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GM Reaches Settlement in Faulty Ignition Switch Probe

Sep 18, 2015

On Thursday, Preet Bharara, U.S. attorney for the Southern District of New York announced that General Motors had agreed to a $900 million criminal settlement, ending the government's investigation into faulty ignition switches in the Chevy Cobalt, Saturn Ion and other small GM cars.

The settlement resolves more than half of the death and personal injury lawsuits in the ongoing multidistrict litigation (MDL) and a shareholder class action in two civil settlements that will result in a $575 million charge in the third quarter, Law360 reports.

A deferred prosecution agreement has been filed in New York federal court, and no individual GM employee has been charged. The Justice Department to defer prosecution of the company for three years. At that time, if GM has adhered to settlement terms that include independent monitoring of its safety practices, the company's record will be wiped clean, the New York Times reports. In court documents, GM admitted that it failed to disclose the ignition switch defect to regulators in a timely manner and had also misled consumers about the safety of the affected vehicles, according to the settlement.

The company was accused of ignoring warnings and evidence about the faulty ignition switch for more than a decade. In cars with the defective switch, if the switch is bumped or jostled, it can move from the "run" position to "off," shutting off the engine and disabling the air bags and electronic systems such as power steering. These sudden shutdowns have resulted in numerous crashes. Last year, as litigation and investigations mounted, GM set up a compensation fund for deaths and injuries linked to the faulty ignition switch. The fund was overseen by compensation expert Kenneth Feinberg, who also headed the 9/11 compensation fund and the Boston Marathon bombing fund. According to the Times, 124 deaths have now been determined to be linked to the defective switch.

Early last year, General Motors began a recall that eventually totaled nearly 2.6 million cars. Many of these are older cars-from the mid-2000s-and are no longer owned by the original buyers, making it a challenge to locate the current owner. And the sheer size of the recall has made it difficult for dealers to get a sufficient number of replacement parts and schedule all the repairs.

Law360 says the civil settlements announced on Thursday resolve more than 1,380 death and injury lawsuits in the multidistrict litigation (MDL) and a shareholder class action filed in Michigan federal court.

The MDL still includes economic loss suits, as well as 370 injury suits and 84 death suits. Injured plaintiffs who resolved their suits will be able to recover from the settlement based on their eligibility, which will be determined by an independent third-party special master, Law360 reports. Craig Glidden, GM's general counsel, said on Thursday, "The parties to these agreements have resolved difficult claims without the burden, expense and uncertainty of litigation." Six cases remain on the ignition switch MDL's trial docket, with the first one moving toward trial in January 2016.

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