Senators to Propose Whistleblower Rewards for the Auto Industry

Close up of a man writing on a clipboard in a garage

Senators John Thune (R-S.D.) and Bill Nelson (D-Fla) are expected to introduce a bill to provide auto industry whistleblowers with up to 30% of monetary penalties resulting from enforcement actions by the Department of Transportation or Justice Department. Called the Thune-Nelson Motor Vehicle Safety Whistleblower Act, it will provide for the Secretary of the Treasury to issue auto industry employees and contractors discretionary rewards for voluntary information about problems at motor vehicle manufacturers, parts suppliers and dealerships. The legislation is modeled after the Internal Revenue Service and Securities and Exchange Commission whistleblower programs, including confidentiality protections.

It is co-sponsored by Claire McCaskill (D-Mo.) and Dean Heller (R-Nevada), the leaders of the Commerce Committee’s subcommittee on consumer protection. The subcommittee is investigating delayed recalls of ignition switches at General Motors. The bipartisan sponsors of the bill suggest that the issue may cross party lines even though corporations have in the past vehemently opposed past efforts to strengthen rewards.

The Detroit News called out the bill as “the first significant auto safety proposal to receive backing of a top Republican.” The chairman of the House Energy and Commerce Committee, Representative Fred Upton (R-MI) said he is still considering proposing a bill for auto reform.

Democrats in the House and Senate proposed sweeping reforms earlier this year. In September, the Vehicle Safety Improvement Act was introduced to reform the industry. Senate Democrats proposed the Early Warning Reporting System Improvement Act in March followed by the Motor Vehicle and Highway Safety Enhancement Act in August.

The introduction of the whistleblower bill comes at a time when several companies in the auto industry are being investigated for defective products. The introduction of the bill coincides with a hearing today in the Senate Commerce Committee regarding the recall of 7.8 million vehicles by 10 major automakers because of defective Takata air bags.

In June, news broke about a GM whistleblower who had been silenced and fired by the company for accusing it of dragging its feet to fix safety issues.  The company had known about the problematic ignition switches for years before it finally issued a recall.

Toyota paid a $1.2 billion fine earlier this year for misleading the government and consumers about unintended acceleration complaints. U.S. Attorney Preet Bharara said, “Even while giving unequivocal assurances that it had fully addressed a grave safety problem, Toyota knew full well that the problem of unwanted acceleration persisted.” Toyota initially blamed the problem on the accelerator being stuck under the floor mat while hiding the potential for “sticky pedals”. The company recall didn’t cover all of the cars in danger and they continued to manufacture problematic vehicles.

Earlier this month, Hyundai Motor and Kia Motors were also fined $300 million for overstating vehicle fuel-economy standards. We haven’t been able to track down the bill yet to determine whether information about this time of fine for a violation of the Clean Air Act will also be covered.

This bill is not the only area where the U.S. Government is considering expanding rewards.

Representative Maxine Walters (D-CA) introduced the Holding Individuals Accountable and Deterring Money Laundering Act (H.R. 3317) into the House of Representatives last October. It provides for an increase in the potential payment for FinCEN whistleblowers from the current maximum payment of $150,000.  The new law would offer a minimum of 10 percent and maximum of 30 percent on eligible recoveries over $1 million.

The Centers for Medicare and Medicaid Services proposed an increase last year in the maximum reward for its own Medicare Incentive Reward Program to $9.9 million from $1,000.  The U.S. Government Accountability Office also published a report on reform of the criminal cartel enforcement laws in 2011 which considered, among other things, adding incentives for reports of antitrust violations.

New York is also considering rewards for information provided to its Department of Financial Services.  The agency, run by Benjamin Lawsky, has issued several large fines against financial institutions this year, including this week’s $315 million settlement with Bank of Tokyo Mitsubishi UFJ.  It also will reportedly pursue penalties against Barclay’s for forex manipulation similar to the conduct involved in settlements between five banks and the CFTC last week.