General Motors Charged with Wire Fraud for Failing to Recall Faulty Ignition Switches
The U.S. Department of Justice (DOJ) charged General Motors with wire fraud and other federal criminal charges for the company’s deadly negligence involving a 10-year-delayed vehicle recall for faulty ignition switches, which have been linked to the deaths of over 100 GM customers in the last decade.
The automobile manufacturer quickly responded to the DOJ’s charges and said that it would pay $900 million to settle the criminal charges without going to court.
If GM abides by the deal’s terms, then the company qualifies for a deferred prosecution agreement, and the government will dismiss the federal criminal charges in three years. This includes an independent safety monitor who will keep track of the company’s safety standards and records.
Manhattan U.S. Attorney Preet Bharara said that GM “didn’t tell the truth in the way they should have to their regulator and to the public.” The automaker disclosed in February 2014 that the ignition switches were defective. The company at first attempted to quietly recall around 250,000 vehicles from the 2004-2005 model years, but the public quickly noticed that the vehicles were older than most recalled vehicles and began to question the company’s statement about the cars and trucks. The National Highway Traffic Safety Administration (NHTSA) began an investigation after GM admitted that it knew of at least 13 deaths and over 30 personal injuries from car accidents caused by faulty ignition switches in vehicles.
U.S. District Judge Alison Nathan approved the terms of the settlement after a hearing on Thursday, September 17th. “If there’s any doubt to the criminality of the conduct, that doubt is put to rest today,” Judge Nathan said.
“People were hurt and people died in our cars. That’s why we’re here today,” GM CEO Mary Barra said during an address to employees Thursday. The company filed for bankruptcy in 2009 and lied to federal regulators at the time, stating that their vehicles were safe and they did not need to issue any recalls as part of their bankruptcy deal. However, because the company has been divided into “Old GM” and “New GM” due to the bankruptcy deal, the current company is safe from any repercussions related to violating the terms of their federal bailout.
Laura Christian, whose daughter died in a 2005 crash of a Cobalt housing the faulty ignition switch, said “monetary fines are grossly inadequate and will never serve as a serious deterrent to corporations.” She did state that “jail time will,” but Mr. Bharara stated that finding and prosecuting individuals on criminal charges for the ignition switch deception would be difficult. He did not, however, say that the case was closed.
“The worst part about this tragedy is that it was entirely avoidable,” said Christy Goldsmith Romero, the special inspector general for the government’s troubled asset relief program that aided auto makers during the financial crisis. “GM could have significantly reduced the risk of this deadly defect by improving the key design for the less than $1 per vehicle.”