General Motors Company (NYSE:GM) is close to reaching a settlement in connection with the criminal investigation regarding its faulty ignition switches that caused the deaths of at least 124 people.
The Department of Justice (DOJ) is expected to announce the settlement agreement during a press conference in New York on Thursday. The settlement will end a broad investigation that tainted GM’s reputation for quality and safety. The faulty switch ignition scandal also damaged the automaker’s bottom line.
GM expected to pay a penalty of around $1 billion
People familiar with the matter said GM agreed to sign a deferred prosecution agreement, and to pay a penalty of approximately $1 billion. Some of GM officials previously estimated that the company would pay more than $1.2 billion, the penalty paid by Toyota Motor Corp (NYSE:TM) for not disclosing the acceleration problems in its vehicles.
Additionally, GM agreed to be monitored by U.S. authorities for three years. The people also suggested that there is a possibility for the automaker to plead guilty to a crime, but its employees are expected to avoid indictment.
The New York Times noted that the Federal Bureau of Investigation (FBI) and federal prosecutors faced challenges in holding any of the employees of the automaker criminally liable after conducting more than a year of investigation regarding the defective ignition switches. The FBI and federal prosecutors eventually concluded that the problem was caused by GM’s collective failure.
The lack of evidence and high legal burden served as a challenge to filing criminal charges to GM employees, according to the people briefed on the issue. Under the wire fraud stature, prosecutors are required to prove that a person intended to defraud, not just the conduct was deceptive. Prosecutors normally use the wire fraud statute in auto cases,
GM internal investigation
Last year, GM recalled 2.5 million vehicles with faulty ignition switches that could turn off the engine unexpectedly—disabling the airbags and cutting off the power steering and power brakes of the vehicle. It took more than a decade for the automaker to recall and report the problem to the government.
Anton R. Valukas, a former federal prosecutor led GM’s internal investigation regarding the problem. He found that GM was a dysfunctional organization with a “pattern of incompetence and neglect.”
The automaker accepted responsibility for its mistakes and promised that the problem will never happen again. GM implemented a compensation program with as much as $600 million fund for crash victims.