Should Company Employees Be Personally Responsible For Product Defects

Discussion Questions:

  1. The U.S. Justice Department may pursue individuals within a company arguing that the individuals who make decisions within a company should be held accountable.  Carefully read the article and list the main points.

  2. Make a list of product related decisions that employees make that may lead to serious product liability issues.  Do this within the context of a specific company or industry.

  3. Do you think that employees should be held personally responsible for the decisions they make for their employer?

  4. How should you personally manage this type of risk?

Judge Wants Toyota Probe to Include Employees

Judge Approves $1.2 Billion Penalty for Misleading Consumers on Safety Problems

Christopher M. Matthews

Updated March 20, 2014 4:06 p.m. ET

Now that the Justice Department has extracted a $1.2 billion penalty from Toyota Motor Corp. for misleading consumers about safety problems in its cars, a federal judge wants prosecutors to go after the employees who were responsible.

U.S. District Judge William H. Pauley approved the auto maker’s settlement with prosecutors on Thursday, saying it “painted a reprehensible picture of corporate misconduct.” But he added that ultimately individuals are responsible for corporate misconduct and urged the Manhattan U.S. attorney’s office, which conducted the investigation into Toyota, to continue its probe.

“I sincerely hope that this is not the end but rather the beginning to seek to hold those individuals responsible for making these decisions accountable,” Judge Pauley said during a hearing in Manhattan federal court.

A Toyota spokeswoman declined to comment.

A spokesman for the Justice Department declined to comment on Thursday. When asked if prosecutors would pursue individuals during a news conference Wednesday, Manhattan U.S. Attorney Preet Bharara said he wasn’t “foreclosing anything” but believed the settlement is the “final resolution” of the case.

“[T]he rules of evidence sometimes do not allow you to use certain kinds of evidence and certain documents against individuals, although they might be admissible against the company itself,” said Mr. Bharara. “And so although there is an admission that there were individuals who engaged in conduct which provides for a basis to bring a case against the company, they are not charged here.”

The comments add to a growing chorus from judges who have criticized prosecutors for settling claims of wrongdoing with companies while not bringing charges against executives or others who actually made the decisions.

Under the terms of the agreement, Toyota admitted that it misled U.S. consumers by concealing information and making deceptive statements about two safety issues affecting its vehicles, each of which resulted in unintended acceleration.

Christopher P. Reynolds, Toyota Motor North America’s top lawyer, admitted Thursday that Toyota had misled consumers, but the company pleaded not guilty to wire fraud, a common part of such settlements.

The $1.2 billion penalty is the largest to date against an auto maker and ends a four-year criminal probe into Toyota’s handling of safety issues that a government regulator in 2010 found had caused at least five deaths.

“This is unfortunately a case that demonstrates that corporate fraud can kill,” Judge Pauley said on Thursday.

The settlement comes as the government is ramping up a similar investigation into General Motors Co. handling of a faulty ignition switch that affected more than 1.6 million vehicles and has been linked to a dozen deaths. GM has acknowledged that it knew about the defect for years before it conducted a full recall.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

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