US Department of Justice probes GM glitch link to bankruptcy filing

Article by Andrew Christian, on March 24, 2014

The United States Department of Justice is investigating whether General Motors concealed an ignition switch glitch when it filed for bankruptcy in 2009, according to a report by The New York Times. The investigation includes a probe of whether GM committed bankruptcy fraud by failing to disclose the ignition issue, a person briefed on the inquiry told the Times.

Authorities also are probing whether GM understated the problem to federal safety regulators. The ignition switch issue has caused GM to issue a recall of 1.6 million vehicles in February. GM has already turned over related documents to federal investigators in New York, the source told The Times. GM spokesman Greg Martin told Reuters in an e-mail that the automaker cannot comment on the Justice Department probe.

"We are cooperating fully with authorities on several fronts and we will continue to do so," he said. The investigation is being conducted by FBI agents and federal prosecutors who worked on the fraud case against Toyota resulted to a $1.2 billion settlement last week, The Times said. A lawsuit was recently filed against GM arguing that the US carmaker be held liable for allegedly concealing ignition issue before its 2009 bankruptcy.

The current GM is a different legal entity than the one that filed for bankruptcy in 2009. Under the terms of its bankruptcy exit, the current GM could not be held liable for legal claims relating to incidents that occurred before July 2009. Any legal claims before July 2009 must be brought against the remnants of the "old" GM.

The proposed class action filed in federal court in California, however, argues that plaintiffs should be allowed to file claims over the pre-bankruptcy actions "because of the active concealment by Old GM and GM." The lawsuit said GM was responsible for reporting to the federal government any safety-related issues prior to its bankruptcy. [source: Reuters]

Topics: gm, ignition switch

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