First Toyota Congressional Hearing Begins as U.S. Opens Criminal Probe

The first of two Congressional hearings is set to begin today in Washington, D.C. regarding the recall at Toyota over an unintended acceleration issue. However, just as the hearing is about to get under way, new developments that may result in a federal criminal probe against Toyota have come to light, in the form of a federal grand jury subpoena for documents related to the unintended acceleration issue. Latest developments include:

• House Committee Calls Toyota Oversight "Seriously Deficient": Representative Bart Stupak of Michigan, the head of the House Oversight Committee, released his panel's findings yesterday, two days before the committee is due to begin its public hearing. In the letter to Toyota Motor Sales USA president Jim Lentz, Stupak and the committee members are blunt in saying that neither Toyota nor the National Highway Traffic Safety Administration (NHTSA) has done enough to rule out electronic interference as a cause for the unintended acceleration issues. "Toyota resisted the possibility that electronic defects could cause safety concerns, relied on a flawed engineering report and made misleading public statements", the committee says in its letter to Toyota. It has equally strong words for the NHTSA. "NHTSA's response to complaints of sudden unintended acceleration in Toyota vehicles appears to have been seriously deficient", the committee says in a letter to Transportation Secretary Ray LaHood. "NHTSA conducted only one cursory investigation in 2004 into the possibility that defects in electronic controls could be responsible for these incidents", despite receiving over 2,600 complaints, an alleged 34 deaths, and six separate investigations into the issue since 2000. Toyota and the NHTSA have both defended their actions, claiming that absolutely no testing by any body has been able to show that the unintended acceleration issue is in any way electronics-related.

• First Witnesses Identified: The panel of witnesses scheduled to testify before two House committees today and tomorrow has been identified, with the schedule now published for viewing. The first panel today will be with the House Energy and Commerce Committee, and scheduled to appear is a Tennessee couple who filed a complaint in 2006 about unintended acceleration in their new Lexus ES350, as well as Sean Kane, president of Massachusetts-based Safety Research & Strategies Incorporated and a vocal critic who has long raised concerns about Toyota's electronics. Also scheduled to appear today are U.S. Transportation Secretary Ray LaHood, NHTSA Administrator David Strickland, and Toyota Motor Sales USA president Jim Lentz. Tomorrow's hearing will be before the House Oversight and Governmental Reform Committee, and will have two panel discussions. LaHood and Strickland will be on the first panel, followed by Toyota global president Akio Toyoda and Toyota North America president Yoshimi Inaba. Kane will then testify again, followed by Joan Claybrook, former NHTSA head under the Bill Clinton administration, and Clarence Ditlow, executive director of the Center for Auto Safety. Also set to appear is Fe Lastrella, mother to the family killed in an August 2009 California crash that sparked the massive recall.

• Federal Grand Jury, SEC Subpoena Toyota Documents for Possible Criminal Probe: Toyota has revealed that it has received two subpoenas this month relating to unintended acceleration in its vehicles and the recall of its hybrid Prius and Lexus HS250h vehicles over a brake feel issue. First was an 8 February subpoena from a federal grand jury in the Southern District of New York seeking "certain documents related to unintended acceleration of Toyota vehicles and the braking system of the Prius". The second was a 19 February subpoena from the Los Angeles office of the U.S. Securities and Exchange Commission (SEC) seeking production of documents, including those related to unintended acceleration of Toyotas and the company's disclosure policies and practices. Those disclosure policies may be the subject of investigation as Toyota is being examined to determine what it knew and when regarding the unintended acceleration issues and the Prius brake feel issues. It is a 15-year felony to lie to the NHTSA with the "specific intention of misleading the Secretary with respect to motor vehicle or motor vehicle equipment safety related defects that have caused death or serious bodily injury to an individual". Toyota reportedly told the NHTSA that it first became aware of a possible Prius ABS brake issue after receiving a complaint in the Japanese market last August, but it did not find any abnormality. A second complaint in October reportedly triggered Toyota to reprogramme the ABS, which it carried out as a running change for production by January 2010.

Outlook and Implications

The mood of the investigative committees going into these hearings is looking increasingly hostile towards Toyota. The appearance of documents over the weekend (20–21 February) suggesting that Toyota put its bottom line before consumer safety, and was actually boastful about it internally, means that Toyota executives are likely to face some tough questioning. From a public relations standpoint, this has been an unmitigated disaster from the start for Toyota, handled poorly by a team unfamiliar with major public relations catastrophes. The situation looks likely to get worse this week for Toyota, as now the company's advertising and public relations teams' attempts to win over the public and media seem disingenuous at best.

However, the real problems may come in the form of the criminal investigations that are now being hinted at by the subpoenas from the SEC and the federal grand jury in New York. Unlike the Congressional hearings, which can make life difficult for Toyota management and potentially result in fines or additional regulation or legislation that could affect the business, the SEC and federal grand jury subpoenas are part of investigations into whether or not a criminal felony has been committed. The federal grand jury will have been convened at the request of the U.S. Attorney's Office, which has not announced any formal investigation into the Toyota issue, but if subpoenas are being served to gather documents, then one must be under way. At issue is whether or not Toyota officials have deliberately misled U.S. government safety regulators in its responses to the NHTSA and the U.S. Congress over the unintended acceleration recall and the Prius/HS250h ABS brake function recall. Given that the unintended acceleration issue has resulted in at least one death, this could be considered a capital crime, and this is likely to be why federal prosecutors are looking into the matter. If a grand jury finds sufficient evidence to warrant furthering the process, indictments could eventually be handed down that would see Toyota officials actually on trial in a criminal case, instead of just appearing before Congress to answer some questions, a far more serious situation for those involved.