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Criminal investigation opened into Toyota's safety problems

By KEN THOMAS and DAN STRUMPF
Associated Press Writers
WASHINGTON (AP) - Federal prosecutors have launched a criminal
investigation into Toyota Motor Corp.'s safety problems and the
Securities and Exchange Commission was probing what the automaker
told investors, the company disclosed Monday. Newly released
internal documents showed that Toyota officials visited with U.S.
regulators years ago who "laughed and rolled their eyes in
disbelief" over safety claims.
The twin developments created new public relations challenges
for Toyota plus the prospects - however likely or unlikely - of
hefty federal fines or even indictments against executives in the
U.S. and Japan. They also complicate Toyota's ability to discuss
details driving its recall of 8.5 million vehicles because anything
executives say could be used against the company inside a
courtroom.
Top Toyota executives were expected to testify at hearings
Tuesday and Wednesday on Capitol Hill. One lawmaker said he
believed Toyota misled owners about the repairs and relied upon a
hastily-arranged study to reassure the public.
In a new filing with the SEC, Toyota said it received the grand
jury request from the Southern District of New York on Feb. 8 and
got the SEC requests Friday.
It wasn't immediately clear what U.S. laws Toyota might have
broken. A subpoena would specify why prosecutors sought company
documents, but Toyota would not comment beyond its disclosure with
the SEC. A spokeswoman with the U.S. Attorney's Office for the
Southern District of New York declined to comment, saying it does
not confirm or deny its investigations as a matter of policy.
The government could be looking into product safety law
violations or whether Toyota made false statements to a federal
safety agency involving unintended acceleration or the Prius
braking system, said Peter Henning, a law professor at Wayne State
University in Detroit. The SEC is seeking documents related to
unintended acceleration as well as to its disclosure policies and
practices, Toyota said.
Legal experts said the fresh subpoenas could affect how Toyota
executives respond to the questions from lawmakers.
Eric Dezenhall, a crisis management consultant in Washington,
said the subpoena might cause Toyota to limit its testimony because
apologies are admissible in court. He predicted the company would
walk a line between carefully phrased testimony and enough
disclosure to describe the cars' mechanical problems and steps
Toyota had taken to make the vehicles safer.
House investigators said they believe Toyota intentionally
resisted the possibility that electronic defects caused unintended
acceleration in their vehicles and then misled the public into
thinking its recalls would fix all the problems.
Rep. Bart Stupak, D-Mich., who will run Tuesday's hearing, said
documents and interviews demonstrate that the company relied on a
flawed engineering report to reassure the public that it found the
answer to the problem.
In a letter to Toyota, Stupak said a review of consumer
complaints shows company personnel identified sticking pedals or
floor mats as the cause of only 16 percent of the unintended
acceleration reports.
Some 70 percent of the acceleration incidents in Toyota's
customer call database involved vehicles that are not subject to
the 2009 and 2010 floor mat and "sticky pedal" recalls.
In a letter to NHTSA, Stupak's committee raised questions about
whether the agency lacked the expertise to review defects in
vehicle electronics and said NHTSA was slow to respond to 2,600
complaints of sudden unintended acceleration from 2000 to 2010.
The government conducted only one investigation, beginning in
March 2004, into whether electronic throttle controls could lead to
sudden acceleration in Toyota vehicles and closed it a few months
later. Since 2004, NHTSA has rejected four petitions from owners
asking for investigations into sudden unintended acceleration in
Toyotas.
As regulators looked into reports that accelerator pedals were
becoming jammed in floor mats on Lexus ES350 sedans, a Toyota
safety official told colleagues that NHTSA didn't appear to be
concerned.
"I ran into a lot of different investigators and (Office of
Defect Investigations) staff and when asked why I was there, when I
told them for the (Lexus) ES350 floor mats, they either laughed or
rolled their eyes in disbelief," wrote Santucci, a former NHTSA
employee.
Toyota said it was reviewing the Stupak letter and would
cooperate with the committee's inquiry. Transportation Department
officials did not immediately comment on the letters from the
congressional panel.
A month later, NHTSA issued an "equipment recall" of floor
mats involving 55,000 Toyota Camry and Lexus ES350. In an internal
presentation, the company later said the limited recall saved
Toyota $100 million or more. The slide was marked "Wins for Toyota
- Safety Group."
The internal presentation, obtained by The Associated Press, was
dated July 6, 2009, less than two months before a high-speed crash
near San Diego killed a California highway patrol officer and his
family and renewed concerns over sudden acceleration in Toyotas. In
October 2009, Toyota issued its largest-ever U.S. recall, involving
about 4 million vehicles, to address pedals getting stuck in floor
mats.
The documents could raise concerns in Congress over whether
Toyota put profits ahead of customer safety and pushed regulators
to narrow recalls' scope.
"You can feel that the staff were thinking more about company
profits than customers," said Mamoru Kato, an analyst at
Tokai-Tokyo Securities.
Toyota has said its "first priority is the safety of our
customers" and promised changes, including an outside review of
company operations, more focus on responding to customer complaints
and improving communication with federal officials.
The House Energy and Commerce Committee is holding its hearing
Tuesday with Jim Lentz, president of Toyota Motor Sales USA, and
Transportation Secretary Ray LaHood. The House Oversight and
Government Reform Committee follows Wednesday with testimony from
Toyota president Akio Toyoda, Yoshimi Inaba, president and chief
executive of Toyota Motor North America Inc., NHTSA Administrator
David Strickland and LaHood, and safety experts and family members
of victims. A Senate committee is planning a March 2 hearing.
Stupak, who leads the investigative panel of the House Energy
and Commerce Committee, said he would ask Toyota executives about
potential electronic problems and complaints of sudden unintended
acceleration.
In his letter to Lentz, Stupak wrote that the committee's
"preliminary assessment is that Toyota resisted the possibility
that electronic defects could cause safety concerns, relied on a
flawed engineering report, and made misleading public statements
concerning the adequacy of recent recalls to address the risk of
sudden unintended acceleration."
Stupak said the documents show the sole report produced by
Toyota on the acceleration issue purported to test and analyze
potential electronic causes. The report, by consulting firm
Exponent Inc., "was initiated just two months ago and appears to
have serious flaws," Stupak wrote.
He said experts interviewed by the committee demonstrated that
the report used an extremely small sample that would not get to the
root of the problem. One of the primary authors of the Exponent
report said they did not examine any vehicles or components that
had the unintended accelerations.
When owners complained about unwanted acceleration, Stupak said
Toyota representatives "commonly responded ... by concluding that
the events the consumer described could not have happened." Stupak
also accused Lentz of misleading the public in television
interviews in which he said Toyota studied the problem and the
cause was the sticky pedals and floor mats.
Dozens of Toyota dealers from around the U.S. plan to lobby
members of Congress Tuesday and Wednesday to stress the automaker's
safety efforts and remind lawmakers that the company is a source of
jobs in every congressional district. The visits, coordinated with
Toyota, will also involve factory employees.
Quinn Gillespie & Associates, a prominent lobbying firm,
meanwhile, said it had stopped representing Toyota because of a
conflict that posed with another client. Quinn Gillespie officials
would not identify the other client, but an auto industry official
speaking on condition of anonymity to reveal private information
said it was State Farm, the giant auto insurer that told federal
regulators in 2004 and 2007 about reports of unexpected
acceleration in some Toyotas.
---
Strumpf reported from New York. Associated Press writers Larry
Margasak and Alan Fram in Washington, AP Auto Writer Tom Krisher in
Detroit and AP writers Kelly Olsen and Malcolm Foster in Tokyo
contributed to this report.

(Copyright 2010 by The Associated Press. All Rights Reserved.)


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