Toyota settles with government for $1.2 billion in recall probe


Toyota representatives examine a crashed Toyota Prius, Wednesday, March 17, 2010, in Harrison, N.Y. (AP Photo/Stephen Chernin)

Toyota Motor Corp. has agreed to a $1.2 billion settlement to end a U.S. Justice Department criminal probe into its handling of safety problems, Attorney General Eric Holder announced.

“The $1.2 billion payment represents the largest criminal penalty imposed on a car company in U.S. history,” Holder said in a statement. “This is appropriate given the extent of the deception carried out by Toyota in this case.  Put simply, Toyota’s conduct was shameful,” Holder said.

Holder said the government will defer prosecution of Toyota for three years – “provided that Toyota complies with the agreement in every respect and continues to fully cooperate with federal authorities.  But let me be clear: the Department has not, and will not, consent to foreclose criminal prosecution if the terms of this agreement are not rigorously honored.”

House Oversight and Government Reform Committee member Rep. Dan Burton, R-Ind., holds a Toyota accelerator pedal while asking a question of Toyota President and Chief Executive Officer Akio Toyoda, on Capitol Hill in Washington, Wednesday, Feb. 24, 2010, as he testifies before the committee. (AP Photo/Alex Brandon)
House Oversight and Government Reform Committee member Rep. Dan Burton, R-Ind., holds a Toyota accelerator pedal while asking a question of Toyota President and Chief Executive Officer Akio Toyoda, on Capitol Hill in Washington, Wednesday, Feb. 24, 2010, as he testifies before the committee. (AP Photo/Alex Brandon)

Holder said that while Toyota conducted a limited recall of some vehicles with accelerator issues in September 2009, the company delayed making a wider recall “despite internal tests warning of the dangers posed by other, unrecalled vehicle models.”

In other words, he added, “Toyota confronted a public safety emergency as if it were a simple public relations problem.  And they mounted this coverup despite widely-documented incidents, and even tragic accidents.”

The Manhattan U.S. Attorney’s Office had been looking into whether Toyota misled federal investigators about the defects in its cars and how it handled drivers’ complaints.

In a separate investigation, the Securities and Exchange Commission was looking into whether the Japanese automaker alerted investors to the problem with its vehicles as required by securities laws.

 

In 2009, the driver of a borrowed Lexus — made by Toyota — was unable to stop the vehicle as it careened off the highway at 120 miles per hour, killing three people. “There’s no brakes…Hold on and pray,” one of the passengers said to a 911 operator.

Toyota recalled more than 11 million vehicles worldwide in 2009 and 2010 after complaints of sudden, unintended acceleration created a public controversy.

Toyota has already paid billions to settle claims related to the recall, including a $1.6 billion class action suit last July that was filed by vehicle owners claiming they suffered financial losses. Hundreds of lawsuits for personal injury and wrongful death are still pending.

News of the settlement follows an announcement that federal prosecutors have launched a criminal probe into General Motors over whether the Detroit automaker failed to properly disclose problems with a faulty ignition switch that has been linked to 13 deaths.

Gail Sullivan covers business for the Morning Mix blog.
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