Associated Press – Toyota’s misleading statements presented a “reprehensible picture of corporate misconduct” as it failed to properly protect consumers from unexpected acceleration in its vehicles, a judge said as he nevertheless accepted a deal that lets the Japanese automaker escape prosecution with a $1.2 billion penalty.
Southern District Judge William H. Pauley III (See Profile) said the case showed that corporate fraud can kill. He also urged federal prosecutors to continue pursuing individuals who were behind the company’s actions after an acceleration problem stemming from ill-fitting floor mats attracted widespread publicity in 2009 when a family of four died in a San Diego crash.
The Justice Department announced the deferred prosecution agreement on Wednesday, saying the company assured the public and regulators that it had adequately addressed the problem through a limited safety recall of certain models when it knew at the time that other models susceptible to the same safety flaw had not been recalled.
U.S. Attorney General Eric Holder told a news conference in Washington on Wednesday that Toyota handled the issue “as if it were a simple public relations problem.”
Southern District U.S. Attorney Preet Bharara, who also attended the press conference, said “Toyota stands charged with a criminal offense because it cared more about savings than safety and more about its own brand and bottom line than the truth.’
Bharara stated that “Companies that make inherently dangerous products must be maximally transparent, not two-faced.” And he warned “the entire auto industry should take notice” at “this landmark enforcement action.”
At a hearing Thursday in New York, where a felony count of wire fraud was lodged against the company, Pauley agreed to suspend the case until March 20, 2017, at the request of prosecutors. Prosecutors would dismiss the charge if the company satisfies the agreement’s terms, which include paying the penalty and appointing a monitor to review policies, practices and procedures.
Pauley said that he read the party’s submissions and a statement of law, concluding that the case “really presents a reprehensible picture of corporate misconduct.” He called it a case “that demonstrates that corporate fraud can kill.”
Pauley added: “I sincerely hope that this is not the end, but only the beginning, to seek to hold those individuals responsible for making those decisions accountable.”
Toyota said in court papers filed in December that it’s in settlement talks on nearly 400 U.S. wrongful death and injury lawsuits. Many of the actions have been consolidated in California state and federal courts, though an Oklahoma jury has awarded $3 million in damages to the injured driver of a 2005 Camry and to the family of a passenger who was killed.
Representing Toyota Corp. in court Thursday was Christopher Reynolds, general counsel of its North America subsidiary. He declined to comment.
A Toyota spokesman in court referred reporters to a statement Toyota issued Wednesday, in which it said it had “made fundamental changes to become a more responsive and customer-focused organization, and we are committed to continued improvements.”
Donald Slavik, senior counsel to Robinson Calcagnie Robinson Shapiro Davis in Newport Beach, Calif., whose firm plays a lead role in the Toyota civil matters, agreed that the deal wouldn’t directly affect settlement negotiations. But it could provide perspective about their overall value, which he estimated Toyota could resolve “for a sum certainly much less than the $1.2 billion they’re paying here.”
Bharara said Wednesday that the $1.2 billion, which will go to the Justice Department’s asset forfeiture fund, could have limited value for civil litigants.
“It is possible for individuals who were victimized or who believe they were victims to get recompensed through the asset forfeiture program, although it’s my understanding that many of them have already settled or found recompense through civil litigation,” he said.
Still, the payment is the largest criminal penalty imposed on a car company in U.S. history.
James Johnson of Debevoise & Plimpton also appeared for Toyota.
The prosecution was handled by the office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Bonnie Jonas, deputy chief of the Criminal Division, and Assistant U.S. Attorney Sarah E. McCallum are in charge of the prosecution, and Assistant U.S. Attorney Sharon Cohen Levin, chief of the Money Laundering and Asset Forfeiture Unit, is responsible for the forfeiture aspects of the case.
Assistant U.S. Attorney Jonas appeared before Pauley.
@|Amanda Bronstad of affiliate The National Law Journal contributed to this story.