Prosecution Deferred: GM Settles Ignition-Switch Case

DETROIT (Detroit Free Press/TNS) -

General Motors, which will pay $900 million to settle a federal criminal probe into its handling of the defective-ignition-switch crisis, also has settled about 1,380 pending civil lawsuits stemming from a record number of vehicle recalls last year, including those related to the ignition-switch problem.

As a result of the latter settlement, GM will take a $575 million charge against its third-quarter earnings.

“The parties to these agreements have resolved difficult claims without the burden, expense and uncertainty of litigation,” said Craig Glidden, GM executive vice president and general counsel.

This is separate from a settlement with the U.S. Department of Justice of criminal charges that will result in GM paying about $900 million. Preet Bharara, U.S. attorney for the Southern District of New York, discussed the matter Thursday at his office in New York.

“For nearly two years, GM failed to disclose a deadly safety defect to the public and its regulator,” Bharara said. “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 … to make sure this never happens again.”

Bharara filed a two-count criminal “information,” in which he charges GM with participating in a scheme to conceal a deadly safety defect from federal safety regulators and committing wire fraud. But Bharara and GM have also agreed to defer prosecution of the charges for three years as long as the automaker pays the $900 million penalty by Sept. 24.

GM also agrees to provide any information about the ignition-switch defect that is requested by the Justice Department, the U.S. Department of Transportation, the National Highway Traffic Safety Administration, the FBI or the Special Inspector General of the Trouble Asset Relief Program. TARP provided GM with $49.5 billion in emergency aid as part of its 2009 bankruptcy restructuring.

If GM cooperates with those requests for three years, Bharara will recommend dropping the charges.

“Every consumer has the right to expect that car manufacturers are taking their safety seriously,” said U.S. Attorney General Loretta Lynch. “The Department of Justice is committed to ensuring that the products Americans buy are safe; that consumers are protected from harm; and that auto companies follow the law.”

The automaker had already agreed to offer settlements for families of 124 victims who were killed and 275 who were injured because of a deadly defect that lingered for more than a decade before it was rectified in 2014. GM has set aside more than $600 million for the cost of those settlements, which were offered through an independently administered settlement fund established last year for victims interested in compensation and willing to relinquish their rights to sue.

“The mistakes that led to the ignition switch recall should never have happened. We have apologized and we do so again today,” GM CEO Mary Barra said in a statement. “We have faced our issues with a clear determination to do the right thing both for the short term and the long term. I believe that our response has been unprecedented in terms of candor, cooperation, transparency and compassion.”

People who opted to sue GM instead of taking a deal may be compensated as part of the settlement announced Thursday by Texas attorney Bob Hilliard, who was appointed by a federal judge to negotiate with the automaker on behalf of individual plaintiffs.

Lauren Gomez, a spokeswoman for Hilliard, said in an email that another 370 potential injury victims and families of another 84 potential victims who were killed are not part of the deal. Hilliard will continue to pursue lawsuits in those cases, she said.

GM said the plaintiffs, which it said numbered 1,380, represent more than half of the personal-injury lawsuits it faces.

A separate shareholder lawsuit, which was filed in a federal court in Michigan, called into question the automaker’s failure to adequately disclose substantive financial risks to its investors.

“It is clear from today’s news regarding the $900 million agreement between GM and the Department of Justice and the deal we have negotiated for my clients that GM is determined to resolve parts of the ignition switch litigation where it feels it is most exposed,” Hilliard said in a statement.

Laura Christian, mother of Amber Marie Rose, who died at age 16 in a 2005 crash that may have been caused by the defective ignition switch, criticized the Justice Department penalty as too lenient.

“There are people at GM who made decisions that caused these deaths,” Christian said in a statement. “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.”

And venerable consumer-protection crusader Ralph Nader condemned Bharara’s agreement as “reverse malicious prosecution.”

“The exoneration of all GM personnel gives new meaning to the surrender of federal law enforcement that remains impervious to the preventable hundreds of thousands of deaths and injuries resulting from documented corporate criminal negligence or outright criminality throughout our country every year,” Nader said.

Total of fines, charges and penalties GM has incurred as a result of its ignition-switch-defect crisis:

– Settlement of criminal charges brought by U.S. Attorney for Southern District of New York: $900 million

– Reserve for settlements approved by the GM Ignition Compensation Fund: $625 million

– Settlement of 1,380 civil suits related to many recall issues: $575 million

– Fine by the National Highway Traffic Safety Administration for failing to report ignition-switch defect in timely manner: $35 million

– Legal fees: Unknown

– Total: More than $2.14 billion