Takata Corporation, one of the world’s largest suppliers of automotive safety-related equipment, has agreed to plead guilty to wire fraud and pay a total of $1 billion in criminal penalties stemming from the company’s fraudulent conduct in relation to sales of defective airbag inflators.
Under the terms of the agreement, Takata will pay $975 million in restitution and a $25 million fine. Two restitution funds will be established: a $125 million fund for individuals who have been physically injured by Takata’s airbags and who have not already reached a settlement with the company, and a $850 million fund for airbag recall and replacement costs incurred by auto manufacturers who were victims of Takata’s fraud scheme. A court-appointed special master will oversee administration of the restitution funds.
An indictment was also unsealed charging three Takata executives with wire fraud and conspiracy in relation to the same conduct.
The three Takata executives – Shinichi Tanaka, 59; Hideo Nakajima, 65; and Tsuneo Chikaraishi, 61, all Japanese citizens – were each charged in an indictment filed on Dec. 7, 2016, in the Eastern District of Michigan with one count of conspiracy to commit wire fraud and five counts of wire fraud for their alleged conduct in connection with the above-described fraud scheme.
According to the company’s admissions, in the late 1990s, Takata began developing airbag inflators that relied upon ammonium nitrate as their primary propellant. From at least in or around 2000, Takata knew that certain ammonium nitrate-based inflators were not performing to the specifications required by the auto manufacturers.
Takata also knew that certain inflators had sustained failures, including ruptures, during testing. Nevertheless, Takata induced its customers to purchase these airbag systems by submitting false and fraudulent reports and other information that concealed the true condition of the inflators. This fraudulent data made the performance of the company’s airbag inflators appear better than it actually was, including by omitting that, in some instances, inflators ruptured during testing.
Takata has also agreed to implement rigorous internal controls, retain a compliance monitor for a term of three years and cooperate fully with the department’s ongoing investigation, including its investigation of individuals.
U.S. Attorney Barbara McQuade of the Eastern District of Michigan, Chief Andrew Weissmann of the Fraud Section of the Justice Department’s Criminal Division, Special Agent in Charge David P. Gelios of the FBI’s Detroit Field Office and Inspector General Calvin L. Scovel III of the U.S. Department of Transportation Office of Inspector General made the announcement.