GM Pays $1M Fine, Settles SEC Charges in Ignition Switch Scandal

DETROIT, MI — General Motors has agreed to pay a $1 million penalty to settle federal charges that it didn’t didn’t properly assess the impact of its defective ignition switch scandal on the company’s financial statements, the Securities and Exchange Commission said Wednesday. The faulty ignition switch is linked to the death of at least 124 people and the injury of another 275

According to the SEC’s order, publicly traded companies like GM are required publicly assess the likelihood of a recall, disclose financial risks or provide a statement that loss estimates can’t be made. In the case of the faulty ignition switches, the recall was of epic proportions, amounting to about 30.4 million cars and trucks at a cost of about $4.1 billion to the automaker.

The defective switch wasn’t brought to the attention of internal accountants until at least November 2013, even though GM employees knew in the spring of 12012 that there were safety issues, the SEC said in a statement. During that 18-month period, General Motors should have publicly disclosed the likely recall and potential losses to the company, according to the statement.

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“Internal accounting controls at General Motors failed to consider relevant accounting guidance when it came to considering disclosure of potential vehicle recalls,” Andrew M. Calamari, director of the SEC’s New York Regional Office, said in the statement. “Proper consideration of loss contingencies and assessment of the need for disclosure are vital to the preparation of financial statements that conform with Generally Accepted Accounting Principles.”

GM neither admitted nor denied the charges, but consented to the SEC’s order finding that the company violated Section 13(b)(2)(B) of the Securities Exchange Act by not devising and maintaining a sufficient system of internal accounting controls.

In a statement on its website, GM noted the SEC settlement does not call into question any of GM’s current or prior financial statements or its disclosures. Also, no material weakness or significant deficiency was found by the SEC, the automaker noted.

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