GM Settles Ignition-Switch Debacle With Feds

     MANHATTAN (CN) – General Motors must pay $900 million to defer criminal charges for concealing an ignition-switch defect that killed at least 15 people and may be responsible for the deaths of hundreds more, federal prosecutors said Thursday.
     GM recalled its 2005-10 Chevy Cobalts, Pontiacs, Saturns and other cars on Feb. 7, 2014, amid reports that defective ignition switches caused certain models to lose power and disable their air bags.
     Despite the company’s lowball estimate of its death toll, an independent report commissioned by Center for Auto Safety estimated that the defect killed more than 300 drivers.
     Speaking at a press conference today, Manhattan U.S. Attorney Preet Bharara described his meetings with the victims as “among the most searing moments I’ve ever spent in my six-plus years as United State attorney.”
     But Bharara also appeared defensive throughout the conference, emphasizing that existing criminal laws prevented him from meting out a tougher penalty.
     “We apply the laws as we find them, not as we wish they might be,” Bharara told reporters.
     The two-count deferred prosecution agreement charges the company with wire fraud and a scheme to mislead a government regulator.
     An attorney for the victims did not immediately respond to a request for comment.
     Ignition switch-linked accidents occurred as early as 2005, and GM officials knew that the defects caused fatal accidents by the spring of 2012.
     Another 20 months would pass until GM disclosed the defect to the National Highway Traffic Safety Administration, and the company lied to consumers that the defects posed no safety concern in the interim.
     A 115-paragraph statement of facts GM filed Thursday acknowledges that the company misled regulators and the public about the defects.
     The detailed admissions of wrongdoing shield the names of the GM officials who misled regulators and the public.
     One unnamed switch engineer is quoted in the statement as saying he was “tired of the switch from hell” but advised the switch supplier to “maintain present course” in an email from early 2002, shortly before the release of the Saturn Ion.
     Bharara noted that federal law has no criminal penalty for knowingly putting a deadly product on the market.
     Nearly half a century of lobbying by GM and other auto giants have hampered efforts to pass such a law, dating back to failed amendment to the National Traffic and Motor Vehicle Safety Act under President Lyndon Johnson’s administration, The New York Times reported in July.
     Nevertheless, Bharara praised GM as providing “fairly extraordinary” cooperation in the government’s investigation. The company fired 15 employees implicated in the probe and set up a victim-compensation program that handed out $156 million.
     The forfeiture, due on Sept. 28, will put GM’s payments to the victims at a total of $1.5 billion, Bharara said.
     “Good behavior after the fact does not absolve GM, or any company, of responsibility,” he added.
     When pressed upon the lack of criminal liability for GM executives, Bharara noted that proving criminal intent at a trial would have been difficult. The USAO’s deal with GM nevertheless led to outcomes that most trials would not accomplish, Bharara said.
     Under the agreement, GM must submit to a federal monitor and cooperate with the Department of Transportation, National Highway Traffic Safety Administration and the FBI for three years.
     As the recipient of $50 billion in bailout money, GM must also work with the Special Attorney General of the Trouble Assets Relief Program (TARP).
     Christy Goldsmith Romero, TARP’s special inspector general, slammed GM for “criminal conduct” that “defies comprehension” and was “entirely avoidable.”
     “GM could have substantially reduced the risk related to this deadly defect by including the design of a piece that would have cost less than $1, but they decided not do it because of cost,” she said.
     Romero urged the company to “step up and make substantial corporate changes to prevent anything like this from happening again.”
     The independent monitor, who has not yet been appointed, must review GM’s “current policies, practices and procedures” concerning motor vehicle safety, litigation practices and recall procedures, according to the government’s agreement.
     The statement of facts relies on GM’s low estimate of the death toll, and Bharara declined to take a view on what his office believes the actual count may be.
     He noted, however, that the company’s independent expert Kenneth Feinberg believes 124 people were killed.

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