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Why the law doesn’t actually cover GM’s deadly defects

General Motors has agreed to pay $900 million in a settlement with the U.S. government over a deadly flaw in its ignition switches, after admitting it hid the problem for over a decade. In addition to the fine, an independent monitor will supervise GM’s compliance. But some critics say the deal is too lenient. Hari Sreenivasan talks to David Shepardson of The Detroit News.

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    But, first, General Motors and the government reached a settlement today over how the automaker handled a defect that led to deaths, injuries and the recall of millions of vehicles. The agreement may resolve many of the cases, but some remain concerned that the government may have let GM off too lightly.

    Hari Sreenivasan has the story from our New York studios.

    PREET BHARARA, U.S. Attorney, Southern District of New York: This office and GM have entered into a deferred prosecution agreement.


    The formal announcement from U.S. attorney Preet Bharara in New York followed years of recalls, lawsuits and congressional hearings. GM agreed to pay $900 million over faulty ignition switches that shut off engines and disabled safety systems. The company now admits it hid the deadly defect for more than a decade.


    They didn't tell the truth in the best way that they should have to the regulator and to the public about a serious safety issue that risked life and limb.


    An independent monitor will check GM's compliance, and pending criminal charges could be dropped after three years. But the deal does have its critics.

    In a statement today, Democratic Senators Ed Markey and Richard Blumenthal said: "The 124 families who lost loved ones deserved individual criminal accountability. It is shameful that they will not be held fully accountable."

    Back in New York, prosecutor Bharara defended the agreement.


    We're not done and it remains possible that we will charge an individual, but the law doesn't always let us do what we wish we could do.


    And in Warren, Michigan, GM's chief, Mary Barra, summed up the automaker's perspective at an employee town hall.

  • MARY BARRA, CEO, General Motors:

    This is a tough agreement. It further highlights the mistakes that were made by certain people in GM and it imposes significant penalties and obligations.


    GM also today said it will spend $575 million to settle civil lawsuits.

    Let's learn more about this settlement and the questions surrounding a lack of charges.

    David Shepardson of The Detroit News was at today's press conference and joins me now.

    It seems that we kind of learned today the limits of the law. GM wasn't necessarily found guilty of the ignition switch problem, but more of the wire fraud connected to the cover-up.

  • DAVID SHEPARDSON, The Detroit News:

    It's basically the same charge the federal prosecutors have used for years for gangs and different crimes, you know, using a telephone or any electronic device across state lines.

    And the U.S. attorney said there is not a statute that makes it a crime solely for an auto company to sell defective vehicles, and that they were not able to determine whether individual employees, you know, actually were engaged in a cover-up or intentionally committing a crime without that specific statute. And so they said they're not giving up, and they're not ruling out any criminal charges in the long run. But, realistically, this is probably the end of the criminal side of this case.


    A lot of families of the victims are saying, listen, my loved one died, and there's not a single human being at General Motors that's responsible for this that we can find criminally negligent here?


    You have 124 deaths, and GM's independent compensation fund is tied to this, 270 injuries, some of them very serious.

    And what the U.S. attorney said is, GM had this silent culture where no one was taking responsibility. The CEO has called it a culture of incompetence and neglect. And, essentially, because of this huge incompetent company, no one is being held responsible. And it is — you know, like you said, there are a lot of families.

    And the U.S. attorney personally met with the families and said he was sorry and he said they're as aggressive as any other office in the country, but they can't find a statute to specifically go after those individual employees.


    That's probably discomforting for any auto owner, that there is no law that can actually prosecute this.

    But how much has GM paid so far? And it seems like this is less than what Toyota was fined with for the sticky accelerator problem a couple years ago.


    That's right.

    In fact, the Toyota sudden acceleration problem, which was linked to about five or six deaths, resulted in a $1.2 billion fine. GM is paying to the U.S. government $900 million. There's about $1.2 billion more in settlements of lawsuit, including to shareholders and people who sued over ignition switch defects. And then there's the independent compensation fund that's awarded about $600 million.

    What the U.S. attorney said was, we're essentially going easier on GM because they fully cooperated, that not only did their attorneys, you know, turn over information to us before they even told the executives, but they created this compensation fund and they quickly said, we're going to change our culture.

    Toyota was accused of misleading government regulators and not coming clean for much longer. It took them four-and-a-half years to reach that settlement. So that's part of the reason for the difference in the fines.


    All right. And this also doesn't count what it is going to cost to fix the ignition switches of all these recalled cars.


    That's right.

    GM last year took about $4 billion in charges for — much of it in the 30 million vehicles they recalled, including another 12 million vehicles beyond the ones involved in this criminal case for other ignition problems, for other key issues. So the expenses are significant. There's many, hundreds of lawsuits left to be resolved. So it's not over yet.


    But what are the next steps? Is GM essentially on some sort of probation for the next few years? They didn't have to admit any wrongdoing, but keep their nose clean?


    Well, they didn't have to plead guilty. They were charged with two felonies. But they were required to admit to the information that's laid out in these two charges.

    And so, for the next three years, they will have a consent decree. They will be on probation. If they violate the law, the government could seek to reinstate those felonies and actually going through conviction. But the reality is, there are not a lot of penalties to a big company.

    Companies don't go to jail. You know, individuals do. And for the most part, Wall Street have basically baked in this cost of the settlement, so the stock was up a little bit today.


    All right.

    David Shepardson of The Detroit News, thanks so much.


    Thanks, Hari.

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