Product Liability

Criminal charges pending for GM’s mishandling of defective ignition switch

GM recall Criminal charges pending for GMs mishandling of defective ignition switchAccording to the Wall Street Journal, General Motors (GM) may soon be facing criminal charges brought by the U.S. Justice Department to punish the company for its alleged lies regarding the decade-long defective ignition switch cover-up.

GM was able to avoid class action fraud lawsuits linked to the long-delayed ignition switch recalls because of its 2009 bankruptcy restructuring.  However, the automaker’s luck might soon take a turn for the worse as federal prosecutors attempt to discern which charges will be brought and how GM will proceed, whether by pleading guilty, or making a deferred-prosecution deal.

If GM were to agree to a deferred-prosecution agreement, the automaker would accept suspended criminal charges that could be dismissed after a period of time if the company abides by the prosecution’s terms. If GM were to plead guilty, the company would not only face damage to its reputation, but sometimes even future regulatory charges. Either option would likely lead to a settlement payout of more than $1 billion.

The U.S. Justice Department may have the ability to charge individual GM employees as well for ignoring the defective ignition switch issues before the roughly 2.6 million affected vehicles went into production. The ignition switches were known to slip out of the “run” position to the “accessory” or “off” position, cutting power to the engine and disabling power steering and air bags in the process. Considering how evidence indicates GM employees and executives were aware of the problem nearly a decade prior, the automaker was fined the maximum penalty of $35 million by federal safety officials.

As the government proceeds with the latter stages of its investigation into GM’s wrongdoing, the automaker’s cooperation has become crucial in determining its future. If federal prosecutors decide to move forward with the criminal charges, it will be the second time the U.S. government has cracked down on the auto industry for not properly addressing safety issues.

Toyota last year entered into a deferred-prosecution agreement with the Department of Justice over its sudden unintended acceleration problems, and was levied a fine of $1.2 billion, the largest ever against an automotive company. Toyota acknowledged wrongdoing in its settlement, but no employees were charged.