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U.S. indicts three Takata executives, fines company $1 billion in air-bag scandal

Japan's Takata agreed to plead guilty to criminal wrongdoing and pay $1 billion to resolve a Justice Department investigation. (Video: Reuters)

Federal prosecutors brought criminal charges against three Takata executives and fined the Japanese auto-parts maker $1 billion on Friday for concealing information about faulty air bags, leading to the deaths of several motorists and prompting the largest safety recall in U.S. history.

Shinichi Tanaka, Hideo Nakajima and Tsuneo Chikaraishi, all of Japan, were indicted on charges connected to deceiving automobile companies about known defects in order to continue selling products they knew failed safety tests. At the time national recalls began in 2015, Takata was the world’s second-largest provider of air bags.

On Friday, the Justice Department announced that Takata would plead guilty to one count of fraud and pay $25 million to settle the criminal charge. The company will also pay $850 million to automakers and $125 million to those injured as a result of the defect, according to a plea agreement.

“Automotive suppliers who sell products that are supposed to protect consumers from injury or death must put safety ahead of profits,” U.S. Attorney Barbara McQuade said Friday. “If they choose instead to engage in fraud, we will hold accountable the individuals and business entities who are responsible.”

Takata chief executive Shigehisa Takada issued a statement that the company will continue to work with regulators and automakers to address ongoing recalls. “Takata deeply regrets the circumstances that have led to this situation and remains fully committed to being part of the solution,” the statement said.

The settlement comes just days after the Justice Department announced that six executives at Volkswagen were indicted in that automaker’s emissions-cheating scandal. It is also the latest example of the Obama administration cracking down on companies and pursuing charges against individual executives in its waning days.

The faulty Takata air bags could rupture or explode and propel shrapnel into the vehicle. The defect has been tied to 11 deaths and more than 180 injuries in the United States, according to the National Highway Traffic Safety Administration. NHTSA has recalled more than 64 million air bags, installed in 42 million vehicles made by just about every brand on the market.

Since at least 2000, Tanaka, Nakajima and Chikaraishi allegedly schemed to hide the fact that at least some of the devices that inflate Takata’s air bags did not perform as promised, court documents state. The three men and others at the company deleted unfavorable data and manipulated other information, then signed off on the falsified records as proof to automakers that the air bags met safety standards, according to the documents.

As the air bags began to fail on the roads, the three executives and other employees continued to hide the safety test information, the documents state.

The indictment was initially filed Dec. 7 and unsealed Friday.

All three executives were longtime employees of Takata until their departure in 2015. They held executive-level roles in Japan and the United States that involved regular communication about the design, production and testing of air-bag inflaters, according to the indictment, which was filed in U.S. District Court in the Eastern District of Michigan. They face six counts, including wire fraud and conspiracy to commit wire fraud.

Sen. Bill Nelson (D-Fla.) has been a vocal critic of Takata and spearheaded a review of the company’s air bag testing last year.

“Companies have a responsibility to ensure that the products they make are safe for consumers,” Nelson said Friday. “These indictments send a strong message that if company executives knowingly put deadly products on the market, they will be held accountable for their actions.”

The Takata recall began with a small number of Honda vehicles as early as 2008, according to NHTSA. The agency expanded recalls to cover more automakers and regions in 2014, and then broadened the order to all parts of the country in 2015.

The breadth of the Takata scandal demonstrates one of the pitfalls of the automobile industry’s global supply chain, industry analysts said. Automakers increasingly buy identical parts from the same provider when that part is common to all vehicles, meaning product deficiencies may then affect a wider swath of the market than in the past.

“Corporate ethics and quality control have always been important elements in automotive design and production,” said Karl Brauer, an analyst at Kelley Blue Book. “Takata’s deficiency in both areas has impacted tens of millions of cars, caused death and suffering in multiple markets, and will ultimately cost the industry billions of dollars to address.”