Too Much — or Not Enough?

Last week, the Justice Department and Toyota announced a $1.2 billion settlement over cases where millions of Toyota and Lexus automobiles accelerated without their drivers’ intent. It is the largest-ever criminal penalty for an automobile manufacturer. Yet there are differences of opinion as to whether this settlement is too steep or does not go far enough.

The issue first came to light in 2009, when a family of four, including California Highway Patrol officer Mark Saylor, was in a high-speed accident that resulted in the loss of all four lives. The event was captured on the 911 call made by Saylor’s brother-in-law, Chris Lastrella, who was in the car. Lastrella described how the accelerator was stuck and the car kept going faster, reaching 125 MPH before crashing and killing them all.

At first Toyota blamed driver error, saying that the driver must have mistakenly stepped on the accelerator when meaning to press on the brake pedal. Then Toyota faulted defective floor mats found in some of its vehicles. However, the corporation knew that the floor mat problem was not only confined to the vehicles for which it issued a recall. Similarly, Toyota was also aware that there was another cause for the problem, which was the gas pedal design.

Toyota lied about these issues.

It lied to consumers, it lied to regulators, and it lied to Congress.

When announcing the settlement, Washington Atty. Gen. Eric Holder made these points clear. “We can say for certain that Toyota intentionally concealed information and misled the public about safety issues. 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 members of Congress.”

The Justice Department, which reportedly has launched a preliminary criminal investigation into similar actions on the part of General Motors, clarified the reason they felt this was an important settlement to reach.

“Companies that make inherently dangerous products must be maximally transparent, not two-faced,” said Preet Bharara, who led the Toyota investigation and is the U.S. attorney for the Southern District of New York. “That is why we have undertaken this enforcement action. And the entire auto industry should take notice.”

Holder echoed these sentiments, saying that “…other car companies should not repeat Toyota’s mistake. A recall may damage a company’s reputation, but deceiving your customers makes that damage far more lasting.”

The $1.2 billion payout comes on top of the more than $66 million already paid out by Toyota in civil penalties, with hundreds of cases still pending. In return for the payout, the Justice Dept. will defer prosecution of a wire fraud charge for three years. That will be dependent on the payments being made, and Toyota submitting to an independent monitor who will review all policies, practices and procedures pertaining to automobile safety at the company.

The $1.2 billion number does sound large — because it is. According to Micheline Maynard of Forbes, that amount of money is almost double what Toyota spent to open its newest U.S. plant in Blue Springs, Mississippi, which cost $800 million and is considered the company’s most advanced plant. Two thousand workers are employed at that location alone. It is also more than the $1 billion usually associated with designing a new car from scratch.

Instead, that money will be going to the Federal Government.

But as big as that penalty does seem, it does not come close to accomplishing the stated goal of the Department of Justice. In its last fiscal quarter alone, Toyota posted a $5.2 billion profit. That means the fine is less than one quarter of its yield in the last quarter alone.

And while it is a lot of money, it is hardly a deterrent.

Some, like Jack Gillis, the director of public affairs for the Consumer Federation of America, a consumer advocacy research and lobbying group, called for “some personal culpability among the decision-makers.” The fact that none of the executives will be held criminally liable and the company can easily absorb the fine will only encourage others to take these chances, putting drivers in danger. But experts say that the problem with prosecuting individuals criminally is a practical one, as much of the work is done overseas, and there is trouble reaching the standard of evidence required to win a conviction.

This is a problem that needs to be addressed, if the intent is indeed to stop future cover-ups from occurring.

Companies should be required to have actual people signing safety statements and verifying compliance with regulations in this area. A rule should be adopted which makes executives of the companies responsible for the veracity of those statements — to the point where they can face criminal prosecution with penalties including, but not limited to, jail time.

Maybe then, if they themselves are at risk, there will be an effective deterrent to cutting corners on safety.