GM Settles Civil & Federal Ignition Switch Claims
One chapter of the investigation into the factors and causes being the record-setting GM ignition switch recall appears to be closing. For months industry-watchers have speculated about the potential fallout from the deadly defect that killed 124 people and injured 275 more. In light of there being 10 times the number of deaths linked to the defective switches than GM initially indicated many believed that harsh criminal charges and penalties would be forthcoming.
In May the Wall Street Journal reported that GM was likely to face criminal charges. In June, the Journal updated its coverage stating that federal prosecutors from New York were still weighing federal wire fraud charges against the company. At the time, federal prosecutors indicated that they hoped to reach a settlement with the company by the end of summer or, at worst, by the early fall.
On Thursday, September 16, 2015, federal prosecutors announced that they had reached a settlement agreement with GM regarding criminal charges from the ignition switch defect and recall.
Terms of the Ignition Switch Settlement
GM faced a two-count criminal information alleging that the company committed wire fraud and engaged in a scheme to conceal a life-threatening safety defect from NHTSA and other federal regulators. The charges filed in the Southern District of New York by US Attorney Preet Bharara allege that from 2012 to the winter of 2014, GM concealed safety defects and misled consumers regarding the safety of GM vehicles.
In reference to these charges, Mr. Bharara also announced that GM had entered into a deferred prosecution agreement with the Department of Justice. Under terms of the deferred prosecution agreement, GM admitted that it did not make proper disclosures regarding the ignition switch defect. Furthermore, the company admitted that it misled car buyers regarding the status of the defect. Per the deferred prosecution agreement, GM has also conceded to allow an independent monitor to oversee GM’s practices regarding sharing of engineering data, safety-related public statements, and recall processes. Under the terms of the settlement agreement, GM has agreed to transfer $900 million by September 24, 2015. GM must also agree that the transferred funds are forfeit on the basis of a separate civil action that was also filed in the SDNY.
If GM meets all conditions of this agreement, the DOJ will agree to defer criminal prosecution against the company for three years. At the expiration of this three year period the DOJ will then recommend for the dismissal of charges against the company.
NHTSA and other government officials praised the deal. Mr. Bharara characterized the deal as:
“For nearly two years, GM failed to disclose a deadly safety defect to the public and its regulator. By doing so, GM put its customers and the driving public at serious risk. Justice requires the filing of criminal charges, detailed admissions, a significant financial penalty, and the appointment of a federal monitor. These measures are designed to make sure that this never happens again.”
Known costs associated with the ignition switch recall now total more than $2 billion. Notable costs include $625 million for the GM Compensation Fund, $575 million to settle nearly 1,400 civil suits, a $35 million fine by NHTSA, and the $900 million settlement and deferred prosecution agreement discussed above.
Other Responses to GM’s Ignition Switch Settlement
However, not all were pleased by the news of the settlement. Laura Christian, the mother of a GM ignition switch victim who was killed at age 16 in a 2005 crash expressed her displeasure with the settlement to the Detroit Free Press. She believes that the penalty imposed was too lenient in light of the more than 100 deaths that occurred. She believes that the executives that made the decision to refrain from fixing the ignition switch due to cost concerns despite knowing about the defects deadly nature should spend time in jail. She states, that there are people at GM who made this decision, “Yet they will not suffer any consequences. If a person kills someone because he decided to drive drunk, he will go to jail. Yet the GM employees who caused 124 deaths are able to hide behind a corporation because our laws are insufficient.” Auto safety advocate Ralph Nader also expressed his displeasure with the settlement characterizing it as “reverse malicious prosecution.”
Injured by a Defective Vehicle in Pennsylvania?
If you have suffered a serious injury in Pennsylvania due to a defective ignition switch, an airbag that deploys with too much force, a car that accelerates without apparent reason, or any other vehicle defect the experienced personal injury lawyers of The Reiff Law Firm can fight for you. To schedule a no-cost, confidential legal consultation call our firm at (215) 246-9000 today.