Hide No Harm Act would fine, imprison execs who conceal product dangers

U.S. Senator Richard Blumenthal, D-Conn., greets family members of General Motors crash victims at a news conference prior to testimony by GM CEO Mary Barra's hearing in the House last month. Photo credit: REUTERS

UPDATED: 7/16/14 1:45 pm ET -- updates announcement

WASHINGTON (Reuters) -- Two U.S. senators today unveiled a bill prompted by the General Motors Co. recalls over defective ignition switches that would make it a crime for corporate officers to conceal dangers posed by their products.

Democratic senators Richard Blumenthal of Connecticut and Bob Casey of Pennsylvania said their proposal calls for up to five years in prison and fines for officers who know their products could cause death or injury to consumers or workers and hide that information.

"Corporate concealment can kill, and corporate officers who engage in concealment must be held accountable," Blumenthal said at a news conference.

Federal prosecutors are building a criminal fraud case based on whether GM made misleading statements about a flawed ignition switch in some of its vehicles, which has been linked to at least 16 deaths and 61 crashes.

It is not clear whether prosecutors will bring cases against any individuals.

The lawmakers said GM officers knew as early as 2004 about the defects but failed to issue recalls until 2014. GM Chief Executive Mary Barra has said she did not know the scope of the problem until January of this year.

GM's internal investigation, prepared by Anton Valukas, chairman of GM's outside law firm Jenner & Block, largely exonerated top executives. Instead, Valukas blamed lower-level lawyers and engineers for failing to properly flag the issue and not connecting air bag failures to the ignition switch defect.

Valukas, Barra and GM General Counsel Michael Millikin will testify about the recalls before a Senate committee on Thursday.

Other companies have come under similar scrutiny. Toyota Motor Corp. settled with the U.S. Justice Department for $1.2 billion after it was revealed the carmaker knew about problems that caused vehicles to accelerate unexpectedly but downplayed the information to safety regulators.

Blumenthal said even if Congress approved his bill, the tougher penalties would not apply to GM executives. He said he thought existing criminal law covered GM's activity, and his new proposal would serve as a deterrent to future wrongdoing.

"Corporations paying fines are an insufficient deterrent. We should have learned that corporate fines simply fail to provide the strong, effective message that some corporate officers need to hear and feel," he said.

The bill, which was co-sponsored by Iowa Democrat Tom Harkin, also provides some legal protections for officers who notify their regulators and consumers about the problems.

The bill is one of several that have been introduced recently in response to the GM ignition switch crisis, including one introduced by Blumenthal in May that would remove the $35 million cap on fines that the National Highway Traffic Safety Administration can impose on automakers who fail to report vehicle defects fast enough and another by Sen. Jay Rockefeller, D-W.Va., in June that would give NHTSA the power to order defective vehicles off the road and boost funding for the nation’s auto safety watchdog.

Ryan Beene contributed to this report.

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