Business / U.S. News

GM will pay $900 million over ignition switch scandal

U.S. Attorney Preet Bharara speaks during a news conference at the U.S. Attorney's office in New York, Thursday, Sept. 17, 2015. The government and General Motors have reached a deal to resolve a criminal investigation into how the Detroit automaker concealed a deadly problem with small-car ignition switches. (AP Photo/Kathy Willens)

U.S. Attorney Preet Bharara speaks during a news conference at the U.S. Attorney’s office in New York, Thursday, Sept. 17, 2015. The government and General Motors have reached a deal to resolve a criminal investigation into how the Detroit automaker concealed a deadly problem with small-car ignition switches. (AP Photo/Kathy Willens)

NEW YORK (AP) — General Motors agreed to pay $900 million to fend off criminal prosecution over the deadly ignition-switch scandal, striking a deal that brought criticism down on the Justice Department for not bringing charges against individual employees.

The switches, which can slip out of the “run” position and cut off the engine, have been linked to at least 169 deaths.

Despite evidence that GM’s legal and engineering staffs concealed the problem for nearly a decade, no employees were charged Thursday, though U.S. Attorney Preet Bharara said the investigation is still going on.

Also Thursday, GM announced it will spend $575 million to settle the majority of the civil lawsuits filed over the scandal.

Under the deal with prosecutors, an independent monitor will be appointed to oversee GM’s handling of safety problems. Two charges drawn up against GM — wire fraud and scheming to conceal information from government regulators — will be dropped after three years if the automaker cooperates fully.

GM agreed to a statement of facts that describes in scathing terms its deceptive and dismissive approach to the defect.

“They let the public down,” Bharara said. “They didn’t tell the truth in the best way that they should have — to the regulators, to the public — about this serious safety issue that risked life and limb.”

The twin agreements bring to more than $5.3 billion the amount GM has spent on a problem authorities say could have been handled for less than a dollar per car. Those expenses include fines, compensation for victims and the recall of millions of vehicles.

With the settlements, GM takes a big step toward moving past the scandal.

On Thursday, GM chief executive Mary Barra appeared before several hundred employees in suburban Detroit and again apologized to the crash victims. When asked whether employees should have been charged, she deferred to Bharara’s office.

But she added: “We understand that lives were impacted. That is something that we understand and we take forward and will have with us every day.”

The settlement brought bitter criticism from safety advocates and family members.

Consumer advocate Clarence Ditlow, head of the nonprofit Center for Auto Safety, said GM officials will “walk off scot-free while its customers are 6 feet under.”

“If a person kills someone because he decided to drive drunk, he will go to jail,” said Laura Christian, the mother of a woman who died in her 2005 Cobalt. Yet GM employees whose decisions led to scores of deaths “are able to hide behind a corporation because our laws are insufficient. It must change.”

Bharara said he understands victims’ families might be disappointed that no individuals were arrested. But he said there is no law with specific criminal penalties for failing to disclose auto safety problems.

Without such a statute, prosecutors had to rely on broader laws covering false statements and wire fraud, he said.

“We apply the laws as we find them, not the way we wish they might be,” he said. He added that GM was given credit for cooperating with the investigation, including sharing the results of its in-house probe.

The Justice Department has been long been criticized for often going after companies instead of individuals in cases of wrongdoing in the business world.

Eric Havian, a former federal prosecutor in San Francisco who now represents whistleblowers, said it can be extraordinarily difficult to prosecute employees.

The schemes are often so complex that a jury can easily get lost, and establishing that a particular person knew his actions were against the law is a challenge, he said.

In this case, court papers showed that GM engineers knew of the problem in 2004 and 2005 when other employees, the media and customers complained. But the engineers left it alone, rejecting a cheap and simple fix, court papers said.

Even after the dangers became plain in 2012, GM did not correct its earlier assurance that the switch posed no safety concern. Instead, Bharara wrote, it concealed the defect from regulators and the public “so that the company could buy time to package, present, explain and manage the issue.”

The wire fraud count pertained to the company’s assurances to customers over the Internet in 2012-13 that its used cars were safe.

The deal with GM comes a year and a half after Toyota agreed to a $1.2 billion penalty from the Justice Department for withholding information about deadly unintended acceleration in its vehicles.

Last year, GM recalled 2.6 million older small cars worldwide, including the Chevrolet Cobalt and Saturn Ion, to replace the faulty switches.

When they slip out of “run,” the engines shut off and the power-assisted steering, power brakes and the air bags are disabled. Some cars ran off the road or collided with other vehicles.

Last year, GM set up a fund to compensate victims. Lawyers administering it accepted 124 death claims and 275 injury claims. Families of those who died will get at least $1 million. GM has set aside $625 million to compensate people who settled with the fund.

Texas attorney Bob Hilliard represents 1,385 plaintiffs with death or injury claims who decided not to seek compensation from the fund. On Thursday, GM said it has agreed to spend $575 million to settle those cases, as well as a shareholder lawsuit that said GM’s actions reduced the value of its stock.

Even with the settlements, GM cannot close the books on the scandal. It still faces more than 400 death and injury cases that have yet to be settled. Six cases are scheduled for trial, including one in January.

Amid the scandal more than a year ago, GM fired 15 employees for failing to act to resolve the switch problem.

The recalls led to other changes at GM. Barra appointed a new safety chief and added 35 product safety investigators. The company does more testing of parts, adopting the standards of the aerospace industry. And it started a program that encourages employees to speak up if they find a safety concern.

In addition, GM ordered a record 84 recalls in 2014 covering more than 30 million vehicles.

“We’re a fundamentally different and better company because of it, and we’re going to continue to build on that,” Barra said Thursday.


AP Writers Larry Neumeister in New York, Eric Tucker in Washington and Dee-Ann Durbin in Detroit contributed to this report.


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