US prosecutors mull new approach vs company misconduct after Toyota

Article by Christian A., on March 27, 2014

Prosecutors in the United States are mulling employing the legal theory behind a $1.2-billion fine imposed against Toyota to go after misconduct in industries ranging from auto to mining, an official for the US Department of Justice told Reuters. The charges of wire fraud against Toyota for hiding safety issues marked the first criminal case of its kind against a carmaker.

The recent announcement of the settlement between the DOJ and Toyota sparked speculation about its implications for General Motors, which is currently under probe over its handling of a recall concerning faulty ignition switches. Prosecutors have typically employed a narrower method in previous criminal cases against companies that misled the public over safety issues. For instance, carmakers are subject to a specific law – the Transportation Recall Enhancement, Accountability and Documentations Act (TREAD Act) that makes it a crime to mislead regulators about safety defects.

Instead of prosecuting Toyota under the TREAD Act, the DOJ depended on a broad theory arguing that misleading statements about major safety issues amounts to wire fraud. The DOJ official and legal experts said that this theory could also be applied across industries, including airplane or train makers or even companies in the mining and oil sectors. "A case of this size is designed to set an example to entire industries," said Brandon Garrett, a University of Virginia Law School professor and expert on corporate crime, told Reuters.

"This isn't a cautious foray into criminal investigations and prosecutions in the auto area," he said. The framework provides prosecutors the ability to target industries that have yet to be subjected to much criminal prosecution in the past. Criminal cases involving corporate malfeasance, however, are typically difficult hard to prove against specific individuals, which means that it remains unclear whether the new framework could enable DOJ to target executives responsible for the conduct. [source: Reuters]

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Topics: toyota

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