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Misleading Statements the Focus of Case Against General Motors

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A criminal fraud case is being developed by federal prosecutors to determine if General Motors issued misleading statements about a deadly ignition switch flaw, according to Reuters.

The prosecutors are also examining activity by the company that dates back one decade, prior to the bankruptcy of GM in 2009. Aside from a federal investigation, at least one dozen states are investigating General Motors. These investigations, in two instances, are to determine if GM broke consumer protection laws.

The faulty switch has caused 13 deaths and 54 crashes. The investigations are still in their infancy and it is possible that cases might not be brought against the company.

According to sources, the federal prosecutors are working on building cases around mail and wire fraud charges. The manufacturer of the GM switch, Delphi Automotive, is not the target of the charges due in large part to the company not making public statements about the safety of the part or the vehicles.



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General Motors has previously stated that some 15 people have lost their roles for the company’s failure to act for more than 10 years after seeing signs of the deadly switch. The switch can be forced from the ‘run’ position and can cause the power brakes, power steering and air bags to deactivate.

Mary Barra, the Chief Executive of GM, said that she was not made aware of the scope of the issue until this past January. GM was fined $35 million in May by the National Highway Traffic Safety Administration for its delayed response to the switch.

“If the General Motors people think – especially with all the publicity, and the congressional hearings, and all of the public scrutiny that has been brought to bear on this – that $1.2 billion is a number that’s going to resolve all of this, they may well be mistaken,” C. Evan Stewart said. Stewart is a defense lawyer for Cohen & Gresser. Stewart is also a former special assistant district attorney for Manhattan.

The states investigating GM for potential consumer protection violations include Arkansas, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Nevada, New York, and South Carolina.

William Brauch is the director of the consumer protection division in Iowa. Brauch is also a special assistant attorney general in the state. Brauch said, “Our laws allow us to take action in connection with omissions of material fact. Simply putting a defective product in the stream of commerce can, under certain circumstances, constitute unfairness in the consumer fraud laws.”

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