The charges of wire fraud against Toyota for concealing safety
problems marked the first criminal case of its kind against an auto
company. The announcement last week of the settlement between the
Department of Justice and Toyota immediately prompted speculation
about its ramifications for General Motors, which is under
investigation over its handling of a problem with ignition switches.
Prosecutors have generally used a narrower approach in previous
criminal cases against companies for misleading the public over
safety issues. Pharmaceutical firms, for example, have been
prosecuted under a law that makes it a crime to market drugs for
uses other than those that have been approved as safe by the FDA.
Auto companies, too, are subject to a specific law that makes it a
crime for them to mislead regulators about safety defects.
Rather than prosecute Toyota under that law, the TREAD Act, the
Justice Department relied on a broad theory arguing that misleading
statements about major safety issues constitute wire fraud.
That theory could be applied across industries, including against
companies that build planes or trains, or potentially the mining and
oil sectors, the DOJ official and legal experts said.
"A case of this size is designed to set an example to entire
industries," said Brandon Garrett, a University of Virginia Law
School professor and expert on corporate crime.
"This isn't a cautious foray into criminal investigations and
prosecutions in the auto area," he said, "This case is designed to
send a big message."
The framework gives prosecutors the ability to go after industries
that haven't been subject to much criminal prosecution in the past.
Criminal cases involving corporate malfeasance are often hard to
prove against specific individuals, so it is unclear whether the
Justice Department's new framework could also target executives
responsible for the conduct. No Toyota executives were charged over
their role in the misconduct.
It is unclear if the Justice Department has active investigations
into such conduct outside of the auto industry. The Justice official
declined to comment on whether there were any such probes.
PROVING CRIMINAL INTENT
The government is investigating General Motors' handling of a defect
in some cars that can lead the ignition to shift suddenly from the
"run" position to "accessory," causing the steering, brakes and
airbag systems to lose power. GM has said it received reports of 12
deaths and 34 crashes in cars with the defect.
[to top of second column]
While he did not refer to GM specifically, Attorney General Eric
Holder said when announcing the Toyota deal that he expected that
settlement to serve as a model for how prosecutors would approach
future cases involving "similarly situated companies."
Prosecutors are required to prove criminal intent in order to bring
such cases, so would need to prove that a company specifically
sought to mislead regulators or the public in order to protect its
As part of its settlement, Toyota admitted it misled Americans about
two different problems that caused cars to accelerate even as
drivers tried to slow them down.
In a lengthy statement of facts, the auto maker admitted it left out
of a recall some vehicles including the top-selling Corolla which
was described within the company as having among the worst problems
with floor mats that trapped acceleration pedals.
And it admitted it concealed from the public and regulators a
separate problem with the acceleration pedal itself.
Legal experts said the new avenue for prosecution could force
companies to pay closer attention to their public statements.
"Prosecutors can only be as successful as the facts allow, but the
Toyota agreement puts companies on notice that when you have a
problem, you need to deal with it quickly and forthrightly," said
Daniel Suleiman, a former top official in the Justice Department's
criminal division who is now a white-collar criminal defense lawyer
at Covington & Burling.
(Reporting by Aruna Viswanatha; editing by Caren Bohan and Andrew
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.