Former federal prosecutor to oversee GM conduct

David Shepardson
Detroit News Washington Bureau

The U.S. Justice Department said Thursday it has named a former federal prosecutor to oversee General Motors Co. for the next three years as part of a $900 million settlement of the criminal investigation into GM’s recall of defective ignition switches linked to at least 124 deaths.

Bart M. Schwartz, who was chief of the criminal division of the U.S. Attorney’s Office in New York under U.S. Attorney Rudolph Giuliani in the 1980s, now runs a firm that oversees companies.

Schwartz, who didn’t return requests for comment, and his team will have broad access to any GM employees, meetings and documents. It will be permitted to make recommendations for corporate changes, and have office space at GM facilities.

In lieu of prosecution for its delayed handling of the recall, GM must comply with all changes Schwartz orders — unless federal prosecutors agree with their objections.

“We welcome Bart Schwartz and his insights, and we pledge our full cooperation and the same transparency and candor that has guided our response to the ignition switch recall,” GM general counsel Craig Glidden said in a statement.

GM was charged with two felonies in its delayed recall of 2.6 million vehicles linked to 124 deaths and nearly 275 injuries.

As part of a deferred prosecution agreement, Schwartz will review GM’s policies and practices concerning vehicle safety.

He will also assess the effectiveness of GM’s “policies, practices, or procedures for sharing allegations and engineering analyses associated with lawsuits and not-in-suit matters with those responsible for recall decisions; GM’s current compliance with its stated recall processes; and the adequacy of GM’s current procedures for addressing known defects in certified pre-owned vehicles.”

He’s the latest outside monitor installed by government agencies at a major automaker in recent years.

Last year, former New York U.S. Attorney David Kelley was named to oversee Toyota Motor Corp.’s compliance with a three-year deferred prosecution agreement as part of a $1.2 billion settlement.

This week, former Transportation Secretary Rodney Slater was named by the National Highway Traffic Safety Administration to oversee Fiat Chrysler Automobiles NV compliance with a three-year $105 million consent agreement. Published reports have speculated that Schwartz’ firm, Guidepost Solutions, has been paid millions or tens of millions in other high-profile monitoring. GM will pay the cost of monitoring.

Schwartz will work closely with Jeffrey A. Taylor, who is joining the company effective Sunday as GM’s Deputy General Counsel for Federal Oversight.

Schwartz has been a monitor or compliance expert at many firms, including Deutsche Bank AG, DHL Express, and oil giant BP.

As a prosecutor “he oversaw prosecutions related to financial and business fraud, among other types of white-collar crime,” the Justice Department said. The U.S. Attorney’s Office in New York said Schwartz will start immediately.

One reason federal prosecutors in New York agreed to a settlement after an 18-month investigation was to get an independent monitor in place quickly, so the company’s progress can be assessed.

The U.S. Attorney’s Office in New York could opt to extend the oversight for a fourth year.

U.S. Attorney Preet Bharara in Manhattan told The Detroit News in a recent interview that his prosecutors have helped make the nation’s roads safer — by sending a powerful message to automakers: We will investigate and prosecute if you fail to follow the law.

His office has been especially aggressive in moving quickly to investigate wrongdoing by automakers.

“I think criminal corporate resolutions like the ones in Toyota and GM, the first of their kind in the auto industry, make a difference. No company wants to publicly admit to a detailed statement of facts that lays out their failures or pay a big fine. Nor do they want to suffer the reputational harm that comes with such criminal resolutions,” Bharara said.

“I would think the management and boards of other car companies have had discussions about how to avoid going through the same thing and have considered reporting and correcting safety issues sooner than they otherwise might have.”

Last month’s Justice Department settlement ended the criminal investigation into the automaker’s delayed recall for defective ignition switches. The switches in Chevrolet Cobalts, Saturn Ions and some other older GM cars can allow the key to inadvertently turn off the engine, disabling power steering and air bags.

Some within the company knew of the problem for as long as 10 years before the cars finally were called back.

As of mid-September, GM’s total cost to date for its delayed recall is about $2.35 billion when including the expected $625 million payout of a compensation program for those hurt or killed in defective cars.

Peter J. Henning, a professor at Wayne State University Law School, said GM will be required to provide the monitor with any information sought.

“He will file reports and if he sees something wrong he will certainly bring it to the Department of Justice’s attention and certainly the court,” Henning said.

Unless GM violates the agreement, the monitor’s reports will be confidential.

Melissa Burden contributed.

Voting on GM contract begins

The 52,600 UAW GM members will begin voting Friday on a tentative agreement reached late Sunday between the union and automaker.

GM’s Lansing Grand River Assembly employees represented by UAW Local 602 have informational meetings and voting Friday.

Voting at GM plants across the country is expected to take at least until next Friday, Nov. 6.

GM’s tentative four-year agreement includes raises for veteran and entry-level workers; an $8,000 signing bonus; moving entry-level workers into traditional workers health care; and $1.9 billion in new investment creating or retaining 3,300 jobs.

Ford Motor Co. has not begun intensive bargaining yet with the UAW.

Source: Detroit News research