It is likely that General Motors got off easy both in comparison to Toyota and to future corporate federal prosecutions. Last week, Deputy Attorney General Sally Q. Yates announced major policy changes in the Justice Department for corporate investigations, focusing on prosecuting individuals who are responsible for wrongdoing instead of offering the deferred agreements and taking financial penalties in lieu of criminal charges. The change in policy discourages the probationary deferred prosecution agreements and requires companies to point out wrongdoing by specific employees to receive any kind of prosecutorial credit.GM as a company had been charged with felonies, according to the New York Times, sources familiar with the settlement say no individuals will be charged in the agreement.
Thursday is the day of reckoning for General Motors in the aftermath of its deadly ignition-switch defect. According to papers filed in Manhattan Federal Court, GM has entered into a three-year deferred prosecution agreement with the Justice Department, meaning that the criminal charges against the company will be dismissed after that time if GM complies with the terms of the deal. GM executives had already admitted to authorities that it mislead consumers about the severity of the ignition-switch defect that has been linked to at least 124 deaths. The agreement also calls for $900 million penalty, which while an enormous sum, is less than the $1.2 billion the Justice Department fined Toyota last year over its unintended acceleration defect that led to at least 34 deaths. Many analysts had expected the GM penalty to be higher given the fact that the alleged concealment occurred around the same time as GM’s 2009 federal bailout, and the fact that Toyota had admitted wrongdoing early on. GM recalled 2.4 million vehicles in early 2014, many of them Chevy Cobalt models, due to the ignition-switch defect.
It is likely that General Motors got off easy both in comparison to Toyota and to future corporate federal prosecutions. Last week, Deputy Attorney General Sally Q. Yates announced major policy changes in the Justice Department for corporate investigations, focusing on prosecuting individuals who are responsible for wrongdoing instead of offering the deferred agreements and taking financial penalties in lieu of criminal charges. The change in policy discourages the probationary deferred prosecution agreements and requires companies to point out wrongdoing by specific employees to receive any kind of prosecutorial credit.GM as a company had been charged with felonies, according to the New York Times, sources familiar with the settlement say no individuals will be charged in the agreement. This was to be expected, as the memo announcing the changes explicitly states that the policy will only apply to cases moving forward. As Yates said in a memo about the GM case, “We’re not going to renege on verbal agreements.” Still, as part of the deal, GM must hire an independent monitor to oversee that the company adheres to the terms of the deal.
The New York Times’ sources said that both the FBI and U.S. attorneys were finding it difficult to pin charges on any particular GM employee. The company hired former federal prosecutor Anton Valukas to conduct an internal investigation. His report indicated that it was more of an issue of incompetence than intentional criminal activity. Valukas’s report led to the firing of 15 GM employees. Although some speculated that GM’s acts of concealment in the early stages of the investigation would lead to a higher penalty than Toyota, it is likely GM’s cooperation once the criminal charges were levied against the company earlier this summer that led to the lower fine. Some like Laura Christian, mother of 16 year-old Amber Rose who was killed in a July 2005 crash, found the settlement amount difficult to swallow. Christian said, “That’s giving GM and the other auto manufacturers permission to do it again. And all of the people who were killed in these crashes, including my daughter, will have lost their lives in vain.” Although some relatives of victims accepted a settlement amount of slightly over $1 million from a fund GM created last year, 1,385 people have rejected the settlement and sued GM instead. As part of the federal agreement, GM will be required to face the litigation and spend as much as $575 million to resolve the lawsuits.
Sources:
ABC News/Associated Press – Tom Hays, Eric Tucker, and Tom Krisher
New York Times – Ben Protess and Danielle Ivory
Reuters – Jonathan Stempel
USA Today – Nathan Bomey
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