GM will pay $900 million over ignition switch scandal


Of the Associated Press

NEW YORK — Trying to move past the biggest safety scandal in its history, General Motors has agreed to pay $900 million to resolve criminal charges for concealing an ignition-switch defect linked to at least 169 deaths, federal prosecutors said Thursday.

Despite evidence that the automaker's legal and engineering staffs hushed up the problem, no charges were brought against any employees, though U.S. Attorney Preet Bharara did not rule out the possibility and said the investigation is still going on.

Also Thursday, GM announced it that it will spend $575 million to settle the bulk of the civil lawsuits filed over the scandal.

Under the deal with prosecutors, an independent monitor will be appointed to oversee GM's handling of safety defects. Two criminal charges drawn up against GM — wire fraud and scheming to conceal information from government regulators — will be dropped after three years if the automaker cooperates fully.

“They let the public down. It's as simple as that,” Bharara said. “To sum it up, they didn't tell the truth in the best way that they should have — to the regulators, to the public — about this serious safety issue that risked life and limb.”

The statement of facts to which the company agreed describes in scathing terms GM's deceitful and dismissive approach to handling a defect that was evident even before the switch went into production in 2002.

The twin agreements bring to more than $5.3 billion the amount GM has spent on a problem prosecutors say could have been dealt with at a cost of less than a dollar per car. Those expenses include government fines, compensation for victims and the recall and repair of millions of vehicles.

With the settlements, GM is taking a big step toward moving past the scandal, which badly damaged its reputation but led to companywide safety reforms.

Later in the day Thursday, GM chief executive Mary Barra appeared before employees in suburban Detroit and again apologized to the victims of crashes caused by the bad switch.

“We didn't do our job,” she said. “We accept the penalties handed down today, because that's what it means to be held accountable.”

Consumer advocate Clarence Ditlow, executive director of the nonprofit Center for Automotive Safety, bitterly criticized the settlement with the Justice Department.

“GM killed over a 100 people by knowingly putting a defective ignition switch into over 1 million vehicles,” Ditlow said. “Today, thanks to its lobbyists, GM officials walk off scot-free while its customers are 6 feet under.”

Bharara said he understands some victims’ families might be disappointed no individuals were arrested, but he added: “We apply the laws as we find them, not the way we wish they might be.” He also said GM was given credit for cooperating with the investigation, including sharing the results of its in-house probe.

When GM employees, the media and some customers complained about the switch in 2004 and 2005, the company's engineers left the switch alone, rejecting a cheap and simple improvement that would have significantly reduced the problem, court papers said.

Court papers said even though the dangers became plain in the spring of 2012, the company did not correct its earlier assurance that the switch posed no safety concern. Instead, Bharara wrote, it concealed the defect from regulators and the public “so that the company could buy time to package, present, explain and manage the issue.”

The wire fraud count pertained to the company's assurances to customers over the Internet in 2012-13 that its used cars were safe.

Last year, GM recalled 2.6 million older small cars worldwide to replace the faulty switches. Those included the Chevrolet Cobalt and Saturn Ion.

The faulty switches can unexpectedly slip out of the “run” position to “off” or accessory. That shuts off the engine and disables power-assisted steering, power brakes and the air bags. Some cars ran off the road or collided with other vehicles.

Last year, the National Highway Traffic Safety Administration slapped GM with a civil fine of $35 million for failing to notify the government of a safety-related defect within five days of learning about it.

Also last year, GM established a fund to compensate victims. Lawyers administering the fund accepted 124 death claims and 275 injury claims. Families of those who died will get at least $1 million. GM has set aside $625 million to compensate people who accept a settlement with the fund.

Texas attorney Bob Hilliard represented 1,385 plaintiffs with death or injury claims who decided not to seek compensation from the fund. On Thursday, GM said it has agreed to spend part of $575 million to settle those lawsuits, which include 45 deaths.

The money also will be used to settle a shareholder lawsuit that said GM's actions reduced the value of its stock.

Even with the settlements, GM cannot yet close the books on the scandal. It still faces more than 400 death and injury cases that have yet to be settled. Six cases have been scheduled for trial, including one set to start in January.

Amid the scandal more than a year ago, GM fired 15 employees, including engineers and lawyers, for failing to act to resolve the switch problem.

The recalls led to other changes at GM. Barra appointed a new safety chief who reports directly to her and added 35 product safety investigators. The company changed its product development process to focus more on safety. And it started a program that encourages employees to speak up if they uncover a safety concern.

GM also reviewed a backlog of safety issues in 2014 and ordered a record 84 recalls covering more than 30 million vehicles, including 27 million in the U.S. So far this year, it has issued 33 recalls covering 2.6 million cars and trucks.

Numerous critics complained that no individuals faced charges, including Laura Christian, the mother of a woman who died in her 2005 Cobalt. She said she felt as if she was in mourning again and called the financial penalty a “slap on the wrist.”

Lance Cooper, an attorney who helped uncover the scandal, said the settlement is no consolation to the victims’ loved ones.

“When individuals, through their reckless conduct, cause someone to die, they go to jail,” Cooper said. “When large corporations such as GM, through their reckless conduct, cause hundreds of people to die, they simply pay a fine, write it off as a tax loss and move on.”

He added: “Unfortunately, it's the same old story — if you have enough power and money, you can always buy your way out of truly being held accountable for your misdeeds.”

The Justice Department has been long been criticized for often going after companies instead of individual employees in cases of wrongdoing in the business world.

Eric Havian, a former federal prosecutor in San Francisco who now represents whistleblowers, said it can be extraordinarily difficult for the Justice Department to prosecute employees.

The schemes are often so complex that a jury can easily get lost, and establishing that a particular person knew his actions were against the law is a challenge, he said.

The deal with GM comes a year and a half after Toyota agreed to a $1.2 billion penalty from the Justice Department for withholding information about deadly unintended acceleration in its vehicles.


AP Writers Larry Neumeister in New York, Eric Tucker in Washington and Dee-Ann Durbin in Detroit contributed to this report.

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