Motor vehicle crashes are a leading cause of death in the United States. Although manufacturers have made significant strides in decreasing the number of fatalities since the late 1960s and early 1970s, there have been several significant instances of auto manufacturers delaying recalls and leaving potentially defective vehicles on the road after they knew or suspected problems.
The National Highway Traffic Safety Administration (NHTSA) has yet to publish the proposed rules for the NHTSA whistleblower program. This whistleblower program was authorized by the Fixing America’s Surface Transportation (FAST) Act in December 2015.
The National Highway Traffic Safety Administration fined Honda $70 million today for violating federal reporting requirements. Honda failed to tell the NHTSA about more than 1,700 injuries and deaths linked to potential defects in its cars. It also failed to report warranty claims made by customers that were fixed under customer satisfaction campaigns even though they were past their normal warranty period. Honda received two $35 million fines for its failure to report these items.
A third-party audit found Honda failed to make 1,729 reports of injuries and death beginning in 2003. Honda only reported 1,144 cases during the years at issue, less than half of the amount the law required.
The Honda fine is one more example of the need to encourage auto industry whistleblowers. USA Today indicated that an employee at Honda discovered the missing disclosures in 2011 but Honda “failed to follow up” until the NHTSA questioned it about the accuracy of its reports the next year. Fortunately, Senators John Thune and Bill Nelson introduced S. 2949, the Motor Vehicle Safety Whistleblower Act, into the U.S. Senate in November to address the issue of automakers ignoring employee reports that they are violating the law or endangering consumers. It gives employees of auto manufacturers, parts suppliers and dealerships the ability to report motor vehicle defects and violations of reporting requirements which pose an unreasonable risk of death or serious physical injury. The Secretary of Transportation is given the authority to issue rewards of up to 30% when the information provided leads to the collection of more than $1 million. For reporting Honda, a whistleblower could have earned up to $21 million if they were issued the maximum award of thirty percent.
Honda violated the Transportation Recall Enhancement, Accountability and Documentation Act (TREAD Act), which was signed into law by President Clinton in 2000 following accidents caused by problems with Firestone tires on Ford Explorers. The TREAD Act requires vehicle manufacturers to report defects, injury reports and other data to the NHTSA. The purpose of the law is to give the NHTSA the data it needs to warn consumers about potential defects. Fines for failure to report under the law accumulate at the rate of $7,000 per violation per day.
The fine of $35 million was the maximum fine the agency can levy per violation. Mark Rosekind, administrator of the NHTSA, indicated that the Department of Transportation would ask Congress to raise the maximum penalty to $300 million per violation. The proposal for increasing fines is a part of the GROW AMERICA Act. In addition to reauthorizing the NHTSA for another four years, the GROW AMERICA Act will provide $87 billion to address the nation’s deficient bridges and roads.
It is the largest fine ever for failure to comply with the early warning report requirements. The previous record was a $3.5 million fine against Ferrari issued in October 2014. Prior to 2011, Ferrari was a small volume manufacturer required to report fatal incidents. Ferrari became subject to the requirements of quarterly early warning reports in 2011 when Fiat acquired Chrysler.
The reporting problems and delayed recalls in the auto industry have been an endemic problem over the past five years. The NHTSA issued civil penalties of $126 million last year. USA Today reported that the amount was a record for the agency and exceeded the total amount it collected during its first 43 years in existence. Since Fiscal Year 2009, auto manufacturers have now been fined more than $200 million by the NHTSA. This doesn’t include the $1.2 billion in fines paid by Toyota Motors to the Department of Justice related to the misrepresentations it made to lawmakers and the public about the “sticky” accelerator recalls.
Spring 2016 Update:
The Thune-Nelson proposal was signed into law by President Obama as part of the FAST Act in December 2015. For additional information, please visit our page dedicated to auto whistleblowers.
The National Highway Traffic Safety Administration (NHTSA) is investigating a fatal crash involving a Tesla Model S with its Autopilot system engaged in May. The car occupant’s death is the first involving a self-driving car. The debate over who is responsible for the car accident could impact the future of both the technology and plaintiff’s attorneys.
The U.S. Commodity Futures Trading Commission (CFTC) announced it will make its second whistleblower award yesterday in a press release. The amount will be approximately $290,000. As expected, no details about the nature of the case resulting in the award were released.
The CFTC whistleblower program was created under Dodd-Frank, so it is only about five years old. Dodd-Frank recently celebrated its fifth birthday and it is nice to see another win under the belt of the commodities regulator.
The CFTC has trailed the SEC program in both the number of tips and awards. The first and only prior reward was issued to a CFTC whistleblower last year in May (2014) for the amount of $240,000. This summer, the Director of the Whistleblower Office at the CFTC told Law360 in an interview that the number and size of awards was expected to increase as the CFTC would soon be handing out big payouts for big enforcement actions.
The SEC program has issued awards to nearly 20 whistleblowers so far with payouts ranging from several hundred thousand dollars to a high of $30 million. There have been four international whistleblowers who have received awards and I believe two compliance officers.
The CFTC has received approximately 10% of the tips that have been received by the SEC but they have been praised as high quality. The CFTC only regulates pursuant to the Commodity Exchange Act whereas the SEC has more roles, including the Securities Act, the “Exchange Act”, the ’40 Act and the Investment Advisers Act.
In part because of the success of the Dodd-Frank program, Congress is considering adding whistleblower incentives to other areas, such as auto safety. A House Subcommittee solicited testimony last week on the bill which passed the Senate unanimously and is now under consideration in the House. Partner Eric Young, a whistleblower attorney here at McEldrew Young Purtell Merritt, recently authored a piece on the legislation as it relates to Volkswagen which was published in TheHill.
Our CFTC whistleblower attorneys can assist you with answers to questions about this information as well as assistance reporting violations of the Commodity Exchange Act to the U.S. Government. To speak to an attorney, fill out our contact form or call 1-800-590-4116.
The National Transportation Safety Board (NTSB) held a hearing today concerning the Florida self-driving car accident in May 2016 that resulted in the nation’s first fatality involving an auto-driving system. According to media reports, the semi-autonomous driving system had a “major role” in the crash because of “operational limitations.”
Driverless cars will be the way of the future. They seem likely to change a number of industries, including car insurance, taxis, and parking. But will they change the practice of law for personal injury lawyers? This might be one of the first major shifts from technology in the plaintiff’s bar other than the acquisition of clients (from the yellow pages and newspaper ads to the internet/websites).
Transportation Funding Bill Set to Increase Damage Cap for Train Crashes and NHTSA Fines for Auto Companies
More money will be available to victims of the Amtrak crash in Philadelphia during May as Congress is set to increase the damage cap for train crashes by nearly 50% to $295 million, according to a compromise reached by members of the United States Senate and House of Representatives on the transportation bill today.
The U.S. government is investigating General Motors (GM) big pickup trucks and SUVs due to faulty braking systems. Roughly 2.7 million vehicles sold in the U.S. may be affected by the issue, so if you own a GM truck or SUV, here is what you need to know.
Eric Young was interviewed for the January 16, 2017 edition of the Corporate Crime Reporter on the new auto whistleblower reward program established by Congress in 2015 as part of the FAST Act. With Takata and VW paying large fines to the U.S. Government in the past two weeks, it is a timely read.