through discovery in filed civil cases and in the congressional investigations. Prosecutors and other federal agencies are still looking into GM’s massive recall. The carmaker is also conducting what it calls its own “internal review.” Of course, NHTSA is still involved even though the agency was very late in joining the fray.
Many experts believe the Toyota settlement and the ongoing investigation into GM are already causing other car companies to change their ways. Hopefully that will mean the companies will conduct thorough examinations of their manufacturing processes and make determinations about whether they need to notify the NHTSA about safety issues or consider recalls. Safety may even become a real top priority in the automobile industry and if that happens the public will have been well-served by all of the activities surrounding the wrongdoing of GM.
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