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General Motors Co. will pay a $1 million penalty to resolve charges that inadequate internal accounting controls prevented the automaker from determining the potential financial impact of a deadly ignition-switch defect, the Securities and Exchange Commission announced Jan. 18 ( In re General Motors Co. , S.E.C., No. Admin. Proc. File No. 3-17797, 1/18/17 ).
GM and other carmakers facing possible vehicle recalls are required to disclose approximate losses or say they don’t have an estimate of the potential financial repercussions from recalling cars, according to the SEC. From spring 2012 to fall 2013, GM’s accountants didn’t know the company was investigating faulty ignition switches, which could trigger recalls, the SEC alleged.
The automaker in 2014 recalled 2.6 million U.S. cars with ignition switches that could jostle off and cause vehicles to lose power and safety systems. The defect was tied to at least 124 deaths and 275 injuries.
“Internal accounting controls at General Motors failed to consider relevant accounting guidance when it came to considering disclosure of potential vehicle recalls,” Andrew M. Calamari, director of the SEC’s New York Regional Office, said in a statement. “Proper consideration of loss contingencies and assessment of the need for disclosure are vital to the preparation of financial statements that conform with Generally Accepted Accounting Principles.”
In settling, GM didn’t admit or deny wrongdoing.
“The SEC settlement does not call into question any of GM’s current or prior financial statements or its disclosures,” the automaker said in a statement. “Also, no material weakness or significant deficiency was found by the SEC. Since the ignition switch recall, GM has been proactively and successfully resolving ignition switch issues with customers and regulators at both the state and federal level.”
To contact the reporter on this story: Andrew Ramonas in Washington at firstname.lastname@example.org
To view this order, visit https://www.sec.gov/litigation/admin/2017/34-79825.pdf.
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