Feds Probe GM Over Ignition Problem Bankruptcy Fraud

Tyler Durden's picture

Not only is GM facing record high inventories of slow-to-sell cars and the recall of million sof its cars (and a sale halt), Reuters reports that the terrible ignition switch problem - that has caused 13 deaths - may have been known about (and not disclosed) prior to the bankruptcy (and subsequent taxpayer bailout). The Justic Department is investigating whether GM understated (or hid) the information from regulators and committed bankruptcy fraud.



Via Reuters,

Federal authorities are investigating whether General Motors hid an ignition switch defect when it filed for bankruptcy in 2009, The New York Times reported on Saturday.


The Justice Department's investigation of the automaker includes a probe of whether GM committed bankruptcy fraud by not disclosing the ignition problem, a person briefed on the inquiry told the Times on Friday, the paper said.


Authorities are also investigating whether GM understated the defect to federal safety regulators, the Times said.




The investigation is being run by FBI agents and federal prosecutors who worked on the fraud case against Toyota that ended in a $1.2 billion settlement last week, the paper said.


On Wednesday, GM was hit with a lawsuit demanding that the company be held liable for allegedly concealing ignition problems before its 2009 bankruptcy.


GM is a different legal entity than the one that filed the 2009 bankruptcy that shook the U.S. economy. The so-called new GM is not responsible under the terms of its bankruptcy exit for legal claims relating to incidents that took place before July 2009. Those claims must be brought against what remains of the "old" or pre-bankruptcy GM.


But the proposed class action, filed in federal court in California, said plaintiffs should be allowed to sue over the pre-bankruptcy actions "because of the active concealment by Old GM and GM."


The lawsuit also said GM was responsible for reporting to the federal government any safety-related problems for cars made before its bankruptcy.

How long until we see May Barra plead da fif?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Newfie's picture

GM is a dinosaur and should be extinct.


smlbizman's picture

heads are gonna roll now......christ that made soda come out my nose....bonuses for everyone...

economics9698's picture

GM should be merged with Chrysler but the smartest government in the world intervened. 

Surly Bear's picture

bankruptcy fraud...sounds like me ex-wife....

CrashisOptimistic's picture

So what if they committed bankruptcy fraud?  They are TBTF.  This episode will justify more money to the UAW.

MontgomeryScott's picture

Just to clarify:

The GOVERNMENT is going to sue GOVERNMENT MOTORS, using GOVERNMENT attornies, with GOVERNMENT hearings (and the subject of the GOVERNMENT-sponsored bankruptcy will also be a topic, I suppose).

No one will go to prison. No one will lose their jobs. The cost of GOVERNMENT MOTORS vehicles will rise, to pay for ther GOVERNMENT settlement.

Mussolini and Hitler are both rolling over in their graves with burning jealousy.

HHRs and Ions are pretty crappy cars, anyway, so the public actually will be relieved of a burden, and will be ever dependent on the GOVERNMENT to keep protecting them... from GOVERNMENT MOTORS...

The shitting ignition switch isn't made in the United States. Would anyone care to place wagers as to the location of manufacture?

Vampyroteuthis infernalis's picture

This is just an excuse for the Obummer administration to dump GM and say, "Hey, they were fraudulent in their dealings with the gov't". This instead of fessing up that saving this POS was a waste of taxpayer money and padding their cronies' pocket. Disgusting to the core.

LetThemEatRand's picture

At least 13 people died while these corporate fucking facsists pocketed billions.  And the government already unloaded its GM stock for a loss.  

I own a small business.  If I decide that a few people have to die to increase my profit, I go to jail.

IndyPat's picture

If I rob a Chase branch for 10K, it's off to Leavenworth...turning big rocks into little rocks.
Professor Black was right...you wanna rob it...own it first.

Oh regional Indian's picture

Unsafe at any speed. Even standing still.

The US auto industry has had it's nuts stripped from it since 1971. The 66 Mustang....tch....

Also, corporate personhood means GM is a machine building a machine, neither has a conscience...... humans are just....



LetThemEatRand's picture

So what about the Japanese?  Those corporate facsists just entered into a $1B no prosecution agreement.  "Saying the case 'demonstrates that corporate fraud can kill' a Manhattan federal judge Thursday approved a $1.2 billion settlement that Toyota Motor Corp. ironed out with the feds over the giant Japanese automaker’s handling of a spate of sudden accelerations in its vehicles.  The settlement between the Justice Department and Toyota announced Wednesday followed a four-year criminal probe."

Tell the families of the victims that it was a Just result.  Just Us.

Oh regional Indian's picture

Toyota is a corporate person too.

It cries tears of lead. ALso noteworthy though, is that many things point to sabotage when it comes to the Toyota sudden acceleration story. Toyota was getting too good to be true. 

The machine needs to keep on killing...I call it th egreat machinery death cult...




LetThemEatRand's picture

Corporate person-hood is a sham.  I have a corporation but if my small business kills someone to increase my profit I go to jail.  Size matters.  The U.S. Supremes know this.

Oh regional Indian's picture

Corporate person hood is not a sham. It is central to the larger sham...


And check this out, good resource:


US is a corporate person. Right at the top.

Trouble is you do not have enouogh money to pay fines as a small biz guy. It's all about monetary value to a ledger...


LetThemEatRand's picture

I don't mean to nit-pick, but the fine paying has nothing to do with it.  It has to do with funding the politicians who appoint the prosecutors and regulators.

The United States is not a corporation, but it is owned by several.  

LetThemEatRand's picture

I've read all that stuff before.  It completely misses the point. 

Oh regional Indian's picture

Actually, here is one more, edited my last comment...

This is via the Cornell Law site:

(15) “United States” means— 

(A) a Federal corporation; (B) an agency, department, commission, board, or other entity of the United States; or (C) an instrumentality of the United States. Check the rest out.... http://www.law.cornell.edu/uscode/text/28/3002
LetThemEatRand's picture

You missed the "or".   The United States is not a corporation.  London is.   The United States broke away from said corporation and its King some years ago.  Now, the United States is ruled by corporations including London.  

Oh regional Indian's picture

Maybe you just want to keep your blinders on?

It defines it right from the Get go, it is a corporation. see (A)

Now I'll rest my case.


LetThemEatRand's picture

EDIT:  sorry for the snark, but this is a pet peeve of mine.  Read the whole law.

Do they not teach you how to read in India?  Let me quote the part you are focused on:

(15) “United States” means—

(A) a Federal corporation;

(B) an agency, department, commission, board, or other entity of the United States; or

(C) an instrumentality of the United States.

Not to mention that this is a Chapter that defines the United States for a specific purpose, and not for general purpose.   This is part of the Chapter of the U.S. collecting debts:

28 U.S. Code § 3001 - Applicability of chapter



Current through Pub. L. 113-86, except 113-79. (See Public Laws for the current Congress.)


US Code


(a) In General.— Except as provided in subsection (b), the  [1] chapter provides the exclusive civil procedures for the United States—

(1) to recover a judgment on a debt; or

(2) to obtain, before judgment on a claim for a debt, a remedy in connection with such claim.

(b) Limitation.— To the extent that another Federal law specifies procedures for recovering on a claim or a judgment for a debt arising under such law, those procedures shall apply to such claim or judgment to the extent those procedures are inconsistent with this chapter.

(c) Amounts Owing Other Than Debts.— This chapter shall not apply with respect to an amount owing that is not a debt or to a claim for an amount owing that is not a debt.

Oh regional Indian's picture

It;s okay LTER, you are generally rude, and accepted as such. Just like you snarked about law and india.

Chew on this, are you saying the definition of the United States will differ with every context it is used in the code? Eh?

Case closed from my end....



LetThemEatRand's picture

Are you calling from Inriana?

Fuck, man.  If you want to tell us what our law means, at least read it first.  We're all ruled by corporations.  I'm sorry that India is still subject to London.  Especially since the U.S. is once again under the control of London bankers.  Let's find a common ground against a common enemy. 

India needs to man up and say fuck you to London (again).  As do we (again).

Oh regional Indian's picture

You've switched topics, so I'll take that as a tap out from you ;-)

Of course we are banded together, the great ZH keyboard brigade...


wee-weed up's picture



Feds Probe GM...

Ha! Who owns GM?


Chickens, meet fox!


LetThemEatRand's picture

The U.S. government no longer owns GM.  They sold their stock for a loss.

wee-weed up's picture

The U.S. government no longer owns GM.

And you really believe that?

LetThemEatRand's picture

The U.S. sold their G.M. stock.  For a loss.  What's not to believe?  If anything, GM owns the government.  What other situation can you imagine where someone would loan you money knowing they will take a loss.

wee-weed up's picture

What other situation can you imagine where someone would loan you money knowing they will take a loss.

This was never a normal situation...

When the "someone would loan you money knowing they will take a loss" (i.e. the gov't) knows they have access to the bottomless well of taxpayer funds...

Anything is possible...

No, correction... PROBABLE.

LetThemEatRand's picture

The corporations and bankers are the ones with the endless well of taxpayer dollars.   Look at any chart of wealth distribution.  But keep preachin' Rand.   Worked for Greenspan.  Which religion were Ayn and Alan again?

A Nanny Moose's picture

At least the Nazis produced the beetle.

RedHarley's picture

What will happen now is the FBI will raid the offices of GM  and take all the evidence, then say they cannot release it due to the "pending investigation".........ala Solyndra.

NoDebt's picture

Did GM immediately stop honoring warranty claims on 2008 cars when it went through bankruptcy in 2009?  No.

I beg to differ that "New GM" has no obligations to anything "Old GM" did.

LetThemEatRand's picture

GM (not Chrysler) accepted liability for all vehicles built before the BK.

RedHarley's picture

Your comment made coffee spray out of my nose, as well as this comment "The Justic Department is investigating whether GM understated (or hid) the information from regulators and committed bankruptcy fraud."

The whole bankruptcy was a frickin' fraud.

Max Cynical's picture

"What difference at this point does it make?"

Yen Cross's picture


   I agree, but can we please keep the new Corvette Z-O6?

 The Nissan Leaf and Toyota Prius drivers are out today.

economics9698's picture

I loved my 3.8 Intrigue.  Damn thing was comfortable and had balls.

NoDebt's picture

Old racing saw:  "As racecars go, the Corvette makes a nice ashtray."


Yen Cross's picture

 No Debt why don't you read the article before commenting. I've owned (2) ZO-6s and currently drive a 599GTO as one of my stable of cars.  I also have an deep affinity for the new Porsche 911.

 For it's intended purpose, the new ZO-6 is a lot of bang for the buck!

NoDebt's picture

If I told you all the Chevys I've owned, worked on and raced (yes, I race- drag, autocross and road course), you would probably back off that statement a little.  I've been at this since I was 14, when I built my first small block Chevy (for my friend who was 16).  I build them, I drive them and I race them- gound up, every damned nut and bolt.  So, yeah, I have some experience with this stuff beyond reading magazines and hanging out with the cool car crowd where dollars equal status.

Yeah, I've owned a Z06 before (no dash in Z06, BTW).  A 2003.  Bought it used.  For the buck, awesome.  In absolute terms, not so fantastic.  And a rattle-trap to boot, like all GM vehicles.

GM builds two things well:  Engines and transmissions.  They get PILES of performance out of them, depspite the antiquated design (the TODAY-CURRENT Z06 uses a 2-valve pushrod engine- the latest itteration of the 'LS' engine family that debuted in the 1997 Corvette).  The piles of crap they wrap around them ruin the experience.


ptolemy_newit's picture

the questions have easy answers regarding product validation and Cpk?  what aboout tolerance stack-up calculation?  all of these are available for review?   This is obvious a design error with probable missing in-process inspection.

It would be impossible for the NEW president who WAS the most senior level product engineering director to not know of these issues.


Look at her aging in the last month alone, (she looks scared)?

post turtle saver's picture

if you're basing your critique on your anecdotal experience with a used c5 z06, you'll pardon if I don't see things the same way you do...

if you think a c7 z06 with the z07 package is going to be a similar experience to a used c5 z06... well, let's just say you need to look up from your muckrake and get out more...

I wrench and tune my own stuff by the way, as I would expect most people on the Hedge to do if they truly want to claim they're prepped for the big one... my view on GM is very different from yours and we'll just have to agree to disagree on things like build quality & interior... on drivetrain we're in violent agreement, except on the point that LSx is antiquated tech... far from it ;)

IndyPat's picture

Yeah, screw all that....

When I'm trollin through Naptown in my fly ass Pinto...bitchez make way!

Like I own the road. No bumper humping or getting cut off.

Worst case scenario, it's as close to a Viking funeral as a hick like me could expect.

iamrage's picture

My dad can beat up both your dads.  Trolls trolling trolls.  Good game.

nofluer's picture

Two replies in one...first - from waaaaay above...

The so-called new GM is not responsible under the terms of its bankruptcy exit for legal claims relating to incidents that took place before July

I bought a brand new special order a 4 dr '82 1T Chebby. With just 28,000 miles on it, it started backfiring and pretty much tried to die. Problem? Bad Camshaft.

GM tried to give ME the shaft by telling me that I hadn't used the correct oil (and then included what ammounted to suborning of perjury from an auto mechanic school. (I used the oil in the owner's manual.) I called BS on them. Then I found out that there was a government agreement on several years of cam shafts and transmissions - that GM KNEW when they sold the trk to me were bad! No... they did not tell me. Then they tried to get out of paying for the repair. I ended up paying for 30% of the repair. (Used after market parts.) 

In return for that 30% and the way they handled the problem, I called the GM "customer service rep" in KC, MO. The guy essentially told me to F***off. My response - I told him that for the rest of my life, I would never ever buy another new GM product. It has been about 30 years since I told him that - and I don't care if they want to sell me a new Super Car for a dime... I WILL NOT BUY IT!

So... GM may not be "responsible" for things after July, but the effects of what they did before will carry on and on and on into the future because they have consistently treated their customers like chumps, lied to them, cheated them, and generally screwed them.

My father bought a new 3/4 T pu in '65 - the cam lobes were off 5 degrees. They replaced just about every part in the engine but it still wouldn't run right, then when the engine shelled out a week after the "warranty period" ran out, tried to weasel out of paying for it. The judge ordered them to pay costs of the action my father brought, his expenses involved in havng the truck towed, and to replace the engine FREE of charge.

Second comment - this one in response to the comment:

GM builds two things well:  Engines and transmissions.

Sorry. Not true. GM builds CRAP! Just in my family we have 18 years of GM building crappy camshafts.

666's picture

Even if the worst is found to be what transpired, what will the punishment be? Another taxpayer bailout?

What's the friggin' point...

Bonapartist's picture

GM must be doing ok seeing as all of the cops and firefighters I know keep buying their wives $50K GMC Acadias.

economics9698's picture

It pays to be a government worker.