GM Unsure If Or How To Compensate Ignition-Switch Victims, Could End Up Facing Criminal Case

Roughly 7 million cars and trucks recalled, at least 13 confirmed deaths tied to one faulty part, and a decade-long cover-up all adds up to one surefire thing: GM is getting dragged to court. But which court? In the midst of all the pending suits, shouting senators, Capitol Hill hearings, and other legalese, there’s still one big question up in the air for General Motors: is this mess only going to cost them money, or did they screw up badly enough to face criminal charges, too?

GM is already facing civil lawsuits, both from families of victims killed in crashes as well as a class-action suit from angry Chevy owners. But civil suits against the company face one big obstacle: GM went bankrupt, and was restructured by the federal government, in 2009.

As Consumerist has reported, one of the results of that restructuring is that the “new,” post-2009 GM is not on the hook for the liabilities of the “old,” defunct GM. And as CNNMoney, explains, if GM pays compensation for anything that happened before the restructuring, they could end up having to pay for everything prior to that restructuring:

[T]he company that emerged from bankruptcy is technically a completely new corporation, taking only the good parts of GM — its functioning plants, brands and cars with it.

The old GM, called Motors Liquidation, was left with the unproductive plants, weak brands and about 2,500 lawsuits seeking billions in damages.

The suits pertain to everything from wrongful deaths in car accidents to contract disputes and abandoned properties. They have all been either settled, dismissed or decided by a verdict. If the plaintiffs got anything, it was only pennies on the dollar compared to what they would have won without the bankruptcy.

And GM continues to use that legal shield in cases unrelated to the recall.

GM is still “evaluat[ing] its options in response to accident victims whose vehicles are being recalled for possible ignition-switch defects,” a company spokesperson told the Wall Street Journal. The WSJ also adds that it is “perfectly legal for GM to steer funds to recall victims, regardless of how they may have been treated in the auto maker’s court restructuring.” But “legal precedents suggest” that they won’t.

The choice of response may be removed from GM’s hands if federal criminal charges are filed, though. In response to GM CEO Mary Barra’s testimony before Congress last week, multiple senators have suggested that perhaps prosecution is the way to go.

Senator Kelly Ayotte (R-NH) said, “I don’t see this as anything but criminal, and speaking on the Sunday morning talk show circuit, Senator Claire McCaskill (D-MO) said: “You know we had the Citizens United case where our Supreme Court said corporations are people … but if in fact they are people, there needs to be some criminal accountability depending on what the facts of the investigation show,” and added, “I know the Justice Department is taking a hard look at this.”

Some families also want to see GM prosecuted, the AP reports. But there are distinct challenges to pursuing a criminal case, too. It’s easy to say, “heads should roll,” but whose? The executives at the top, who came in after the fact? The engineers in the middle, who might have flubbed testing or records? Someone else entirely?

A legal expert explained to the AP that “prosecutors face a higher burden to prove criminal wrongdoing” than what comes up in a Congressional committee. And while it may be easier to spot individual actions, through particular incriminating documents, “To charge an individual, you have to show that one individual acted illegally by himself,” he said. It’s harder to prove individuals’ guilt beyond a reasonable doubt than it is to go after a company as a whole.

GM is now in a bind: beset with lawsuits, they can’t necessarily create the compensation fund some lawmakers have asked for without finding themselves in even worse trouble. Perhaps if they hadn’t spent 13 years covering up problems, the mess they’re in now wouldn’t be quite so big.

Victim-Compensation Dilemma Hangs Over GM [Wall Street Journal]
Angry families want GM prosecuted for defects [Associated Press]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.