By Tim Higgins and Jeff Plungis
July 17 -- Mary Barra, General Motors Co.'s chief executive officer, July 17 defended her general counsel as a man of integrity after a senator said he should've been fired for the company's poor handling of a fatally flawed ignition switch.
Barra added that the problems with the switch and the potential for punitive damages weren't brought to the general counsel's attention.
Sen. Claire McCaskill (D-Mo.), chairman of the Senate Subcommittee on Consumer Protection, which July 17 held the fourth congressional hearing into GM's slow recall of fatally flawed ignition switches, said the company should have dismissed its top lawyer. A culture of “lawyering up” as a defense against lawsuits “killed innocent customers” of GM, McCaskill charged.
“How in the world, in the aftermath of this report, did Michael Millikin keep his job?” said McCaskill, who otherwise praised Barra for her efforts to fix the company. The senator told Barra that excusing Millikin's inaction represented a “blind spot,” saying that Eric Shinseki wasn't told of long delays at Veterans Affairs hospitals, yet he was removed as secretary of Veterans Affairs.
Millikin and Barra testified before the Senate panel, along with Anton Valukas, the lawyer who led GM's internal investigation, and Rodney O'Neal, CEO of Delphi Automotive Plc. Kenneth Feinberg, who is administering a victim compensation program, appeared separately.
GM has recalled almost 26 million cars in the U.S. so far this year, an annual record. Since the February recall of defective vehicles tied to the deaths of some drivers, several lawsuits have been filed against the Detroit-based automaker, in which shareholders allege that board members are liable for false statements and “ongoing” quality control issues.
Millikin said some of his staff failed the company in handling the ignition-switch defect. He apologized for how the recall was handled and said he will work to ensure such a failure never happens again.
“We had lawyers at GM who didn't do their jobs; didn't do what was expected of them,” Millikin said in his statement. “Those lawyers are no longer with the company.”
The Valukas investigation found that Millikin hadn't been informed of the lengthy review of the Chevrolet Cobalt switch until the recall decision was made in 2014 and that he was also unaware of litigation involving fatal accidents.
During the June 18 House hearing, Valukas told lawmakers that Delphi, which manufactured the faulty ignition switch to GM's specifications, didn't give his investigators access to the supplier's witnesses and received limited response to requested records.
Meanwhile, Sen. Richard Blumenthal (D-Conn.) introduced a bill that would mean fines and prison time for corporate executives who knowingly hide information about a serious danger associated with a product or service.
The Hide No Harm Act, sponsored by Blumenthal, Sen. Bob Casey (D-Pa.) and Sen. Tom Harkin (D-Iowa), comes in response to allegations that General Motors reacted slowly in implementing the recall of flawed ignition switches that have been tied to 13 deaths.
Blumenthal and other members of Congress have called for criminal penalties for GM executives.
“There is an investigation ongoing right now--I called for it--by the Department of Justice,” Blumenthal told reporters July 16 at a Capitol Hill event announcing the bill's introduction.
Under the bill, after acquiring knowledge of a serious danger associated with a product, service or business practice, corporate executives must inform federal authorities verbally within 24 hours and in writing within 15 days.
The executives also would be required to warn employees and individuals who may be exposed by the danger “as soon as practicable.” If the executives knowingly failed to convey the dangers, they would be subject to fines and imprisonment of up to five years.
“What's needed is strong, effective deterrent and punishment … which may be the hammer over the head that corporate executives need to understand the perils and grave damage that concealment can do,” Blumenthal said.
With additional reporting by Rebecca Kern
©2014 Bloomberg L.P. All rights reserved. Used with permission.
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