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Corporate 'siloing' an obstacle to charging GM employees

Posted On: Sep. 18, 2015 12:00 AM CST

(Reuters) — The chief U.S. prosecutor in Manhattan blamed gaps in federal law and "siloing" within General Motors Co. for the failure so far to charge any individual employees who may be responsible for faulty ignition switches linked to 124 deaths.

The lack of individual prosecutions infuriated GM's critics despite the company agreeing to pay $900 million to end a criminal investigation of the defects and a cover-up.

GM, the No. 1 U.S. automaker, signed what is known as a deferred prosecution agreement with the U.S. Department of Justice to avoid a conviction on charges of fraud and hiding information from a regulator. The company would see the charges dropped in three years if it hires an independent monitor and meets other terms.

Responding to criticism from victims, lawmakers and safety advocates, U.S. Attorney Preet Bharara said at a news conference on Thursday he understood the calls to hold individuals legally accountable but insisted his office's hands were probably tied.

"We're not done, and it remains possible that we will charge an individual, but the law doesn't always let us to do what we wish we could," Mr. Bharara said.

Mr. Bharara, whose office began investigating GM in February 2014, told reporters that it is lawful for an automaker's employees to put a potentially deadly product on the market. The auto industry is unlike many others in that regard, he said.

What is unlawful, Mr. Bharara said, is to hide problems from regulators, but he said the reporting responsibility is generally so diffuse at automakers that no single person could be held responsible.

"A particular person may have had only partial knowledge, and contributed in a chain of actions," he said.

Describing it as a "problem in business culture," he said such "siloing" was also harmful to corporate compliance programs designed to catch wrongdoing. Mr. Bharara also said, "it's not as easy as it looks sometimes" to bring a prosecution.

GM's agreement with the Justice Department does make clear, however, that prosecutors do blame individuals for the problems at the company. It praises GM for "terminating wrongdoers" and says its "agents and employees" concealed a potentially deadly safety defect.

Lance Cooper, a lawyer whose investigation on behalf of the family of a fatal crash victim broke the case open, said the settlement was no consolation.

"It's the same old story. If you have enough power and money, you can always buy your way out of truly being held accountable for your misdeeds," Mr. Cooper said in a statement.

GM CEO Mary Barra said last year that 15 employees had been fired over the company's poor handling of the defective ignition switch, which could cause engines to stall and prevent air bags from deploying during crashes.

Two product litigation attorneys and a quality control executive were among them.

Adding to the challenge facing prosecutors, Mr. Bharara said, was the need to prove "criminal intent," which is generally required to prosecute crimes in the United States.

The Justice Department has been criticized for years that it had gone easy on executives who were suspected of helping to cause the global financial crisis that began in 2008.

New guidelines released by the Justice Department just last week were designed to increase prosecutions of high-level executives and other corporate employees, but the guidelines were aimed primarily at new investigations, not cases at an advanced stage, and appeared to have no impact on the GM case.

Sens. Richard Blumenthal, D-Conn., and Edward Markey, D-Mass., said they were disappointed by the whole deal GM received, including the lack of charges against individuals.

"The 124 families who lost loved ones deserved an explicit acknowledgment of criminal wrongdoing, and individual criminal accountability, as well as a larger monetary penalty," the lawmakers said in a statement.

They have pushed for changes to relevant laws but so far without success.