After failure to relay important safety information regarding faulty ignition switches in their vehicles, an act that cost 124 individuals their lives, GM was issued a $900 million fine last week as part of a deferred prosecution agreement. While many believed the fine was too small, there was hope that individual company employees would also face criminal charges for their complicity in the concealment of this dangerous defect. However, no company officials who were involved in the scheme have been charged and, additionally, if GM complies with the terms of the deferred prosecution agreement, all criminal charges against the company will be dropped.
Many are outraged that the company is not being forced to plead guilty and is paying a relatively small amount in relation to how many lives were lost. As part of the deferred prosecution agreement, GM admitted to knowing as early as 2004 about the faulty ignition switches but did nothing to recall any affected vehicles. Many are criticizing the Justice Department for the decision in this case specifically, as well as the broader implications it has about using deferred prosecution and nonprosecution agreements in lieu of criminal convictions in instances of corporate crime.
The criminal investigation into General Motor’s handling of faulty ignition switches was settled today, after federal prosecutors accused GM of not disclosing a serious safety defect in some of its ignition switches that has been associated with at least 124 deaths.
Though some executives with GM expected that the penalty would exceed the record $1.2 billion penalty paid by Toyota for its own concealment of a serious defect, federal prosecutors will only be imposing a $900 million dollar penalty on General Motors. As part of the deal, GM also had to admit that it failed to disclose important information about a potentially deadly defect with ignitions in certain vehicles. It is still unclear as to whether prosecutors will be pressing any charges against individual employees with GM.
As long as GM complies with the terms announced today for the next three years, the company will have the two criminal charges against them dismissed. Those criminal charges include charges of wire fraud and “scheming to conceal material facts from a government regulator.”
In addition to a host of lawsuits revolving around ignition defects in G.M. vehicles, last week, plaintiffs asked the Manhattan Federal District Court to rule that G.M. and its outside attorneys covered up the defect, an act that may be considered criminal or fraudulent.
This request is made all the more ambitious by the fact that a ruling in favor of the plaintiffs could result in judges overruling the attorney-client privilege that keeps communication regarding a case confidential. According to the crime fraud exception, courts can require the disclosure of not only confidential communication, but also any documents, called work product, that were prepared by the attorneys if the client asked for or was given advice on how to engage in a crime or fraud now or in the future.
As a recent New York Times article points out, G.M. now faces a difficult situation, as the result of its pending settlement with federal prosecutors will have an effect on whether the attorney-client privilege is negated. A guilty plea could support the plaintiffs’ accusation that conversations with G.M.’s attorneys, King & Spalding, were a part of covering up the faulty ignition switch. Likewise, a deferred-prosecution agreement wherein G.M. would pay a major fine to avoid being forced to plead guilty could still involve G.M. admitting to criminal conduct. Both options could help the plaintiffs’ case against G.M. and contribute to a court decision requiring the company and King & Spalding to produce details of their communications.
A recent article by Reuters, published on March 23, took a more in-depth look into the GM recall, its ignition defect, and how the National Highway Traffic Safety Association (NHTSA) failed to detect the problem like many others.
The article focuses on retired Wisconsin state trooper Keith Young, who submitted a report in 2006 to the NHTSA regarding a car accident that he stated was caused by an ignition problem. The 2006 St. Croix County, Wisconsin crash, which caused the deaths of 18-year-old Natasha Weigel and 15-year-old Amy Rademaker, and permanently damaged the brain of 19-year-old Megan Ungar-Kerns, had been professionally analyzed by Young, who had a 20-year career as an accident reconstructionist. Young sent his findings to the NHTSA that the ignition had been switched to “accessory” from “run” before the crash occurred, thereby disabling the air bags’ ability to deploy and cutting off the engine.
However, the NHTSA did not act on Young’s observation, and only began investigating GM after the company issued the recall in February. The company is now under scrutiny for this lack of action at the time.
Unfortunately, this defect and many others have caused many people in Tennessee to suffer serious harm or be killed. At Pohl & Berk, LLP, we help victims of such accidents take action against the car manufacturers responsible for the defect. Call us at (615) 277-2765 if you have been involved in an accident caused by a defect and want to learn more about your legal options.