GM simply writes a $900 million check: Our view
The $900 million General Motors agreed on Thursday to pay the government for concealing a deadly ignition switch from regulators is a lot of money — nearly one-third of GM’s earnings last year — though hardly an existential threat to the company. Indeed, GM stock was up 11 cents to$31.31 a share on the news.
But the truly disturbing part of the announcement was that not a single individual has been criminally charged for concealing the defect: a faulty ignition switch that allowed cars to suddenly stall or prevented air bags from deploying. Defective vehicles remained on the road even as cars crashed, lawyers secretly settled complaints with victims’ families, and more than 120 people were killed.
Real people, not some faceless “company,” made the fateful decisions not to fix a switch that failed to perform properly even before it went into production in 2002; not to do more once complaints of stalls and shutoffs came in; not to inform regulators of the defect when occupants began dying in crashes; and not to stop selling cars and misleading the public about their safety.
No one — engineers, lawyers or executives — has been personally called to account before the law.
Laura Christian, whose 16-year-old daughter was one of GM’s earliest victims, in 2005, described why the system needs to change. “We buried our loved ones because GM buried a deadly defect. And yet today, all GM has to do is write another check to escape.”
Thursday’s disappointing conclusion after months of federal investigation is simply par for the course. In the past decade, corporations have gotten away with all manner of fraud, self-dealing, negligent manufacturing and market manipulation. The subprime mortgage industry nearly brought down the U.S. economy and ruined untold number of lives. But to the extent there was punishment at all after these acts, it usually involved a company writing a check, as if these firms ran on automatic pilot.
Individuals are deterred from wrongdoing by the prospect of going to jail, much more so than by the prospect of seeing the corporate treasurer pay money to the government.
In GM’s case, federal prosecutors in New York can point to two criminal charges against General Motors, the company, for concealing a deadly defect and for wire fraud. But even here, GM got off easy. The charges are deferred and will be dismissed in three years if GM fixes its recall process under an appointed federal monitor. Prosecutors also left the door open to charging individuals in the future, but nobody should hold their breath. It’s hard to see what more investigating could turn up at this stage.
If criminal laws are inadequate to handle the types of fraud or negligence committed by people running companies, it’s time to carefully re-examine those laws.
For auto safety, there’s an easy fix. Under laws that cover many consumer products, individuals at companies can be charged criminally when they willfully fail to report unsafe products to regulators. Auto safety laws make it far more difficult to prosecute company executives for similar acts. Three Democratic senators — Richard Blumenthal of Connecticut, Ed Markey of Massachusetts and Bill Nelson of Florida — have been pushing a measure that would plug this hole, making it easier to hold auto executives responsible when safety laws are willfully flouted. Despite the uproar over hidden defects in Toyota vehicles a few years ago and the recent GM fiasco, the measure has failed to gain traction in Congress. The Senate, which will consider an auto safety measure this fall, should embrace it.
The logic is pretty simple.
If an individual who kills someone, even unintentionally, through negligent acts with a car can be charged with manslaughter, individuals at a company that kills scores of people with a car they know is unsafe ought to face criminal prosecution, too.