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From Products Liability Law Daily, March 19, 2014

$1.2 billion settlement with Toyota announced by USAG Eric Holder

By Joe Bichl

At a press conference announcing criminal wire fraud charges against, and a deferred prosecution agreement with, Toyota Motor Corporation, Attorney General Eric Holder said that the Justice Department had concluded its years-long investigation into Toyota regarding the widespread incidents of unintended vehicle acceleration that resulted in one of the largest motor vehicle recalls ever.

Under the agreement, Toyota will pay a $1.2 billion penalty, the largest criminal penalty imposed on a car company in U.S. history, as well as admit to making misleading statements and undertaking acts of concealment. In addition, the company will submit to “rigorous” review by an independent monitor that will examine and assess the manner in which Toyota reports safety issues to the public and federal regulators.

Background. In 2009 and 2010, Toyota issued recalls affecting nearly six million vehicles due to unintended acceleration where the acceleration pedal became entrapped by the floor mat. The National Highway Traffic Safety Administration determined poor communication between Toyota’s corporate center in Japan and Toyota’s U.S. holdings was partially responsible for the company’s failure to timely report known safety issues.

According to the allegations in the complaint and the Deferred Prosecution Agreement, as well as other documents, including the Statement of Facts:

In the fall of 2009,  Toyota had informed consumers and NHTSA that it had “addressed” the “root cause” of unintended acceleration in its vehicles through a limited safety recall of eight models for floor-mat entrapment, a condition in which an improperly secured or incompatible all-weather floor mat can “trap” a depressed gas pedal causing the car to accelerate to a high speed. At the time the statements were made, however, Toyota knew that it had not recalled some cars with design features that made them just as susceptible to floor-mat entrapment as some of the recalled cars. Weeks before these statements were made, Toyota had taken steps to conceal from NHTSA another type of unintended acceleration in its vehicles, separate and apart from floor-mat entrapment: a problem with accelerators getting stuck at partially depressed levels, known as “sticky pedal.”

DOJ investigation. According to Holder, the years-long investigation examined the way the automaker disclosed complaints about problems of sudden acceleration associated with many of its Toyota and Lexus models. Rather than promptly disclosing and correcting safety issues about which they were aware, Toyota made misleading public statements to consumers and gave inaccurate facts to Congress. In addition, the company concealed from federal regulators the extent of problems that some consumers encountered with sticking gas pedals and unsecured or incompatible floor mats that could cause these unintended acceleration episodes.

“The company delayed a broader recall until early 2010—despite internal tests warning of the dangers posed by other, unrecalled vehicle models,” Holder said. He stated that Toyota confronted a public safety emergency as if it were a simple public relations problem, and that the penalty was appropriate “given the extent of the deception carried out by Toyota in this case. Put simply, Toyota’s conduct was shameful.”

In addition to Holder, Transportation Department Secretary Anthony Foxx and United States Attorney for the Southern District of New York Preet Bharara made statements at the press conference.

Foxx said that the penalties “follow NHTSA’s own record civil penalties of more than $66 million—together, they send a powerful message to all manufacturers to follow our recall requirements or they will face serious consequences.”

Bharara, who filed the charges against Toyota, said, “Toyota stands charged with a criminal offense because it cared more about savings than safety and more about its own brand and bottom line than the truth. In its zeal to stanch bad publicity in 2009 and 2010, Toyota misled regulators, misled customers, and even misstated the facts to Congress. The tens of millions of drivers in America have an absolute right to expect that the companies manufacturing their cars are not lying about serious safety issues; are not slow-walking safety fixes; and are not playing games with their lives.”

Companies: Toyota Motor Corp.

MainStory: TopStory MotorVehiclesNews ProductRecallsNews NHTSANewsStory

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