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.