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The Honolulu Advertiser
Posted on: Tuesday, February 23, 2010

Toyota faces criminal probe as executives head to Capitol Hill


By Ken Thomas and Dan Strumpf
Associated Press

Hawaii news photo - The Honolulu Advertiser

Akio Toyoda

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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 was probing what the automaker told investors, the company disclosed yesterday. Newly released internal documents showed that Toyota officials visited with U.S. regulators years ago, who "laughed and rolled their eyes in disbelief" over safety claims.

The twin developments created new public relations challenges for Toyota plus the prospects of hefty federal fines or even indictments against executives in the U.S. and Japan. They also complicate Toyota's ability to discuss details driving its recall of 8.5 million vehicles because anything executives say could be used against the company inside a courtroom.

Top Toyota executives were expected to testify at hearings today and tomorrow on Capitol Hill.

In an opinion piece published by The Wall Street Journal, Toyota's president acknowledged the automaker had stumbled badly.

"It is clear to me that in recent years we didn't listen as carefully as we should or respond as quickly as we must to our customers' concerns," wrote Akio Toyoda, who is the grandson of the company's founder.

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 wasn't immediately clear what U.S. 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 U.S. Attorney's Office for the Southern District of New York declined to comment, saying it does not confirm or deny its investigations as a matter of policy.

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.

Legal experts said the fresh subpoenas could affect how Toyota executives respond to the questions from lawmakers.

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

In his opinion piece, Toyoda vowed to oversee "fundamental changes" in the way the automaker handles current and future safety problems. He said he was looking forward to discussing the "back-to-basics" approach tomorrow when he is scheduled to testify before U.S. lawmakers.

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.