GM’s cooperation in probe key to early resolution

David Shepardson
Detroit News Washington Bureau

New York — General Motors Co.’s settlement of a Justice Department investigation into its deadly ignition switch defect linked to 2.6 million vehicles — a $900 million fine, no guilty plea and a resolution in just 18 months — is attributable largely to an early decision: its full cooperation with federal prosecutors.

The Detroit automaker quickly decided in early 2014 after the scandal exploded into public view that it would admit wrongdoing and pledged significant cooperation. In June, GM released a painful internal report from its outside lawyers, Jenner & Block, that painted a brutal picture of a company that had lost its way.

GM CEO Mary Barra fired 15 employees and disciplined five in the wake of the report blaming a “pattern of incompetence and neglect.”

Soon after the scandal hit public view, U.S. Attorney Preet Bharara in March 2014 slapped Toyota Motor Corp. with a $1.2 billion fine after a 4 1/2-year investigation into sudden acceleration linked to about a half dozen deaths. Many commentators suggested GM’s eventual fine would top Toyota’s. The government investigation showed Toyota took steps to try to hide its acceleration problems from regulators.

Barra approved a compensation program run by lawyer Ken Feinberg who has agreed to $566 million in settlements for 124 deaths and nearly 275 injuries. GM also announced Thursday it was settling most of the ignition switch lawsuits for injury and death claims for another $575 million.

Peter Henning, a Wayne State University law professor said “there’s bending over backwards and then there’s what GM did,” he said, noting that GM had waived attorney client privilege for significant material. The message the Justice Department was sending, he said, was that it will reward complete cooperation and efforts to make amends.

Barra had been CEO for just a few weeks when the scandal erupted and GM and its internal investigation found that senior executives had no knowledge of the deadly defect in the prior decade. It's not clear if a company that found wrongdoing at higher levels would have taken the same path.

GM's internal investigation was led by Anton Valukas, a former U.S. attorney in Chicago known for conducting extensive internal probes.

“The company’s cooperation and remediation have been fairly extraordinary. They conducted a swift and robust internal investigation,” Bharara said. GM lawyers gave federal prosecutors real-time updates on the investigation — “often revealing to the office what witnesses had said — even before GM management was filled in ... That cooperation is the reason we are here after only 18 months in a complicated case — rather than four years or more.”

GM still faces many depositions in civil lawsuits, and Barra is to give a sworn interview next month. But prosecutors decided to settle the criminal case even before those are completed.

One testament to GM’s cooperation is the government’s statement of facts it released Thursday largely mirrors GM’s own internal findings.

Barra said last year she wanted to settle the case as soon as possible. “We furnished the government with information and a continuous flow of unvarnished facts,” Barra said. “We voluntarily provided various confidential documents and information ...We held people accountable for their actions or inaction.”

Barra said “the specific steps we took to do the right thing at every turn persuaded the Justice Department to defer prosecution. They acknowledged as much in their announcement and it was an important validation.”

Bharara said that cooperation couldn’t let GM off the hook. “To be clear, good behavior after the fact does not absolve GM or any company of responsibility. But companies should be encouraged to act as GM did here to help the truth come out faster, to help victims families get compensated earlier, to weed out the bad actors faster, to do everything they can to make sure tragedies like those that involved in this case never happen again.”

A person briefed in the matter said federal prosecutors about two weeks ago proposed a settlement that included the $900 million penalty. It’s not clear what if any other changes were made before the sides officially signed the deal on Wednesday.

Bharara credited GM with cleaning house and firing those it deemed responsible. He noted the GM victim compensation program gave more to victims than they would have received if they went to court, and at far less expense. Toyota, by contrast, did not create a victims compensation program.

Prosecutors, Bharara said, had the victims and their families in their minds throughout the probe. He met with victims’ families. “Justice requires measures to make sure this doesn’t happen again,” Bharara said explaining why the government insisted on a yet-to-be-named independent monitor to oversee GM for three years.

That monitor, to be picked by the Justice Department, will get office space and support staff at GM and conduct a full review of GM’s safety efforts, then offer recommendations and ensure GM complies with safety requirements. They will be able to talk to any GM employees, review documents and file reports on GM’s efforts.