New York Times, 11 March 2014
The Justice Department has begun a criminal investigation into General Motors’ decade-long failure to address deadly safety problems before announcing a huge vehicle recall last month, according to people briefed on the matter.
The preliminary inquiry by federal prosecutors in New York is focused on whether G.M., the nation’s largest automaker, failed to comply with laws requiring timely disclosure of vehicle defects. The prosecutors, one of the people said, are questioning whether G.M. misled federal regulators about the extent of the problems.
The investigation is the latest in a widening series of threats to G.M. over its handling of faulty ignition switches in its Chevrolet Cobalt sedan and other cars that the company says are linked to 31 accidents and 13 deaths.
On Tuesday, Senator Jay Rockefeller, Democrat of West Virginia, said he would ask Senator Claire McCaskill, Democrat of Missouri, to hold hearings on a panel that oversees consumer product safety. The hearings are expected to begin within weeks.
A House committee said on Monday that it would conduct its own investigation and hearings into events leading to G.M.'s recall of 1.6 million vehicles worldwide, and it sent letters demanding extensive records to the company and the National Highway Traffic Safety Administration.
That agency is also investigating G.M.'s actions since the company first learned of possible defects in its ignition systems, in 2004. And G.M. has hired outside lawyers to lead its own review of why it failed to fix or replace switches tied to a mounting toll of fatal accidents.
It is unclear whether any of the inquiries will lead to charges against G.M. If the prosecutors in New York are unable to prove criminal liability, they could pursue civil charges instead.
The federal inquiry is the Justice Department’s latest move to investigate how automakers have responded to recalls.
The department, for example, is talking with Toyota about settling a four-year criminal investigation into how the Japanese automaker disclosed complaints related to unintended acceleration of its vehicles. Toyota eventually recalled millions of its vehicles in 2009 and 2010.
The G.M. investigation, while still in its early stages, reflects the escalating reaction among government officials to the company’s admission to the safety agency on Feb. 24 that it knew of problems with ignition switches over the last 10 years but never moved to fix or replace the parts.
When asked on Tuesday about the inquiry, a G.M. spokesman, Greg Martin, declined to comment. Bloomberg News first reported the investigation
“G.M. has to be concerned, given the breadth and quality of these investigations,” said Carl Tobias, a law professor at the University of Richmond, who has followed the Toyota case. “The prosecutors in the Southern District of New York already have considerable expertise from the Toyota investigation, and know exactly what questions to pursue.”
He added, “This all gets to disclosure and why didn’t G.M. share information sooner with N.H.T.S.A.”
He noted that Toyota faced a possible settlement as high as $1 billion.
“It just shows how serious the consequences can be for this type of investigation,” he said.
As early as 2004, G.M. found that if an ignition switch in a Cobalt was bumped or weighed down by a heavy key chain, it could turn off, shutting down the engine and electrical systems and disabling the air bags.
In 2005, an engineer proposed a fix, G.M. has said in a filing with regulators, but it was canceled. Instead, G.M. sent dealers a service bulletin asking them to urge car owners to take additional items off the key chain.
“It’s high time for the Justice Department to conduct criminal investigations of automakers who conceal defects and people die,” said Clarence Ditlow, head of the Center for Auto Safety in Washington, a private watchdog group.
Mr. Ditlow said the inquiry would most likely parallel a special order made last week by the safety agency demanding that G.M. answer 107 detailed questions about its internal actions and the people involved.
For example, the agency wants G.M. to identify the engineer who proposed the fix in 2005 and the executives who decided against it. It also wants G.M. to explain why it initially recalled 778,000 cars on Feb. 13 before expanding that to the 1.6 million. “To impose the criminal penalties, Justice has to find who did the criminal act,” Mr. Ditlow said. “N.H.T.S.A.'s special order has multiple questions on who the individuals were in the various acts that resulted in a 10-year delay.”
The recall covers six models, none of which is still being made: 2005-7 Chevrolet Cobalts; the 2007 Pontiac G5; 2003-7 Saturn Ions; 2006-7 Chevrolet HHRs; 2006-7 Pontiac Solstices; and the 2007 Saturn Sky.
A House committee is also stepping up pressure on G.M. to disclose records and documents related to the ignition switches.
http://www.nytimes.com/2014/03/12/business/house-committee-demands-records-from-gm.html
