The DOJ is About to Take General Motors on a Rough Ride

The criminal penalties that GM faces for the Cobalt debacle could be massive and deleterious to the driving public


It is hard to feel sorry for a company that got the government to transfer $10 billion from taxpayers' pockets to its

Crashing Car
JasonParis / Foter / CC BY

own to save itself from bankruptcy. But General Motors' joyride with the administration might be over and rough-ride about to begin. According to the New York Times, the Justice Department is gearing up to slap the company with a record fine for "criminal wrongdoing" in how it handled its ignition switch debacle. If NYT is to be believed, these fines will dwarf even the billion-dollar penalty that Toyota was forced to cough up for its accelerating cars.

This might seem like rough justice for GM given that in addition to the cash, it also received a liability shield as part of its bailout package that has severely limited what its victims can collect in damages from it. However, GM's loss won't be their gain or the gain of the driving public, I note in my morning column at The Week.

Rather, if the Toyota settlement is any indication, most of the money that Justice gets, Justice will keep.

In Toyota's case, the Justice Department put the entire $1.2 billion it collected from the carmaker in criminal fines — along with the$1.7 billion it received in the Bernie Madoff case — into its notorious civil asset forfeiture fund, an all-purpose slush fund where the department also parks assets seized during illicit drug raids from people never accused of a crime.

Although Toyota's victims had the option of filing copious amounts of paperwork to collect additional damages for economic losses relating to accelerating vehicles, it is unclear how many of them actually did so. (My queries to DoJ went unanswered.) What is clear is that the forfeiture program's operating expenses not related to any kind of victim payoff experienced a $1.3 billion boost in 2014 — as per page 8 of this report.

The moral of the story for GM might be that a government that is powerful enough to give you what you want is also powerful enough to take away what you have.

Go here to read the whole thing.