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Criminal investigation adds to Toyota’s troubles

Company called to NY grand jury

By Ken Thomas and Dan Strumpf
Associated Press / February 23, 2010

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WASHINGTON - Federal prosecutors have launched a criminal investigation into Toyota Motor Corp.’s safety problems, and the Securities and Exchange Commission is reviewing what the automaker told investors, the company disclosed yesterday.

The developments created new public relations challenges for Toyota plus the prospects of hefty federal fines or even indictments against executives in the United States and Japan.

They also complicate Toyota’s ability to discuss details of its recall of 8.5 million vehicles because anything executives say could be used against the company in court.

Top Toyota executives were expected to testify at hearings today and tomorrow 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 was not immediately clear what US 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 US attorney’s office for the Southern District of New York declined to comment.

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.

Eric Dezenhall, a crisis management consultant in Washington, said the subpoena might cause Toyota to limit its testimony before lawmakers 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.

Representative Bart Stupak, Democrat of Michigan, who will run today’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 complaints shows company personnel identified sticking pedals or floor mats as the cause of only 16 percent of unintended acceleration reports.