General Motors (GM) has reportedly agreed to pay $1 million to the Securities and Exchange Commission (SEC) as part of the settlement for its faulty ignition switch.
The SEC announced its verdict on Wednesday, Jan. 18. The civil penalty of $1 million to be paid by GM will finally settle the ongoing government investigations into the company's handling of the defect.
The ignition switch scandal is the result of faulty ignition switches which reportedly shut off the engine during driving, and as a result, prevented the airbags from inflating.
The case was first highlighted in February 2014, when GM recalled nearly 800,000 of its small cars due to faulty ignition switches. The number of recalls, however, continued to climb in the following months and nearly 30 million cars were recalled from all over the world.
Due to the ignition switch flaw, at least 124 people lost their lives and 275 people ended up being injured.
Prosecution And Penalties
The first major lawsuit was filed in July 2014 at a U.S. District Court in Manhattan. The lawsuit was filed on the behalf of 658 people who claimed to be severely affected by the ignition scandal. The lawsuit alleged that even if GM was aware of the problematic switches since 2001, it did not take any measures and recall any of the affected cars until 2014.
Another lawsuit was filed by the Orange County District Attorney on behalf of the people of California when the company failed to disclose its defects. The lawsuit alleged that GM was engaged in unfair competition and cited false advertisements violating the law of California.
In February 2015, Tech Times reported that GM paid about $900 million to settle a criminal investigation case carried out by the U.S. DOJ. It also set aside nearly $1.1 billion to settle several lawsuits from investors and owners, as well as to pay injury and death claims stemming from the ignition switch recalls.
However, despite these setbacks, the net revenue of GM in the year 2015 was $152.4 billion. SEC's Director of New York regional office Andrew Calamari thinks that the company did not take into consideration the "relevant accounting guidance when it came to considering disclosure of potential vehicle recalls."
Compared to other penalties, the fine of $1 million seems to be quite nominal.
"The SEC settlement does not call into question any of GM's current or prior financial statements or its disclosures," stated by the company, which did not deny any wrongdoing.
GM ensures that it has already reorganized the engineering team to bring transparency, urgency, and accountability. The company has reportedly launched a program where both customers and suppliers can cite their opinions about possible safety measures.
