Firm in air bag scan­dal must pay $1 bil­lion

Houston Chronicle - - FRONT PAGE -

Takata Corp. agrees to pay a $1 bil­lion fine and plead guilty to a sin­gle crim­i­nal charge for con­ceal­ing a de­fect in its air bag in­fla­tors blamed for 16 deaths.

DETROIT — Takata Corp. has agreed to plead guilty to a sin­gle crim­i­nal charge and will pay $1 bil­lion in fines and resti­tu­tion for a years-long scheme to con­ceal a deadly de­fect in its au­to­mo­tive air bag in­fla­tors.

The U.S. At­tor­ney’s Of­fice in Detroit an­nounced the deal Fri­day, hours af­ter it un­sealed a six-count grand jury in­dict­ment against three for­mer Takata ex­ec­u­tives who are ac­cused of car­ry­ing out the scheme by fal­si­fy­ing and al­ter­ing test re­ports that showed the in­fla­tors could rup­ture.

Takata in­fla­tors can ex­plode with too much force, spew­ing shrap­nel. At least 11 peo­ple have been killed in the U.S. and 16 world­wide be­cause of the de­fect. More than 180 have been in­jured. The prob­lem touched off the largest au­to­mo­tive re­call ever in the in U.S., cov­er­ing 42 mil­lion ve­hi­cles and 69 mil­lion in­fla­tors. It will take years for the re­calls to be com­pleted.

“The risk that they al­lowed to hap­pen is re­ally rep­re­hen­si­ble,” said Bar­bara McQuade, the U.S. at­tor­ney in Detroit whose of­fice worked on the two-year in­ves­ti­ga­tion.

Un­der the deal, Takata will pay a $25 mil­lion crim­i­nal fine, $125 mil­lion to in­di­vid­u­als in­jured by the air bags and $850 mil­lion to au­tomak­ers that pur­chased the in­fla­tors.

A fed­eral judge will be asked to ap­point at­tor­ney Ken­neth Fein­berg to dis­trib­ute resti­tu­tion pay­ments. He han­dled resti­tu­tion in the Gen­eral Mo­tors ig­ni­tion switch and BP oil spill cases, among oth­ers.

Pay­ments to in­di­vid­u­als must

be made soon. Au­tomak­ers must be paid within five days of Takata’s an­tic­i­pated sale or merger. Takata is ex­pected to be sold to an­other auto sup­plier or in­vestor some­time this year.

“Au­to­mo­tive sup­pli­ers who sell prod­ucts that are sup­posed to pro­tect con­sumers from in­jury or death must put safety ahead of prof­its,” McQuade said. “If they choose in­stead to en­gage in fraud, we will hold ac­count­able the in­di­vid­u­als and busi­ness en­ti­ties.”

The Jus­tice Depart­ment was crit­i­cized for fail­ing to charge in­di­vid­u­als in ear­lier high-pro­file cases against au­tomak­ers Gen­eral Mo­tors and Toy­ota. Now it’s done so twice in one week. On Wed­nes­day, pros­e­cu­tors dis­closed the in­dict­ment of six Volk­swa­gen ex­ec­u­tives when they an­nounced the set­tle­ment of a crim­i­nal probe into the Ger­man com­pany’s emis­sions-cheat­ing scheme.

On Fri­day, pros­e­cu­tors un­sealed a Detroit fed­eral grand jury in­dict­ment of three Takata ex­ec­u­tives, Shinichi Tanaka, Hideo Naka­jima and Tsu­neo Chikaraishi. All were sus­pended by the com­pany last year.

As early as 2000

Ac­cord­ing to an in­dict­ment, as early as 2000 the trio fal­si­fied and al­tered re­ports to hide from au­tomak­ers tests that showed the in­fla­tors could rup­ture. Each was charged with six counts of con­spir­acy and wire fraud. Takata was charged separately with one count of wire fraud. All three worked for Takata in Ja­pan and the U.S. Takata has its U.S. head­quar­ters in the Detroit sub­urb of Auburn Hills, Mich.

Un­like most other air bag mak­ers, Takata’s in­fla­tors use ex­plo­sive am­mo­nium ni­trate to fill the bags in a crash. But the chem­i­cal can de­te­ri­o­rate over time and burn too fast, blow­ing apart a metal can­is­ter. Au­thor­i­ties said the in­fla­tor prob­lems were hid­den from Takata’s cus­tomers.

In 2008, when Takata’s in­fla­tors be­gan ex­pe­ri­enc­ing rup­tures on the road, the three ex­ec­u­tives and oth­ers con­tin­ued to with­hold in­for­ma­tion from cus­tomers, the in­dict­ment said. As a re­sult, au­tomak­ers paid Takata more than $1 bil­lion for tens of mil­lions of faulty in­fla­tors. McQuade said the in­ves­ti­ga­tion is on­go­ing.

Now in Ja­pan

All three for­mer Takata ex­ec­u­tives are now in Ja­pan, and McQuade said her of­fice will work with au­thor­i­ties there to ex­tra­dite them to the U.S. for trial. “Ex­tra­di­tion is not au­to­matic. It is dis­cre­tionary with Ja­pan,” she said. But she added that her of­fice has had suc­cess in ex­tra­dit­ing Ja­panese ex­ec­u­tives in au­to­mo­tive parts price-fix­ing cases.

Also Fri­day, Toy­ota Mo­tor Corp. said it is re­call­ing an­other 543,000 ve­hi­cles in the U.S. for de­fec­tive front pas­sen­ger air bag in­fla­tors made by Takata. Toy­ota said Fri­day that the re­call in­cludes var­i­ous mod­els of sedans and SUVs made be­tween 2006-2012.

U.S. At­tor­ney Bar­bara McQuade says the risk Takata al­lowed was “re­ally rep­re­hen­si­ble”

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