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Takata to Pay $1 Billion in Air Bag Scandal

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By William Vogeler, Esq. on January 17, 2017 12:15 PM

Japanese auto-parts maker Takata will pay $1 billion as part of a criminal settlement stemming from the company's cover-up of defective air bags that contributed to the deaths of at least a dozen motorists and injuries to almost two hundred others.

The U.S. Justice Department announced the deal Friday, which included one guilty plea to wire fraud, $25 million in fines, $125 million for injured motorists, and $850 million for recall and replacement costs. Prosecutors said Takata and three of its executives, who separately face fraud and conspiracy charges, repeatedly falsified critical test data about the safety of its products for more than a decade.

"Automotive suppliers who sell products that are supposed to protect consumers from injury or death must put safety ahead of profits," said U.S. Attorney McQuade. "If they choose instead to engage in fraud, we will hold accountable the individuals and business entities who are responsible."

Second Largest Maker of Air Bags

Shinichi Tanaka, Hideo Nakajima, and Tsuneo Chikaraishi, all of Japan, have been indicted on charges that they deceived automobile companies about defects in order to sell products they knew failed safety tests. They were all executives of the company until 2015, when recalls began. At the time, Takata was the world's second-largest maker of air bags.

"Takata deeply regrets the circumstances that have led to this situation and remains fully committed to being part of the solution," said Shigehisa Takada, the company's chief executive, in a statement saying Takata will work with regulators and automakers to ongoing recalls.

According to the company's admissions, Takata began developing airbag inflators that relied upon ammonium nitrate as their primary propellant in the late 1990's. Tanaka, Nakajim and Chikaraishi knew that certain inflators had sustained failures, including ruptures, during testing.

Case Far From Over

But for 15 years, prosecutors said, the company induced automakers to purchase the faulty airbag systems by submitting false reports. Even after the airbags ruptured in the field, causing injuries and deaths, Takata continued to deceive customers about the problems.

Takata agreed to pay $200 million last year to settle with the National Highway and Safety Administration. In the plea deal with the Justice Department, Takata has also agreed to retain a compliance monitor for three years and to cooperate fully with the government's ongoing investigations.

More than 42 million vehicles are involved in air-bag recalls around the world.

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