Takata to Pay $1 Billion for Hiding Airbag Defect

(CN) – Takata Corp. on Friday agreed to plead guilty to wire fraud in concealing its sales of defective automotive airbag inflators, and will pay $1 billion in fines and restitution.

In announcing the plea deal, the U.S. Attorney’s Office in Detroit also unsealed an indictment charging three Takata executives with wire fraud and conspiracy.

The Tokyo-based company began developing automotive airbag inflators in the late 1990s that relied upon ammonium nitrate as their primary propellant.

In its plea, Takata admitted that since at least 2000, it knew the certain of its nitrate-based inflators were not performing to the automaker’s  specifications, and also that certain iterations of the inflator were prone to failures during testing, including but not limited to rupturing.

Despite this knowledge, the company says, it induced its customers to purchase the airbag systems by submitting false and fraudulent reports that concealed the true condition of the inflators.

Takata further admitted that a number of its executives and employees routinely discussed the falsification of test reports being provided to the company’s customers in email and in verbal communications.

Further, the company admitted that even after the inflators began to experience repeated problems in the field – including ruptures causing injuries and deaths – Takata executives continued to withhold the true and accurate inflator test information and data from their customers.

None of these executives were disciplined for their actions until 2015, the government said in a news release.

Under the terms of the plea deal, Takata will pay a $25 million criminal fine, $125 million to individuals who were injured by the air bags and $850 million to automakers that purchased the inflators.

U.S. District Judge George Caram Steeh, of the Eastern District of Michigan, has appointed attorney Kenneth Feinberg to distribute restitution payments.

Steeh also directed that payments to automakers must be paid within five days of Takata’s anticipated sale or merger.

Federal prosecutors announced they’ve also charged three former Takata executives with concealing the deadly defects in the air bag inflators.

The indictment was handed down by a federal grand jury in December, but not unsealed until Friday.

According to an indictment, the executives — Shinichi Tanaka, Hideo Nakajima and Tsuneo Chikaraishi – falsified and altered reports to hide from customers tests that showed the inflators could rupture or otherwise fail to meet specifications.

They were charged with six counts of conspiracy and wire fraud, while the company faces one count of wire fraud.

Takata is expected to be sold to another auto supplier or investor sometime this year.

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