Takata’s $1 Billion Plea Deal In Airbag Fiasco Faces Objections From Victims

(Updated) DETROIT, MI — As expected, Tokyo-based Takata Corporation, one of the world’s largest suppliers of automotive safety-related equipment, pleaded guilty Monday to one count of wire fraud and was sentenced to pay a total of $1 billion in criminal penalties stemming from the company’s conduct in relation to sales of defective airbag inflators, the Justice Department said.

The plea came as attorneys for some of the 17 people whose deaths have been attributed to the defective inflators and more than 180 people who were injured alleged in court filings that five automakers knew the inflators were defective, but allowed them to be installed anyway to save money.

“For over a decade, Takata lied to its customers about the safety and reliability of its ammonium nitrate-based airbag inflators,” Acting U.S. Assistant Attorney General Blanco said in a statement. “Takata abused the trust of both its customers and the public by allowing airbag inflators to be put in vehicles knowing that the inflators did not meet the required specifications. Today’s sentence shows that the department will work tirelessly to hold responsible those who engage in this type of criminal conduct.”

U.S. Attorney Barbara McQuade of Detroit’s Eastern District, where the plea took place Monday, said the settlement sends a strong “message to suppliers of consumer safety products that they must put safety ahead of profits.”

Takata pleaded guilty before U.S. District Judge George Caram Steeh of the Eastern District of Michigan to a one count criminal information charging the company with wire fraud. After accepting Takata’s guilty plea, Judge Steeh, consistent with the terms of the plea agreement, sentenced Takata to pay a total criminal penalty of $1 billion, including $975 million in restitution and a $25 million fine, and three years’ probation.

Under a joint restitution order entered at the time of sentencing, two restitution funds will be established: a $125 million fund for those individuals who have been physically injured by Takata’s airbags and who have not already reached a settlement with the company, and a $850 million fund for airbag recall and replacement costs incurred by those auto manufacturers who were victims of Takata’s fraud scheme. A court-appointed special master will oversee administration of the restitution funds. Takata will also implement rigorous internal controls, retain an independent compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.

According to admissions made during the course of the guilty plea, from 2000 through and including 2015, Takata carried out a scheme to defraud its customers and auto manufacturers by providing false and manipulated airbag inflator test data that made the performance of the company’s airbag inflators appear better than it actually was. Even after the inflators began to experience repeated problems in the field – including ruptures causing injuries and deaths – Takata executives continued to withhold the true and accurate inflator test information and data from their customers.

(Our earlier story) DETROIT, MI — Attorneys representing victims are expected to push back against a $1 billion settlement with airbag manufacturer Takata due to be finalized Monday in U.S. District Court in Detroit. The Tokyo-based airbag manufacturer is expected to plead guilty to wire fraud in connection with the sale of defective airbag inflators, which the Justice Department said the company knew did not work correctly.

Nearly 42 million of the airbags were recalled in what National Highway Traffic Safety Administration has called the largest safety recall in U.S. history. The massive safety recall touched 33 automakers that have used the airbags, which have been linked to 17 deaths and more than 180 injuries.

The defect caused metal shards to fly around the vehicle when front airbags ruptured during a crash.

In its announcement of the settlement last month, the Justice Department also unsealed an indictment charging three former company executives with wire fraud. The deal finalized a 25-month international investigation in the case.

Among those objecting to the settlement are attorneys for Dianne Moulton, a retired Dearborn teacher who died Feb. 2 from injuries her family said are linked to a defective Takata airbag, the Detroit Free Press reported.

Attorneys objecting to the deal say it gives a pass to automakers that used the defective devices because the deal shields Takata’s U.S. subsidiary, Auburn Hills-based TK Holdings.

At least five automakers — Honda, Toyota, Nissan, Ford and BMW — knew the airbag inflators were defective but installed them anyway because they were inexpensive, The Detroit News reported.

The allegations against the five automakers were made in a “status report” filing in Miami federal court, which is a clearinghouse for pretrial evidence in dozens of lawsuits against Takata and automakers. Attorneys argued the automakers “were aware that rupture after rupture, both during testing and in the field, confirmed how dangerous and defective Takata’s air bags were.”

In its announcement of the settlement last month, the DOJ said that Takata knew the inflators were defective but induced its customers to purchase these airbag systems by submitting false and fraudulent reports that concealed the true condition of the inflators, making their performance appear better than it actually was. Additionally, the DOJ also said that Takata employees, including some key executives, routinely discussed falsification of test reports, and even after inflators began to experience problems that caused injuries and death, the company's executives continued to withhold the accurate data.

In addition, Takata took no disciplinary actions against those involved in the falsification of test data until 2015, despite the fact that senior executives had been made aware of the fraudulent conduct years earlier, the DOJ said.

The three Takata executives – Shinichi Tanaka, 59, Hideo Nakajima, 65, and Tsuneo Chikaraishi, 61, all Japanese citizens – were charged in an indictment filed on Dec. 7, 2016, in the Eastern District of Michigan with one count of conspiracy to commit wire fraud and five counts of wire fraud for their alleged conduct in the fraud scheme.

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