Feds Hit Toyota with Car Industry Record Penalty for Hiding and Lying about Safety Problems (But No Jail Time for Anyone)

Friday, March 21, 2014
Akio Toyoda, president and CEO of Toyota

Toyota’s highly publicized troubles with cars suddenly accelerating and causing accidents have resulted in a record fine for an auto manufacturer, but no criminal prosecution of its executives.


Under a deal reached with the federal government, Toyota will pay a $1.2 billion financial penalty as part of the deferred prosecution agreement drawn up by the Department of Justice (DOJ). The penalty is the largest ever imposed on an automobile company by the U.S. government. However, considering that Toyota has cash reserves of $59 billion, company executives aren’t complaining.


The agreement also imposes on Toyota an independent monitor who, according to the DOJ, will “review and assess policies, practices and procedures relating to Toyota’s safety-related public statements and reporting obligations.”


The charge of wire fraud is the culmination of a four-year criminal investigation. Federal prosecutors accused the Japanese automaker of defrauding consumers by issuing misleading statements about safety issues in Toyota and Lexus vehicles. It was also accused of giving “inaccurate facts” to members of the U.S. Congress.


Toyota admitted it was guilty of concealing and making deceptive statements about two safety matters that each caused a type of unintended acceleration.


One involved floor mats that would interfere with the gas pedal, and the other involved “sticky pedals.”


Five years ago, the company told the National Highway Traffic Safety Administration (NHTSA) that it had addressed the unintended acceleration problem by recalling eight models of cars experiencing floor-mat entrapment. However, between 2010 and 2012, Toyota’s delays in reporting that problem resulted in NHTSA fining the company more than $66 million in civil penalties—a record amount charged by the agency.


It has since been learned that Toyota officials knowingly did not recall all vehicles with this trouble. In addition, officials deliberately hid from federal regulators another type of unintended acceleration caused by pedals getting stuck after being pressed.


As long as the company fully addresses these safety issues, the Justice Department will delay prosecution of any company official for three years and then seek to dismiss the charge.


U.S. Attorney Preet Bharara was asked by reporters why he chose to not prosecute anyone now.


He responded by saying: “I’m not foreclosing anything necessarily.”


“As you might imagine, when you have a company with individuals who are responsible for unlawful conduct in other jurisdictions, there are problems of evidence and problems of proof. It happens to be the case that the rules of evidence sometimes do not allow you to use certain kinds of evidence and certain documents against certain individuals, although they might be admissible against the company itself. Although there is an admission that there were individuals who engaged in conduct which provides for a basis to bring a case against the company, they are not charged there,” he added.

-Noel Brinkerhoff


To Learn More:

Justice Department Announces Criminal Charge Against Toyota Motor Corporation and Deferred Prosecution Agreement with $1.2 Billion Financial Penalty (U.S. Department of Justice)

Toyota Gets Prosecution Deferred, No Corporate Crime Plea, No Individuals Charges (Corporate Crime Reporter)

Toyota's Huge Fine won't Dent its $60 Billion Cash Pile (by Chris Isadore, CNN Money)

$1.6 Billion Toyota Sudden Acceleration Class Action Settlement Tried to Blame Drivers (by Noel Brinkerhoff, AllGov)


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