Toyota agrees to pay U.S. $1.2 billion fine to settle fraud charge

Windsor Genova – Fourth Estate Cooperative Contributor

Washington, DC, United States (4E) – Toyota Motor Corp. agreed Wednesday to pay the U.S. government $1.2 billion in fine to settle a charge of defrauding American consumers by not telling the truth about flaws in its cars, the Department of Justice (DOJ) said.

In the settlement with the U.S. Attorney for the Southern District of New York called Deferred Prosecution Agreement (DPA), the Japanese carmaker admits to misleading U.S. consumers in 2009 and 2010 by concealing and making deceptive statements about two safety-related issues affecting its Toyota and Lexus cars. The defect caused the cars to accelerate unintentionally.

The DPA requires the company to pay the fine, the largest criminal penalty imposed on a car company in U.S. history, through the U.S. Marshals Service by March 25.

In exchange for the payment of the fine, the U.S. government, through the DOJ, defers prosecution of Toyota for the fraud for three years, after which it dismisses the charge. The DPA is still subject to approval by a federal judge.

In a statement announcing the settlement, U.S. Attorney General Eric Holder said Toyota failed in its duty to quickly inform consumers about the safety issues of its cars and did not fix the problem quickly. He warned other car companies not to repeat Toyota’s mistake.

“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,” said Preet Bharara, U.S. Attorney for the Southern District of New York. “In its zeal to stanch bad publicity in 2009 and 2010, Toyota misled regulators, misled customers, and even misstated the facts to Congress. The tens of millions of drivers in America have an absolute right to expect that the companies manufacturing their cars are not lying about serious safety issues; are not slow-walking safety fixes; and are not playing games with their lives.”

The fraud charge stemmed from 2007 reports alleging unintended acceleration in Toyota and Lexus vehicles. Toyota investigated and identified the problem, but did not disclose its findings to the National Highway Traffic Safety Administration (NHTSA). The agency’s own investigation into the issue found the defect in a Lexus ES350 and other Toyota and Lexus models but the company denied that a recall to repair throttle pedal was needed. Instead, Toyota recalled the floor mats.

Toyota engineers made a design fix to the problem in 2007 but did not apply it in the production of existing models. On Aug. 28, 2009, a family of four traveling in a Lexus ES350 were killed in a crash in San Diego, California. The mat entrapped the accelerator at full throttle causing the car to uncontrollably speed for more than 100 miles per hour and crash.

Toyota’s 2009 notice to the NHTSA said it addressed the floormat entrapment problem with a limited safety recall of eight models. Later, the company announced it had fixed the problem.

TOYOTA also hid from NHTSA the sticky pedal defect that also caused unintended acceleration in its Camry, Matrix, Corolla, and Avalon models. The accelerator pedal has a plastic material inside that causes it to get stuck in a partially depressed position.

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