Takata to plead guilty to Criminal Wrongdoing in Air-Bag Probe

Takata to plead guilty to Criminal Wrongdoing in Air-Bag Probe

Automotive supplier Takata Corp. is expected as soon as Friday to plead guilty to criminal wrongdoing and pay roughly USD 1 billion to resolve a U.S. Justice Department probe of the Japanese company’s handling of rupture-prone air bags, people familiar with the matter said

Takata, which faces significant financial pressures from an onslaught of recalled air bags linked to numerous deaths and injuries, is expected to plead guilty to criminal wire fraud, the people said. The charge stems from Takata falsifying data in air-bag-testing reports provided to auto makers, they said.

As part of the plea agreement, Takata is expected to pay a USD 25 million criminal penalty, the people said. Takata also is preparing to pay USD 850 million in restitution to auto makers that purchased its air bags and hire an independent monitor to audit the company’s practices under the settlement’s terms, they said.

Another USD 125 million will go toward establishing a compensation fund for motorists or their relatives harmed by the company’s air bags, the people said. The air bags, which risk exploding and spraying shrapnel in vehicle cabins, are linked to 11 deaths and 184 injuries in the U.S.

Takata is expected to agree to come up with the USD 1 billion in funds within a year, with the stipulation that if within that period the company secures a financial backer to help it restructure, the money should be handed over at that time, the people said.

The negotiations between Takata and federal prosecutors on the settlement, which isn’t ensured, are continuing, and some terms could change.

Federal prosecutors developed a case against Takata in part after finding the supplier provided misleading testing reports to customers including Honda Motor Co., a large buyer of the company’s air bags, the people said. Takata has acknowledged the lapses, while noting that the discrepancies weren’t tied to later air-bag ruptures.

The anticipated Takata settlement would cap a government probe stemming from the largest automotive recall in U.S. history. The unprecedented safety crisis affecting motorists, regulators and nearly all car companies across the globe had prompted a major campaign aimed at recalling 42 million vehicles with nearly 70 million Takata air bags. The deadly air bags have sparked litigation, congressional hearings and government investigations.

The expected Takata settlement comes within days of Volkswagen AG pleading guilty to a series of criminal charges to resolve a Justice Department probe of the German auto giant’s diesel-emissions cheating, an investigation that also resulted in the indictment of six current and former executives.

It remained unclear whether the Justice Department plans to bring any criminal cases against Takata employees alongside the company’s expected guilty plea. The Journal earlier reported Takata was near settling a U.S. criminal probe and that prosecutors were pursuing potential cases against company employees. Federal prosecutors are racing to complete corporate investigations before Inauguration Day, a common practice that reflects officials’ desire to finish work before departing and some uncertainty over how the incoming Trump administration will approach open cases.

Takata still faces a dramatic financial restructuring to address mushrooming recall costs, with suppliers bidding for control of the Japanese company. Takata is expected to seek bankruptcy protection this year to clear the way for a takeover, and agreeing to a financial penalty in the Justice Department case could help make its future financial liabilities clearer.

Takata has made earlier admissions to failures with its air bags. The company in November 2015 admitted to failing to alert regulators within five days of uncovering safety defects as legally required as part of a civil settlement with the National Highway Traffic Safety Administration.

The agency also found Takata several times produced testing reports with “selective, incomplete or inaccurate data” and failed to “clarify inaccurate information” provided to regulators during a January 2012 presentation, according to settlement documents.

A federal grand jury indicted three Takata Corp. executives, charging them with providing auto makers with misleading test reports on rupture-prone air bags at the center of an unprecedented recall linked to numerous deaths and injuries.

Takata executives Shinichi Tanaka,Hideo Nakajima and Tsuneo Chikaraishi were criminally charged for participating in the alleged fraud undertaken at the Japanese automotive supplier, according to an indictment unsealed Friday. They face charges of wire fraud and conspiracy to commit wire fraud. The grand jury handed up the indictment of the executives in December, according to court records.


Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.