Last week was another slow week concerning the number of IT-related malfunctions, bugs and kinks reported. So we decided to devote this week’s IT Hiccups to the U.S. Department of Justice's (DoJ's) controversial announcement last week of a massive fine and deferred criminal prosecution as punishment for Toyota having misled the National Highway Traffic Safety Administration (NHTSA) and the public about two safety issues. The deception was part of the automaker's attempt to beat back claims that “sticky pedal” and “floor mat entrapment” in its vehicles could lead to sudden unintended acceleration (SUA). We have been following the Toyota SUA saga in the Risk Factor for several years.
The DoJ announcement states that Toyota “defrauded consumers in the fall of 2009 and early 2010 by issuing misleading statements about safety issues in Toyota and Lexus vehicles.” In addition, Toyota “misled U.S. consumers by concealing and making deceptive statements about two safety issues affecting its vehicles, each of which caused a type of unintended acceleration.”
“Contrary to public statements that Toyota made in late 2009 saying it had ‘addressed’ the ‘root cause’ of unintended acceleration through a limited safety recall addressing floor mat entrapment, Toyota had actually conducted internal tests revealing that certain of its unrecalled vehicles bore design features rendering them just as susceptible to floor mat entrapment as some of the recalled vehicles. And only weeks before these statements were made, individuals within Toyota had taken steps to hide from its regulator another type of unintended acceleration in its vehicles, separate and apart from floor mat entrapment: the sticky pedal problem.”
The statement of fact also highlighted a January 2010 report of an apparent “smoking gun” discussion following a meeting between Toyota and NHTSA in which “one Toyota employee was said to exclaim, ‘Idiots! Someone will go to jail if lies are repeatedly told. I can’t support this.’”
The agreement between the DoJ and Toyota requires Toyota “to pay a $1.2 billion financial penalty—the largest penalty of its kind ever imposed on an automotive company, and imposes on Toyota an independent monitor to review and assess policies, practices and procedures relating to Toyota’s safety-related public statements and reporting obligations.” If Toyota abides by the terms of the agreement and continues to cooperate with the U.S. government for the next three years, the criminal prosecution will be dismissed. The Toyota fine is not tax-deductible, in case you are wondering.
U.S. District Judge William H. Pauley, who signed off on the DoJ-Toyota agreement last week, was quoted in a Wall Street Journal report as saying that Toyota’s activities “painted a reprehensible picture of corporate misconduct.” In addition, the judge said that, “I sincerely hope that this is not the end but rather the beginning to seek to hold those individuals responsible for making these decisions accountable.”
Toyota declined to make a comment in regard to the judge’s comments, preferring to let its published statement about the agreement say it all:
“At the time of these recalls, we took full responsibility for any concerns our actions may have caused customers, and we rededicated ourselves to earning their trust. In the more than four years since these recalls, we have gone back to basics at Toyota to put our customers first. … Importantly, Toyota addressed the sticky pedal and floor mat entrapment issues with effective and durable solutions, and we stand behind the safety and quality of our vehicles.”
You will no doubt notice that there is nothing in this settlement that addresses the other high-profile sudden unintended acceleration issue: a supposed hardware and/or software defect in Toyota’s electronic throttle system. As I noted at the end of last year, Toyota and the myriad lawyers suing it over that allegation are still in court-ordered negotiations, even as Toyota continues to maintain that there isn’t any electronics/software-related SUA defect but only human error involved.
Several commentators at the Wall Street Journal and Washington Times have called the agreement an “unjust” “government shake-down” of Toyota. Their claim is that Toyota did nothing wrong other than perhaps, as one commentator put it, a “few incidences” where its employees “dithered about whether to report data to [NHTSA] right away and took pains to present facts to the public in the most flattering light.” In other words, Toyota didn’t violate any important safety procedures in its recall approach, just government paperwork requirements, despite Judge Pauley’s comments to the contrary. Toyota, they go on to maintain, only agreed to the $1.2 billion fine and deferred prosecution to put an end to what they see as the totally media-inspired public frenzy and besmirchment of Toyota's reputation.
These commentators see GM as the next likely “victim” of government overreach when the Justice Department assesses penalties related to the case of the automaker's belated 3-million-vehicle ignition-switch recall. They point to the warning that Attorney General Eric Holder made in the news conference announcing the department's agreement with Toyota: “Other car companies should not repeat Toyota’s mistake: A recall may damage a company’s reputation, but deceiving your customers makes that damage far more lasting.”
Of course, the “Toyota got railroaded” crowd don’t say what would rise to fraudulent and deceptive practices on Toyota’s part, or why GM should receive a pass from the DoJ, especially in light of GM’s own admissions. Their lines of reasoning might be more convincing if they had.
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