Denny Gioia says he believes in regulation.

And he believes in corporate criminal prosecution if the corporation violates regulations.

He says that the criminal homicide prosecution of Ford Motor Company for the deaths of two teenage girls in Indiana in the early 1980s was justified.

As was the not guilty verdict.

Gioia chairs the management department at Penn State’s business school.

Back in the early 1970s, Gioia headed Ford’s recall office in Dearborn.

It was at the time of the Ford Pinto.

“I had started this file on the Pinto fires and it never got big,” Gioia told Corporate Crime Reporter in an interview last week. “I’m used to getting 25 to 50 reports before I act to recommend recall of a car. The Pinto file never got more than five reports. But one day, I was out at the parts return depot. We called that place the chamber of horrors. That’s where all the broken stuff ended up. I was out there inspecting. I went out there every week. I was out there inspecting broken components on some other issue when I saw a burned out Pinto off to the side. I went over and looked at it. And I don’t know if you have ever seen a burned out car, but it is just repulsive. All the plastic is melted. The paint is burned off. And it begins to rust in very short order. And I was told that this was a death vehicle. That people had died in this and the car had come back.”

“I went back to the office and said — you wouldn’t believe what I just saw. We ought to be recalling these things. They said — if the recall coordinator says we ought to recall it, then it goes on the docket. But then when it came up for discussion they asked me — what evidence do I have? How many cases do I have that would support a recommendation of recall? And I had to own up that I didn’t have anything.”

But then somebody drops a memo on Gioia’s desk. It was a memo written by Ford engineers in 1970.

“In that year, before the Pinto went into production, some engineers found out that there was a proposed Federal Motor Vehicle Safety Standard that was going to demand 50 kilometers an hour as an impact speed by which automakers should build cars without leaking fuel. That was proposed and not implemented,” Gioia said.

“But the engineers said — let’s test this as if the standards were in place. They tested eight Pintos and they all failed. They did modify one car by putting a piece of baffle plate between the fuel tank and the differential housing, which had the projecting studs. That worked. Ford was getting into racing. Someone decided to modify the car by putting a fuel bladder inside the tank. And that worked.”

“The engineers said, if the standard ever comes into play, we can fix it. They wrote up this memo and put it on the shelf and didn’t tell anybody else about it. I did not know about that memo until it mysteriously showed up on my desk in 1974.”

Someone dropped it on your desk?

“I think it was a whistleblower. I think they dropped it on my desk. But somebody simultaneously sent it to the executive level. When we said — get ready, we may have a bad one coming, they said — we are in the middle of tests. That was mid-1974.”

“When I got the memo, that was my prompt to put the case back up for a vote. The people who voted were the people within the recall office. If we got a strong positive vote, it automatically went to the executive level.”

“What we learned from the crash test memo was that these cars would split their fuel tanks at under 30 miles per hour. That’s residential speed. But other people were saying — so? We have an internal Ford standard that said it shouldn’t leak fuel at anything under 20 miles per hour. We had a proposed standard that was likely to come in within the next few years that is going to call for 31 miles per hour. That standard went into effect in 1976.”

When you went for the second vote, what was the decision?

“The decision was to recommend recall to the executive committee. The final fix was a plastic baffle plate that went between the fuel tank and the differential housing.”

Did the company recall the Pintos?

“The company recalled them in August 1978, which happened to be the time of the accident that killed the two teenaged girls in Indiana and led to the criminal prosecution of Ford.”

You recommended a recall in 1974. Why did it take four years?

“Executives don’t like surprises,” Gioia said. “We told the executives we were investigating and it looked likely that we would recommend recall. The word came back from the executive level — we are currently running crash tests on these cars. Don’t send it up here until we finish the crash tests. Those crash tests showed that yes the Pinto was bad. The average speed at which the fuel tank would split was just over 25 miles per hour. But Ford was testing the competition — including the Vegas and the Gremlins and all the cars that had the fuel tank behind the rear axle. And what they discovered was that those cars lit up too at a slightly higher speed.”

If you were recommending recall in 1974, why did it take until 1978?

“When they did the competitive crash tests, they said the Pinto is no worse than the competition.”

They rejected your recommendation?

“Yes.”

What made them recall in 1978?

“I dare say it was the publicity that was initiated by the Mother Jones article,” Gioia said.

The Mother Jones article was written by Mark Dowie and titled Pinto Madness. It was published in October 1977.

“As an insider, I saw it as a sensationalist depiction. I was keeping a file on this thing. And if there had been 600 deaths in accidents, I would have known about it. I thought — somebody is making up numbers. Ford hired Jim Neal — the Watergate lawyer. Neal commissioned these statistical studies. And what was born out there was what the executive committee concluded — all these cars were bad. And the Pinto wasn’t even the worst of the bad lot. It just happened to be the one with the projecting studs — and people could say — that is what is causing the problem.”

“But in the end, Ford won that case.”

Do you think you did anything wrong?

“I don’t think I did anything wrong legally. Do I wish I had done things differently? The answer is yes. But this is one reason why I say you have to appreciate the information overload environment. We were charged with handling the worst cases. And there were so many cases. You had to make decisions about whether you had the resources, including time and money. You needed political skill — to convince people within the company that this was worth recalling. And of course I had the reputation as the bleeding heart liberal in the room. Gioia will vote to recall anything. I had to maintain my credibility too. But within the context of the range of possible recallable problems, the Pinto was just tiny.”

When you heard about the criminal prosecution, you were at Penn State?

“Yes. I got here late 1979 and the prosecution was in 1980.”

If they had gone after executives at Ford, they probably would have at least interviewed you, right?

“Yes, I think so.”

When you heard about the criminal prosecution, what were your thoughts?

“I was struck by the fact that they had indicted Ford as a company, as a social entity. They charged the company. You would think they would have charged Henry Ford II and Lee Iacocca. But they didn’t. They indicted the company.”

Did you think that the prosecution was justifiable?

“I would have to say it was justifiable because that memo from 1970 showed that there was traceable cause. Now we have a question — if you have something you can point to that causes a car to split its fuel tanks, but other cars don’t have exactly that same problem, but something similar, then where do you draw the line?”

You believe the criminal prosecution of Ford was justified. Was the judgment of not guilty also justified?

“Yes.”

Did you worry at all while you were at Penn State that if they had gone after individuals, you might have been getting a call?

“Sure.”

When did you decide to start writing about the case and why?

“I hid out for years. I wrote up a case in 1986 — it was meant to prompt discussion. I didn’t write up the original Pinto Fires and Personal Ethics piece until 1992. That’s almost twenty years after the fact before I came out and said — I’m the guy, I’m the insider here.”

But you were not involved in litigation?

“No and there weren’t grounds. Were my decisions and actions consistent with all of my counterpart recall coordinators in the industry? I was entirely consistent with what they were doing.”

“Looking back from 2016 in retrospect, everyone says — those cars should have been recalled. But remember, you are looking with hindsight. Fortune magazine, when they were celebrating their 75th anniversary in 2005, nominated a panel to identify the 25 most significant business decisions in history — good or bad. And there were only two bad ones on the list of 20 — the rest were screaming successes. But one of the two bad ones was the Ford Pinto. It affected all future manufacturing liability law and therefore manufacturing practice. So you can say — we are better now than we were then. Of course we are — because of the Pinto.”

Was the fact that you started to speak out twenty years after the fact — was that a matter of conscience? Was it bugging you?

“The honest answer to that has to be yes. I felt like I had insider knowledge of organizational processes that could lead to an explanation about why decisions that are so retrospectively obvious to people don’t get enacted in real time. It’s organizational dynamics, learning, dissemination.”

What is the role of corporate criminal prosecutions in keeping corporations in line?

“It’s absolutely essential. I’m a strong believer in regulations. I do not believe that corporations do a very good job in regulating themselves, mainly because the profit motive tends to dominate decisionmaking. We do have to have government agencies articulating regulations, which constitute standards by which all members of an industry should behave.”

“We have to have standards that say both individuals and corporations are responsible. One of the greatest lessons has to do with organizational learning and knowledge. The dissemination of organizational knowledge. People are at the center of it, but when they come together collectively, they enact organizational phenomena. Regulation, yes, I’m an advocate.”

Criminal prosecution?

“It follows naturally, doesn’t it? I would rather have a set of regulations and say — if you breach these regulations, then you should understand that you are subject to criminal prosecution.”

Why do you think corporate crime is not taught at Penn State and other universities?

“We do have a couple of business law people — in a different department and they teach corporate crime.”

There was also a famous Ford memo in the Mother Jones piece that laid out a cost benefit analysis.

You didn’t know about the cost benefit memo at the time?

“I was not aware of that during my time there,” Gioia said. “I read a recent article that said that the memo was germane to the case from the beginning. But that memo was not even written until late 1973.”

“The backstory on the memo was interesting. Where did we get the cost benefit analysis. This started with Robert McNamara, who was one of the wiz kids at Ford in the wake of World War II — one of the twelve who rescued Ford. He was the chief financial guy. He was tapped in 1960 by President Kennedy to be the Secretary of Defense. He’s known as the architect of the Vietnam War.”

“While at Ford, McNamara was the guy who went to the government and said — can we agree that cost benefit analysis is a reasonable way to make business decisions? And the answer was — yes of course. And then he said — can you agree that for manufacturers who make products in which people can be injured and killed, don’t we need a number for injuries and deaths? And the answer was yes, of course. If you are going to do a cost benefit analysis, you need to have a cost of a human life.”

“The government said to McNamara — okay, let us know the cost of a human life. And McNamara said — are you kidding? No business is going to do that. The government needs to come up with a number that represents the value of a human life.”

If you look at the number in that memo — $200,000 — it was desperately pathetic. And the question is now — why is a human life so much more than that now? Pinto fires, that’s why. That’s why this case is so significant.”

What is the number now?

“It’s in the neighborhood of $6 million. There are people who say — you cannot put a value my life. But the 9/11 Commission had to figure out the value of the human lives lost in 9/11.”

[For the complete q/a format Interview with Denny Gioia, see 30 Corporate Crime Reporter 15(12), April 11, 2016, print edition only.]