Toyota on Verge of Settlement of Criminal Probe

Toyota Motor Corp. is on the verge of a settlement of a federal criminal probe into sudden acceleration and other auto defect issues,  the Wall Street Journal reported.

If criminal penalties result, the settlement would represent the first time a major auto company has been criminally sanctioned in an auto safety case.

In June 2010, Toyota said that a federal grand jury in Manhattan had subpoenaed documents related to faulty steering components.

That subpoena indicated a broadening of the grand jury’s initial inquiry beyond problems related to sudden acceleration of Toyota vehicles.

The grand jury subpoena requested documents related to “defective, broken and/or fractured steering relay rods of Toyota vehicles,” according to a Toyota filing with the Securities and Exchange Commission at the time.

Auto safety advocates, led by Clarence Ditlow of the Center for Auto Safety and Joan Claybrook of Public Citizen, have condemned Toyota for boasting in 2009 about saving $100 million by securing an agreement from the National Highway Traffic Safety Administration (NHTSA) in 2007 to require only an “equipment” recall instead of a vehicle recall on the Camry and Lexus floor mats and at the same time dodging a finding of a safety defect for the sudden acceleration of those vehicles.

Because federal auto safety carries no criminal penalties for failure to correct a safety defect or failure to recall a defective automobile, the only way prosecutors can proceed in a criminal case against automakers is through obstruction or lying to the government.

“The only penalty in NHTSA’s statute for Toyota’s knowing and willful refusal to initiate a recall to correct safety defects is a maximum $16.4 million dollar civil penalty,” Claybrook told Congress in 2010 testimony. “There are no criminal penalties for the company executives or agents. Compared to other consumer protection statutes such as the Consumer Product Safety Act, NHTSA lacks strong incentives for companies to comply with the law. Under that Consumer Product Safety Act, any person who knowingly and willfully violated the mandatory provision of the Act is subject to criminal penalties of up to 5 years in prison and personal fines of up to $250,000.”

“This highlights the need for change in the NHTSA statute,” Claybrook testified. “Criminal penalties would add a large incentive for a company not only to say that ‘our first priority is the safety of our customers’ but to actually make decisions and carry out its business to achieve safety.”

“And the civil penalty should also be raised with no maximum limit. A company the size of Toyota, the largest automaker in the world, must be fined $100 million dollars or more before it really flinches.”

“If Toyota had been an honorable company and recalled the defective vehicles when it first learned of the problems in 2003/2004, or perhaps even earlier, and taken steps to redesign subsequent production, many of the resulting deaths and injuries would not have occurred. Now the only remedy for the families of these Toyota victims is a product liability lawsuit and payment by Toyota for the death — a few dollars for each precious life. Toyota may be interested in trading dollars for lives, despite the likelihood of its products causing deaths and injuries, but its customers are not. Car buyers will pay for safety. For a company that built its reputation on quality and reliability, this is an embarrassing and dark chapter that I hope will result in major internal changes at Toyota, is a clear warning to other auto manufacturers who put profits before safety, and will result in new legislation for NHTSA. The victims deserve nothing less.”

Toyota said that it is cooperating with federal prosecutors.

“In the nearly four years since this inquiry began, we have made fundamental changes to become a more responsive and customer-focused organization, and we are committed to continued improvements,” the company said.

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