NEW YORK — (Mealey’s) Toyota Motor Corp. will forfeit $1.2 billion as part of a deferred criminal prosecution agreement for wire fraud for allegedly misleading consumers, the federal government and Congress about “sudden acceleration” problems in the company’s cars, the parties announced March 19 (United States of America v. Toyota Motor Corporation, No. n/a, S.D. N.Y.).
(Agreement, complaint available. Document #77-140414-010P.)
In a criminal complaint filed in the U.S. District Court for the Southern District of New York, Toyota is charged with one count of wire fraud for misrepresenting and hiding information about problems with accelerator pedals becoming stuck because of a design flaw or becoming trapped by floor mats. The complaint says Toyota claimed it had addressed the root cause of the problem through a limited safety recall when it knew that the problem existed in many more vehicles.
The complaint seeks forfeiture of revenue traceable to the problem.
On March 19, Toyota entered into a deferred prosecution agreement with the U.S. Attorney for the Southern District of New York. In it, Toyota admits that it misled U.S. consumers, the government said in a press release.
The deferred prosecution agreement is subject to judicial review.
Under the agreement, Toyota will forfeit $1.2 billion and agrees to pay for an independent federal monitor to review and assess policies, practices and procedures relating to its safety-related public statements and reporting obligations. A separate forfeiture complaint was filed March 12 in the District Court (United States of America v. $1,200,000,000 in United States Currency, No. 14-1907, S.D. N.Y.).
In a press release, the U.S. Justice Department said the forfeiture is “the largest penalty of its kind every imposed on an automotive company.”
The government alleges that there were two accelerator problems. One was from accelerator pedals becoming entrapped in poorly designed or poorly installed floor mats. The other was from poorly designed accelerator pedals becoming stuck while partially depressed.
The government said the accelerator problems led to an unspecified number of deaths and injuries when Toyota and Lexus cars could not be slowed down and stopped.
Fix Identified, Implementation Delayed
The government said that after a family of four was killed when their Lexus crashed while the gas pedal was stuck, Toyota refused to issue a recall but privately identified the cause as the floor mat problem. When Toyota engineers revised internal design guidelines to address the floor mat problem, the government says, Toyota delayed the changes until models were undergoing full redesigns, something that takes place every three to five years.
The sticky pedal problem surfaced in 2008 in Europe, the government says, and Toyota recommended replacing pedals with one from a different supplier. Instead of notifying U.S. authorities, Toyota quietly told a supplier to change its pedals for 2009, the government says.
In the meantime, the government alleges, Toyota was well aware of the sticky pedal problem, its cause and its solution.
Nothing In Writing
In an effort to hide what it knew from the National Highway Traffic Safety Administration (NHTSA), U.S. Toyota subsidiary employees were told not to put anything in writing about the pedal change in order to eliminate a paper trail, the government says.
The government also alleges that Toyota issued misleading statements to it and to consumers and gave a false timeline of events to a congressional committee.
Toyota issued a press release March 19 that did not say it had been criminally charged, saying only that it agreed to “resolve” the government investigation into the company’s “communications and decision-making processes” and to make a “payment” of $1.2 billion.
Toyota Takes Steps
Toyota says that since its acceleration recalls, it has launched rapid-response teams to investigate customer concerns quickly, committed $50 million to Toyota’s Collaborative Safety Research Center, expanded its network of field offices to improve customer responsiveness, enhanced regional autonomy, improved its quality control process and extended its new vehicle development cycle by four weeks to ensure reliability and safety.
Previously, the NHTSA fined Toyota $66 million for the same acceleration problem. The Justice Department said that fine was a record for the NHTSA.
The United States is represented in the deferred prosecution agreement by U.S. Attorney Preet Bharara, Assistant U.S. Attorneys Bonnie Jonas, Sarah E. McCallum and Sharon Cohen Levin and Deputy U.S. Attorney Richard B. Zabel of the U.S. Attorney’s Office in New York.
Toyota is represented in the deferred prosecution agreement by James E. Johnson, Matthew Fishbein and Helen Cantwell of Debevoise & Plimpton in New York
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