Toyota Motor Corp. closed a chapter last month in the saga concerning its hiding of sudden acceleration defects from the National Highway Traffic Safety Administration (NHTSA) and the public. The government said in a New York federal court that the monitoring period laid out in a $1.2 billion deferred prosecution agreement in 2014 had come to a close. In March 2014 Toyota had agreed to a deal with the U.S. Department of Justice (DOJ) in an investigation into whether the company knew about the defects, which caused vehicles to accelerate suddenly, pleading not guilty to a criminal charge of wire fraud but agreeing to submit to an independent monitor for three years. There was no doubt that Toyota had successfully withheld its knowledge of the defect for about 10 years.
The government said in a letter to U.S. District Judge William H. Pauley III that Toyota had held up its end of the bargain, so the monitor was no longer needed and the fraud charge would be dropped by prosecutors. The DOJ said in its letter to the court:
The agreement provides for the dismissal of the information after the period of deferral if Toyota complies with its obligations under the agreement. The government has determined that Toyota has complied with these obligations and accordingly respectfully submits the attached nolle prosequi.
In March 2014, Judge Pauley had approved the agreement. It appears from the letter that Toyota has complied with the deferred prosecution agreement and that the government won’t prosecute the company on the fraud charge.
Toyota admitted to making misleading statements about the safety issues. The agreement provided that prosecutors would drop the fraud charge after three years if Toyota complied with all of the terms of the settlement, including appointing an independent monitor. At the hearing, Judge Pauley had this to say:
The Toyota suit demonstrates that corporate fraud can kill. Corporations only act through their agents. From this court’s perspective, I sincerely hope that this is not the end, but rather the beginning, to seek to hold those individuals who were responsible for making those decisions accountable.
The settlement stems from Toyota’s recall in 2009 and 2010 of nearly 8 million vehicles in the U.S. because of sticking accelerator pedals and a design flaw that could cause floor mats to trap the pedals. The $1.2 billion penalty was the largest of its kind ever leveled against an automaker, according to the DOJ. Under the deferred prosecution agreement, Toyota agreed to allow an independent monitor to review safety-related public statements and the sharing of accident information within the company.
Prosecutors accused Toyota of misleading NHTSA about both the accelerator pedal and floor mat defects. After NHTSA launched a defect investigation in 2007 following reports of unintended acceleration, Toyota did not immediately recall any vehicles, even though its own internal probe showed that floor mats were more likely to entrap gas pedals in some models, the DOJ said. Toyota also did not share its findings with NHTSA.
Our firm tried the first civil case in Oklahoma City in 2013 and we fully exposed Toyota’s wrongdoing for the first time. We were able to prove Toyota’s knowledge of the defect and its withholding of that knowledge. The real problem causing the sudden accelerations actually involved the computer system. The jury found in our favor and found Toyota’s conduct to be reckless. The case settled before we went to the punitive damages phase of the trial. This was the case that brought everything into focus and it was the real stimulus for all that occurred thereafter.
The government is represented by Joon H. Kim and Sarah K. Eddy. The case is U.S. v. Toyota Motor Corp. (case number 1:14-cr-00186) in the U.S. District Court for the Southern District of New York.
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