GM Will Pay $900 Million Over Ignition Switch Scandal

NEW YORK— General Motors has agreed to pay $900 million to resolve criminal charges for concealing a defective ignition switch linked to at least 169 deaths, federal prosecutors said Thursday.The agreement calls for two charges — wire fraud and sch...
GM Will Pay $900 Million Over Ignition Switch Scandal
U.S. Attorney Preet Bharara speaks during a news conference at the U.S. Attorney's office in New York, Thursday, Sept. 17, 2015. The government and General Motors have reached a deal to resolve a criminal investigation into how the Detroit automaker concealed a deadly problem with small-car ignition switches. (AP Photo/Kathy Willens)
The Associated Press
9/17/2015
Updated:
9/18/2015

NEW YORK—General Motors has agreed to pay $900 million to resolve criminal charges for concealing a defective ignition switch linked to at least 169 deaths, federal prosecutors said Thursday, Sept. 17.

The agreement calls for two charges—wire fraud and scheming to conceal information from government regulators—to be dropped after three years if the automaker cooperates fully.

However, U.S. Attorney Preet Bharara did not rule out the possibility that employees could still face charges.

“They let the public down. It’s as simple as that,” Bharara said. “To sum it up, they didn’t tell the truth in the best way that they should have—to the regulators, to the public—about this serious safety issue that risked life and limb.”

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The faulty switches can unexpectedly slip out of the “run” position to “off” or accessory. That shuts off the engine and disables power-assisted steering, power brakes, and the air bags. Some cars ran off the road or collided with other vehicles.

Last year, the National Highway Traffic Safety Administration slapped GM with a civil fine of $35 million for failing to notify the government of a safety-related defect within five days of learning about it.

Also last year, GM established a fund to compensate victims. Lawyers administering the fund accepted 124 death claims and 275 injury claims. Families of those who died will get at least $1 million. GM has set aside $625 million to compensate people who accept a settlement with the fund.

Texas attorney Bob Hilliard represented 1,385 plaintiffs with death or injury claims who decided not to seek compensation from the fund. On Thursday, GM said it has agreed to spend part of $575 million to settle those lawsuits, which include 45 deaths.

The money also will be used to settle a shareholder lawsuit that said GM’s actions reduced the value of its stock.

Even with the settlements, GM cannot yet close the books on the scandal. It still faces 454 death and injury cases that have yet to be settled. Six cases have been scheduled for trial, including one set to start in January.

Amid the scandal more than a year ago, GM fired 15 employees, including engineers and lawyers, for failing to act to resolve the switch problem.

The recalls led to other changes at GM. Barra appointed a new safety chief who reports directly to her and added 35 product safety investigators. The company changed its product development process to focus more on safety. And it started a program that encourages employees to speak up if they uncover a safety concern.

GM also reviewed a backlog of safety issues in 2014 and ordered a record 84 recalls covering more than 30 million vehicles, including 27 million in the United States. So far this year, it has issued 33 recalls covering 2.6 million cars and trucks.

Numerous critics complained that no individuals faced charges, including Laura Christian, the mother of a woman who died in her 2005 Cobalt. She said she felt as if she was in mourning again and called the financial penalty a “slap on the wrist.”

Lance Cooper, an attorney who helped uncover the scandal, said the settlement is no consolation to the victims’ loved ones.

“When individuals, through their reckless conduct, cause someone to die, they go to jail,” Cooper said. “When large corporations such as GM, through their reckless conduct, cause hundreds of people to die, they simply pay a fine, write it off as a tax loss, and move on.”

He added: “Unfortunately, it’s the same old story—if you have enough power and money, you can always buy your way out of truly being held accountable for your misdeeds.”

The deal with GM comes a year and a half after Toyota agreed to a $1.2 billion penalty from the Justice Department for withholding information about deadly unintended acceleration in its vehicles.