GM Settles Criminal Investigation into Ignition Switch for $900 Million

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The Department of Justice has resolved its criminal investigation into General Motor’s conduct concerning the sale of cars with defective ignition switches and the delayed recall of those vehicles. The result is an agreement by GM to pay $900 million

GM’s $900 million penalty was 25 percent less than the fine handed out to Toyota Motors in 2014. The DOJ indicated that once the company came forward, the speed of its internal investigation and the fact that it took responsibility for its behavior allowed it to settle the case much faster than the one against Toyota. GM also paid $35 million previously to resolve violations of regulations enforced by the NHTSA requiring companies to announce recalls in a timely fashion. GM paid the maximum fine for a single violation.

GM was accused of wire-fraud and a scheme to conceal a deadly safety defect. GM failed to fix the defect at issue, which has been blamed for more than 120 deaths, over a period of more than a decade. The DOJ has not closed the door on prosecuting specific employees yet, but indicated it may be difficult to hold them responsible. GM also reached a settlement agreement with over a thousand victims of the defect.

The House has yet to act to pass legislation to address the increase in misconduct by auto manufacturers. Several bills to address auto safety issues have been introduced but there has not been much momentum on them. Earlier this year, the Senate passed a bill to authorize monetary rewards for auto whistleblowers employed by auto manufacturers, parts dealers and suppliers if the government collects monetary sanctions as a result of the information. Unlike the Dodd-Frank Act, the payment of rewards is discretionary rather than mandatory to eligible individuals.

In other automaker news, the EPA has accused Volkswagen of evading the Clean Air Act emissions standards with a defeat device. The vehicles reportedly emitted nitrogen oxide well in excess of the legal limit but detected when an emissions test was being conducted in order to hide the air pollution from federal regulators. The maximum Clean Air Act fine is $37,500 per vehicle, leading to a potential fine of as much as $18 billion if the maximum penalty were to be handed out.

To learn more about the auto whistleblower law, contact one of our whistleblower attorneys via our contact form or by calling 1-800-590-4116.

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NHTSA Fines Fiat Chrysler up to $105 Million over Auto Safety Recalls

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The National Highway Traffic Safety Administration has fined Fiat Chrysler $105 million in its largest civil penalty imposed on an auto manufacturer for misconduct involving recalls. The government said that it has repeatedly failed to notify purchasers of recalls and repair cars in a timely fashion. The previous record was set last year when the NHTSA fined Honda $70 million over its problems with faulty airbags.

GM Ignition Switch Fine to Top $1.2 Billion

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The Department of Justice is expected to fine General Motors more than $1.2 billion in connection with its delayed recall of automobiles with faulty ignition switches. The DOJ is still considering whether to require a guilty plea to criminal charges or offer a deferred prosecution agreement. This includes a possible charge of criminal wire fraud for misleading statements and the concealment of the defect.

The amount of the fine may still change. Wall Street analysts have speculated that the fine may exceed $2 billion. GM has already paid a fine of $35 million, the maximum the auto regulator is currently allowed to penalize a company for these types of cases, to the National Highway Traffic Safety Administration. Federal prosecutors are hoping to resolve the matter by early fall.

The total number of deaths from defective ignition switches in GM vehicles is now 111, since two more claims were approved by the compensation fund last week. GM has also approved claims for 12 serious injuries and 179 other injuries. 191 claims are still being reviewed. The total cost of compensating victims is estimated at around $550 million. The deadline for submission was January 31st.

In March 2014, Toyota Motors was fined $1.2 billion by the Justice Department for misleading consumers about the unintended acceleration of its vehicles through deceptive public statements. This was the largest criminal fine ever levied against an automaker by the United States. Toyota initially blamed acceleration issues on floor mats becoming stuck under gas pedals as well as driver error. Toyota also entered into a deferred prosecution agreement with the Government.

Two internal reports from the Transportation Department have also identified mistakes made by the NHTSA. The agency reportedly missed clues about the defect and is revising its procedures in response to the reports. President Obama is also seeking to provide the NHTSA additional funding and lift the maximum cap on penalties issued by the agency.

The Senate has already passed the Motor Vehicle Safety Whistleblower Act sponsored by Senators Thune and Nelson to provide monetary incentives to auto whistleblowers employed by car manufacturers, dealers and part suppliers about delayed recalls and other violations of federal law. The House has yet to act on the proposals for auto safety legislation made in light of the recalls by Toyota, GM, and Takata.

To learn more about the proposed bill, contact one of our whistleblower attorneys via our contact form or by calling 1-800-590-4116.

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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.

Senate Passes Auto Whistleblower Reward Bill

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The U.S. Senate unanimously passed the Motor Vehicle Safety Whistleblower Act yesterday to provide auto industry whistleblowers with incentives to provide the Department of Justice and the NHTSA information about product defects. It’s the first auto safety legislation to pass since the recalls of millions of vehicles because of issues with GM and Takata products.

The law is modeled after proposed legislation allows employees or contractors of manufacturers, part suppliers and dealers to become eligible for a reward.

The bill was sponsored by Senators John Thune and Bill Nelson. Senator Thune is the chair of the Senate Commerce Committee and Senator Nelson is the top Democrat there.

We have previously suggested three changes that should be made to the bill, including:

Mandatory Rewards: The bill leaves awards up to the discretion of the Secretary of Transportation. Other laws, like the Dodd-Frank Act, the False Claims Act and IRS Section 7623(b) all have mandatory award provisions. Discretionary programs at the SEC on insider trading and the IRS on

Anti-Retaliation Protections: The legislation does not provide for them. It is similar to the IRS program in this respect. The President and the Internal Revenue Service have been asking Congress for years to fix this missing piece. The lesson from this situation should be heeded and a remedy for whistleblowers who are retaliated against should be added.

Expanded Eligibility: The bill only allows employees at certain companies within the industry to receive a reward. As data from the SEC whistleblower program suggests, industry experts, customers and many other individuals will also have information that would be welcomed by the U.S. Government. Ex-employees are also a large source of reports of corporate wrongdoing. Including these individuals would be beneficial to the government’s goal of

The next obstacle for the legislation is the House of Representatives, where a number of different initiatives to promote motor vehicle safety are pending.

Here is our discussion of the bill from a few months ago:

If the legislation passes the House and is signed by President Obama, our whistleblower attorneys will be expanding their practice to represent members of the auto industry reporting violations of federal laws governing recalls and auto safety. To learn more about the auto whistleblower law, contact one of our whistleblower attorneys via our contact form or by calling 1-800-590-4116.

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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.

Is it Time for a Broader Debate About Transportation Safety?

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The Department of Transportation has a number of issues to tackle now, including spending on the nation’s highway infrastructure and strengthening the safety of motor vehicles, which we discussed in one of our blog posts last week. It seems likely that railroad safety will be added to that list following the two high profile train accidents to make the national news over the past month.

The first incident, on February 3rd outside of New York City, involved a Metro-North passenger train which derailed after striking an SUV on the tracks.

The second incident involved the derailment of a train pulling more than 100 oil tank cars during a snowstorm in West Virginia on Monday, February 16. As the crude oil exploded, it sent a massive fireball into the sky which was captured and played on the national news media.

Following these two accidents, there have been calls for improvement to both the safety of rail crossings and the transportation of crude oil by train.

Senators Schumer and Blumenthal have already announced that they will propose a bill to increase federal funding to improve the safety of railroad crossings. The Highway-Rail Grade Crossing Safety Act of 2015 will strengthen funding for improved education, engineering and enforcement at railroad crossings.

More than 200 people were killed nationwide at the nearly 2,100 grade crossing accidents last year. According to Operation Lifesaver, a person or vehicle is hit by a train roughly every three hours.

Additional regulation of trains carrying oil is likely to be on the way as well. The U.S. Department of Transportation developed a proposal for tougher regulation of the industry over the summer. The plan went to the White House for final review this month. It would require tougher shells on cars carrying oil and advanced braking systems.

However, it is not clear that the measures proposed would have prevented the West Virginia derailment. The government will probably take a fresh look at the regulations in light of the results of the present investigation. If the measures are determined inadequate, there will likely be additional rules put in place.

With the safety of motor vehicles and truck driving also hot issues, this could be the right time for comprehensive legislation to attempt to address the nation’s transportation problems. Perhaps it is time for a “Dodd-Frank” type bill before things get worse in the transportation industry.

Congress will consider a number of bills over the next year to improve motor vehicle safety and delayed recalls by manufacturers. There may also be support for changes to the regulation of truck drivers following the high profile crash between a Walmart truck and the limo carrying Tracy Morgan this summer. Given all of the transportation safety issues, a comprehensive bill might be best. This would probably also help the chances of passage for whistleblower rewards in the auto industry.

We will continue to follow these issues here as solutions are proposed. Railroad injuries are a major aspect of our trial attorneys’ practice. Jim McEldrew has represented clients in railroad litigation, including lawsuits under the Federal Employer’s Liability Act (FELA) by railroad workers, for years. He also has extensive experience litigating serious injuries due to accidents involving cars and trucks.

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Thune-Nelson Bill Back in Senate as Auto Safety Reforms Remain in Focus

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The nation’s auto safety and highway infrastructure is increasingly demanding the attention of Congress and the White House. This trend continued over the past month. At the end of January, Senators Thune and Nelson reintroduced the Motor Vehicle Safety Whistleblower Act into the U.S. Senate. Transportation Secretary Anthony Foxx also commented to reporters in early February on both the budget proposal seeking increased funding for the NHTSA and the potential for the White House to unveil new auto safety reforms when it revamps the long-term highway funding bill. Foxx also pushed for the bill to boost infrastructure funding at the House Transportation Committee yesterday.

The upcoming legislation for auto safety previewed by Foxx would have many of the Obama administration’s previously proposed reforms, including an increase to $300 million in the maximum fine for an automaker that unnecessarily delays the recall of a vehicle and the power to get vehicles deemed an “imminent hazard” off the road faster.

If the auto safety reforms can latch on to the highway funding bill, they may move faster than might otherwise be expected. The Highway Trust Fund, which pays for infrastructure projects, will run out of money on May 31st and will be hotly debated over the next few months. The Obama administration’s initial proposal in this area was a six year, $478 billion plan to improve the nation’s infrastructure. Among the ideas for funding the bill has been a tax on overseas corporate revenue and an increase on the federal gas tax.

The record number of auto recalls last year and the continuing investigation into Takata has maintained momentum for action in this area. The White House’s budget proposal in early February called for the defect investigation budget at the National Highway Traffic Safety Administration to more than triple from its current $9.7 million budget to $31.3 million. The increased funding would allow the agency to create a trend analysis division as well as a separate, specialized crash investigation group.

The defects team currently has 8 screeners and 16 defects to analyze 75,000 complaints a year. The proposal would allow the defect team to double its personnel by adding a mathematician, two statisticians, four investigators and 16 engineers. Amid the growing complexity of automotive technology and more data in accident reports, manufacturers’ data, medical records and even social media, the Transportation Department needs the additional funds in order to be able to identify safety defects quicker, ensure remedies are put in place and the public informed about the problems.

The crash investigations group would be similar to the National Transportation Safety Board team investigating high-profile accidents. The NHTSA already has a crash investigation group as part of its statistics and analysis unit. However, this group would target accidents which may involve a defect that the NHTSA is investigating and collect the data the NHTSA needs.

Overall, the six-year budget proposal calls for an increase in the funding of the NHTSA’s vehicle and research program from $269 million to $414 million in 2021.

I have yet to see the public discussion include much talk about the possibility of whistleblower incentives. However, Senators Thune and Nelson did reintroduce their auto whistleblower legislation into the Senate on January 29, 2015. The Thune-Nelson bill is now S.304 in the 114th Congress.

Senator Thune spoke when re-introducing the bill. Thune called it a commonsense, bipartisan bill that will help to prevent injuries and deaths for American drivers. It is absolutely clear that vehicle safety defects need to be identified as early as possible to protect consumers from death and injury, according to Thune. He also cited reports of employees concerns being ignored, silenced or covered up as evidence that the bill was necessary to encourage them to come forward sooner.

Following Thune’s remarks, Senator Nelson provided an update on the investigation into the defective Takata airbags. Takata identified to the committee a total of 5 deaths and 64 injuries due to ruptured airbags. Nelson added that there was another death due to a defective airbag in Texas in January and expressed his desire to get to the bottom of the situation.

Senators Jerry Moran (R-KS) and Richard Blumenthal (D-CT) were added as cosponsors of the legislation. Senator Moran is the Chair of the Subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security and Richard Blumenthal is the Ranking Minority Member of the Subcommittee. They join Senators Heller, McCaskill, Klobuchar and Ayotte.

The legislation has been referred to the Committee on Commerce, Science and Transportation. We will keep you updated as it moves through Congress.

To learn more about the auto whistleblower law, contact one of our whistleblower attorneys via our contact form or by calling 1-800-590-4116.

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.

After the S&P Settlements, What’s Next for Government Prosecution?

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The Wall Street Journal has reported that Standard & Poor’s, a unit of McGraw Hill Financial Inc., could settle SEC charges of securities fraud related to its rating of commercial real estate in 2011 this week. Previous estimates have put a settlement of these charges, unrelated to the subprime rating lawsuit by the DOJ, at around $60 million.

This report comes on the heels of Bloomberg and Reuters reports that Standard & Poor’s will settle for more than $1 billion the DOJ lawsuit brought under the False Claims Act for misleading the United States Government about its mortgage-backed securities ratings.

The S&P lawsuit is one of four largest that remains as a result of the financial crisis. The United States also has the FHFA lawsuit against the Royal Bank of Scotland settles the FHFA lawsuit and Morgan Stanley is under investigation for its mortgage-backed bond practices in 2015.  All three could easily settle in 2015 to avoid a cloud over their heads while their competitors move on from the mortgage crisis.  large settlements in this arena that have dominated the headlines could be over by the end of the year.

There’s also the $10 billion lawsuit Credit Suisse faces from New York. In an interview with Reuters, New York Attorney General Eric Schneiderman indicated that there will be more lawsuits filed against banks for selling mortgage-backed securities.  So it still may be too early to call the end to cases of mortgage fraud, but not too early to start speculating about the future.

If the U.S. no longer spends significant resources targeting mortgage fraud, what will be the next area of corporate misconduct on the government’s radar?

If the government looks overseas, it should find plenty of potential cases.

Bribery is one area that is prime for additional prosecution. The record settlement with Alstom for violations of the Foreign Corrupt Practices Act (FCPA) in December could be the beginning of greater prosecutions in this area as the government frees resources from the mortgage prosecutions.

The FBI has already announced that it will triple the number of agents investigating foreign corruption, which includes both FCPA violations and kleptocracy. FBI agents play an important role in the investigation of bribery charges brought by the SEC and DOJ under the FCPA.

There should be no shortage of cases for them to investigate. China has been hunting down corruption within its country and whistleblowers are bringing cases to the SEC in record numbers. In FY2014, whistleblowers classified 159 tips as related to FCPA violations. Since starting the whistleblower program, the SEC has received more than 400 tips in this area.

Another area that took a big leap forward last year was the prosecution of anti-money laundering and economic sanctions violations.  With the BNP Paribas settlement reaching nearly $9 billion last summer, this could become a hot area as government attorneys look for other financial institutions involved in similar banking deals.

If the government looks domestically, the auto industry is another potential target. Delayed recalls by car manufacturers have put millions of families at risk as unsafe vehicles have been driven unknowingly by families. There are several bills in Congress to strengthen regulation of motor vehicles and the passage of the Thune-Nelson bill would add whistleblower rewards to this area.

The high profile cases of GM and Takata last year might just be the tip of the iceberg. After a record 60 million cars were recalled last year, more than twice the previous record, the NHTSA is already predicting that we will see a new record set in 2015 as the government pushes manufacturers for more aggressive recalls. The Fiscal Times declared 2015 the year of the recall already.

Will mortgage cases stay on the government’s radar?  Will the government focus elsewhere?  Let us know your thoughts in the comments.

Honda TREAD Act Fine is More Ammunition for Thune-Nelson Supporters

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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.

To learn more about the auto whistleblower law, contact one of our whistleblower attorneys via our contact form or by calling 1-800-590-4116.

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.

Top Government Settlements from 2014

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As the calendar year wraps up, we thought it would be interesting to take a look back at the companies paying more than $1 billion in 2014 to resolve investigations into corporate misconduct.  Twelve companies agreed to these large fines (if we include Suntrust which fell just shy of $1 billion) for a total of more than $45 billion in penalties to the US (and a handful to the UK from the forex settlement).  A few things worthy of note:

  • Only 2 companies were not financial institutions.
  • Only 5 cases involved mortgage fraud.
  • Not one pharmaceutical company is on the list.
  • We only used the calendar year.  J&J and JPMorgan Chase both had large settlements that would have qualified if we used Fiscal Year 2014.

Bank of America – $16.65 Billion in August
The largest civil settlement with a single entity in American history was agreed to by the financial institution to resolve misconduct by Countrywide, Merrill Lynch and BofA stemming from .  The $5 billion penalty imposed under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) is the largest under the law, eclipsing the $4 billion paid by Citigroup only a month before.  Four whistleblowers in this case were paid approximately $170 million in total under the False Claims Act and FIRREA.

BNP Paribas – $8.9 Billion in June
The French bank agreed to a guilty plea to charges it violated US economic sanctions by providing dollar clearing services to individuals and entities dealing with Sudan, Cuba and Iran between 2004 and 2012.  Three individuals helped the government make their case agains BNP.

Citigroup – $7 Billion in July
The settlement covered misrepresentations made to investors regarding the quality of mortgage securities.  It paid a short-lived record $4 billion as a civil penalty to settle the Justice Department claims under FIRREA.  It also paid $208.25 million to the Federal Deposit Insurance Corporation (FDIC) and nearly $300 million to five states participating in the agreement.  The remaining $2.5 billion was earmarked for consumer relief.

Anadarko – $5.15 Billion in April
Anadarko agreed to pay the largest recovery for the cleanup of environmental contamination.  It resolves the liability of Kerr-McGee, an Anadarko subsidiary acquired in 2006, for legacy liabilities spun off in an inadequately funded company which filed for bankruptcy in 2009.

Goldman Sachs – $3.15 Billion in August
Goldman agreed to pay the Federal Housing Finance Agency (FHFA) for securities law violations in the sale of private-label mortgage-backed securities to Freddie Mac and Fannie Mae between 2005 and 2007.

Credit Suisse – $2.6 Billion in May
The Swiss bank pleaded guilty to conspiracy to aid U.S. taxpayers in filing false income tax returns with the Internal Revenue Service.  It paid $1.8 billion to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services.  It also paid $196 million to the SEC earlier in the year for providing cross-border brokerage services without registering.

MF Global Holdings Ltd. – $1.3 Billion in December
A consent order in December 2014 requires the parent company of brokerage unit MF Global Inc. to pay $1.2 billion in restitution and $100 million in fines to the CFTC.  MF Global had liquidity problems in 2011 due to trading losses that caused its bankruptcy.

Morgan Stanley – $1.25 Billion in February
The FHFA settled its claims over private-label mortgage-backed securities sold to Freddie Mac and Fannie Mae between 2005 and 2007 for $625 million to each.

Toyota Motors – $1.2 Billion in March
Toyota agreed to the largest penalty for an automobile manufacturer to resolve allegations of misconduct related to its recall of vehicles for unintended acceleration.  The charges involved misleading statements made to consumers and regulators in 2009 and 2010 concerning the safety of its vehicles.

FOREX Manipulation – $4.3 Billion by six banks in November to three agencies in the US and UK.
Citigroup and JPMorgan each paid a total of about $1 billion in fines between the US Commodity Futures Trading Commission, Office of the Comptroller of the Currency and UK Financial Conduct Authority to resolve allegations its traders manipulated the FOREX market.  Four other banks paid amounts under $1 billion to resolve the investigations by these government agencies.  UBS, RBS, HSBC and Bank of America each paid between $250 million and $800 million.

Suntrust Mortgage – $968 Million in June
The mortgage company settled claims involving problems with improper mortgage origination, servicing and foreclosure arising between 2006 and 2012.  The settlement involved the Justice Dept., Housing and Urban Development (HUD), Consumer Financial Protection Bureau (CFPB) and 49 states plus the District of Columbia.  The deal was agreed to in principal in late 2013 but announced in 2014.

Other Settlements of Interest

While we were doing our research, we found a few other record settlements that we thought you would find interesting.

Alstom – The French engineering company agreed to the largest criminal tax penalty for an FCPA violation imposed by the Department of Justice, $772 million, in December 2014.  Alstom used consultants to pay $75 million in bribes to secure $4 billion in projects with state-owned companies in five countries.

Hyundai Motor and Kia Motors – The two related auto manufacturers agreed to a $100 million penalty, the largest ever for violation of the Clean Air Act, in November 2014.  They overstated the fuel economy and understated the greenhouse gas emissions of their cars and SUVs in 2012 and 2013.

AT&T Mobility – The $105 million settlement with the Federal Communications Commission over cramming unauthorized third party subscriptions and premium text messaging onto customer bills was the largest enforcement action in the FCC’s history.

Whistleblowers
We are aware of ten whistleblowers involved in four of these cases.  At this point, only payments to the individuals in the Bank of America case have become public knowledge.

There may have been additional cases involving insiders where the details have not yet been made publicly available.  For example, the CFTC has not yet issued a notice of covered action for the fines issued to the banks in the forex case.

A First Look at the Proposed Auto Whistleblower Bill

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After nearly a week of waiting, a copy of the Thune-Nelson Motor Vehicle Safety Whistleblower Act was posted online on the Wednesday before Thanksgiving.

The law contains two substantial deviations from the one passed by Congress for the securities industry as part of the Dodd-Frank Act. It fails to offer whistleblower protections through a retaliation lawsuit and the award is discretionary rather than mandatory. Together, the combination could cause individuals with some of the best tips to forgo providing them to the U.S. Government.

Although whistleblowers are typically motivated by the opportunity to stop a wrong rather than the prospect of substantial monetary rewards, these two differences may signal to potential informants that their information will not be taken seriously and cause them to think twice about reporting information.

The proposed bill does not authorize retaliation lawsuits.

The Thune-Nelson bill provides for confidentiality protections but does not authorize the filing of a lawsuit with compensatory damages for wrongful termination. If the final bill were to pass as is, auto employees would need to rely on qualifying for protection under various state laws. There is no guarantee that they would be able to do as state laws differ and were not written with auto whistleblowers in mind.

An appropriate mechanism to handle cases of retaliation is important both to ensure that individuals feel comfortable providing the government with information and they are compensated for any wrongful treatment. The SEC has repeatedly acknowledged the importance of protecting its whistleblowers from retaliation. Absent protection from termination, some whistleblowers may choose not to come forward with information about suspected legal violations.

The IRS program, which currently lacks retaliation protections, has mentioned this shortfall in its annual report several times. Although it doesn’t appear that Congress will alter the program anytime soon, it would be better for Thune-Nelson to learn from the errors of previous programs rather than repeat their mistakes.

The bill only provides for discretionary awards.

The Thune-Nelson bill currently provides for any determination of “whether, to whom, or in what amount to make an award, shall be in the discretion of the [U.S. Department of Transportation Secretary].”

Discretionary awards have fallen out of favor recently compared to the large, mandatory awards authorized by Internal Revenue Service Code § 7623(b) and the Dodd-Frank Act. Prior to the implementation of their current whistleblower programs, both the IRS and the Securities and Exchange Commission had discretionary award programs. Neither was considered successful.

The IRS program had been around since 1867 but was largely ineffective prior to the adoption of a mandatory award. Few informants came forward because awards were completely discretionary and the program was not well publicized.

Prior to Dodd-Frank, the SEC offered a discretionary bounty for information about insider trading. Authorized by the Insider Trading and Securities Fraud Enforcement Act of 1988, the law only led to payouts for five individuals during . The total sum paid out was only $160,000. Mandatory awards were implemented to remedy the institutional failures that led information about Bernard Madoff’s ponzi scheme to be ignored.

The track record of discretionary programs hasn’t been nearly as strong as the laws requiring government agencies to distribute mandatory awards.

It also doesn’t provide for a minimum award.

The major whistleblower programs currently specify a range of monetary awards for information, typically from 10 to 30 percent. The absence of a minimum award leaves open the possibility that a successful individual could receive an award that does not fairly compensate them for the risks involved. Agency regulations could alleviate this concern, of course, but it is another area for Congress to clarify prior to adoption.

To learn more about the auto whistleblower law, contact one of our whistleblower attorneys via our contact form or by calling 1-800-590-4116.

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.

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