More probes launched in Toyota recall saga

February 23, 2010 at 12:00a.m.

WASHINGTON (AP) — Facing tough questions in Congress, Toyota Motor Corp. said Monday that federal prosecutors have launched a criminal investigation into the company’s safety problems, and the Securities and Exchange Commission was probing what the automaker told investors.

Lawmakers pledged to ask executives about internal documents showing that Toyota visited with regulators who “laughed and rolled their eyes in disbelief” over safety claims.

The twin developments created new challenges for Toyota officials scheduled to testify at hearings today and Wednesday amid concerns that the company and federal regulators failed to take safety problems seriously. Congressional investigators are reviewing the Japanese automaker’s recall of 8.5 million vehicles since fall to deal with safety problems involving gas pedals, floor mats and brakes.

In a new filing with the SEC, Toyota said it received the grand jury request from the Southern District of New York on Feb. 8 and got the SEC requests Friday.

The investigations raised the possibility of hefty fines for the automaker or possible indictments against executives in the United States or even in Japan. The latter would require executives to be extradited to the U.S. to face trial.

“As a general matter, prosecutors will look at whether individuals may have violated the law and bring charges against them as individuals, rather than seeking to build a case against the corporation itself,” said Robert Mintz, a former federal prosecutor in New Jersey who leads the government investigations and white-collar criminal defense practice group with McCarter & English in Newark, N.J.

It wasn’t immediately clear what U.S. laws Toyota might have broken. A subpoena would specify why prosecutors sought company documents, but Toyota would not comment beyond its disclosure with the SEC. A spokeswoman with the U.S. Attorney’s Office for the Southern District of New York declined to comment, saying it does not confirm or deny its investigations as a matter of policy.

The government could be looking into product-safety-law violations or whether Toyota made false statements to a federal safety agency involving unintended acceleration or the Prius braking system, said Peter Henning, a law professor at Wayne State University in Detroit. The SEC is seeking documents related to unintended acceleration as well as to its disclosure policies and practices, Toyota said.

Legal experts said the fresh subpoenas could affect how Toyota executives respond to the questions from lawmakers.

Eric Dezenhall, a crisis management consultant in Washington, said the subpoena might cause Toyota to limit its testimony because apologies are admissible in court. He predicted the company would walk a line between carefully phrased testimony and enough disclosure to describe the cars’ mechanical problems and steps Toyota had taken to make the vehicles safer.

House investigators said they believe Toyota intentionally resisted the possibility that electronic defects caused unintended acceleration in their vehicles and then misled the public into thinking its recalls would fix all the problems.

Rep. Bart Stupak, D-Mich., who will run today’s hearing, said documents and interviews demonstrate that the company relied on a flawed engineering report to reassure the public that it found the answer to the problem.

In a letter to Toyota, Stupak said a review of consumer complaints shows company personnel identified sticking pedals or floor mats as the cause of only 16 percent of the unintended acceleration reports.

Some 70 percent of the acceleration incidents in Toyota’s customer call database involved vehicles that are not subject to the 2009 and 2010 floor mat and “sticky pedal” recalls.