General Motors company to pay $1 million for lack of communication with accountants

General Motors is set to pay $1 million in civil penalty fines for not notifying accountants of a proposed recall.

Back in Spring of 2012, the company were aware of a potential safety recall, but reportedly failed to let accountants know. This failure prevented accountants from assessing the financial impact the recall may have, including any potential losses. This information was allegedly kept from accountants for around 18 months, though it is unclear whether this was intentional or an expensive oversight.

The American multinational corporation based in Detroit has agreed to a cease and desist order, all the while remaining silent on committing any wrong-doing.

The recall was of a potentially deadly ignition switch failure which allegedly caused 124 reported deaths. The ignition switch could cut off power to airbags; preventing the safety devices from deploying when needed. The dangerous and potentially fatal defect led to a huge strain on the company’s finances, with billions reportedly being paid out for various fines and claims.

“Internal accounting controls at General Motors failed to consider relevant accounting guidance when it came to considering disclosure of potential vehicle recalls”. Andrew M. Calamari, Director of the SEC’s New York Regional Office.

GM Co.’s omission breached the U.S.’ Security Exchange Act, which requires stock issuers to have significant internal accounts controls. The million dollar fine will be paid to the U.S. Securities and Exchange Commission who issued a press release condemning GM Co.’s failure:

“Deficient internal accounting controls prevented the company from properly assessing the potential impact on its financial statements of a defective ignition switch found in some vehicles.“

Billions paid to victims and in fines

This $1 million is but a fraction of GM’s total pay-out in the whole ignition switch fiasco. The automaker has already reportedly paid out billions for various settlements and other penalty fines. A total of 1,385 claims were made and settled but more claims are still pending. $900 million alone went to the U.S. Department of Justice and $595 million went to a fund for crash victims’ families. The entire scandal could have been avoided if GM had applied a simple fix that costs 57 cents during production.

The major car manufacturer also entered into a consent agreement with the U.S.’s National Highway Traffic Safety Administration. Under this agreement, GM Co. will have to implement extra safety compliance measures. So far, they have rearranged its engineering and manufacturing team to make sure more accountability is in place. Some of the workers and managers apparently knew about the defect for over a decade before finally recalling the potentially dangerous vehicles. In additional to the 124 deaths, 275 injuries have been linked to the ignition switch defect.