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Toyota faces criminal probe, lawmakers' ire

Toyota Motor Corp revealed it faces a criminal investigation into its handling of the safety problems that led to massive vehicle recalls, while a congressional panel accused it of making apparently misleading statements.

Adding to the Japanese automaker's deepening crisis on Monday, new documents detailing how Toyota beat back US safety regulators efforts for a wider probe in 2007 and disclosure of a Securities and Exchange Commission request for documents.

It all comes as Toyota's top executive, the grandson of the company founder, prepares for a hearing on Capitol Hill over unintended acceleration problems that have been linked to at least five deaths, with 29 other fatality reports being examined.

Akio Toyoda, who took the helm at the world No. 1 automaker last June, is scheduled to testify before the US House Oversight and Government Reform Committee on Wednesday.

In a gesture it said was intended to reassure customers, Toyota said late on Monday that it would install brake override systems on three additional models for vehicles already on US roads: the Tacoma truck going back to 2005 model year, the Venza crossover from 2009 and the Sequoia SUV.

The system ensures the brake overrides input from the accelerator in cases where both are depressed.

The move extends the scope and cost for a recall that had already targeted five models including the top-selling Camry. Toyota said it would have the same safety technology on most new models sold in the United States by the end of 2010.

Toyota has recalled more than 8.5 million vehicles globally in recent months for problems including sticky accelerators, accelerators that can be pinned down by loose floor mats and a braking glitch affecting its hybrid models.

It is also investigating reports of steering problems in the Corolla, its second most popular US model.

In a preview of the line he could take in his testimony, Toyoda said in a statement published in the Wall Street Journal that he was committed to making sure that Toyota learned from the crisis and changed its ways.

“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,” Toyoda said. “While we investigated malfunctions in good faith, we focused too narrowly on technical issues without taking full account of how our customers use our vehicles.”

The extended apology from Toyoda came hours after Toyota said it had received a federal grand jury subpoena from the US attorney's office in Manhattan on February 8.

The Manhattan US Attorney's office has one of the highest profiles in the United States, with jurisdiction over some of Wall Street's largest publicly traded companies. Toyota has shares listed on the New York Stock Exchange.

The automaker also said the SEC had asked for documents related to unintended acceleration of Toyota vehicles and the company's disclosure policies.

Toyota said it would cooperate with the investigations.

William Johnson, a partner at Fried, Frank LLP in New York, said often such inquiries boil down to what he described as the "Watergate questions."

“What did you know and when did you know it? There are variations of that, but that's the crux of the matter,” said Johnson, a former US prosecutor and former SEC lawyer.

Daniel Margolis, a former federal prosecutor with Pillsbury Winthrop Shaw Pittman LLP in New York, said a product recall normally would not trigger a criminal investigation.

“They must have some information that leads them to believe there is something worth investigating,” Margolis said.

He added that prosecutors would likely focus on any false statement the company may have made to a federal agency such as the National Highway Traffic Safety Administration.

 

LAWMAKERS' CHARGE

 

Documents reviewed by Congress appear to show that Toyota consistently dismissed the possibility that electronic failures could be responsible for incidents of unintended acceleration, two senior lawmakers investigating the matter said on Monday.

US representatives Henry Waxman and Bart Stupak, chairmen of the House Energy and Commerce Committee and the panel's investigative subcommittee, respectively, also said in letters to Toyota and US regulators that the automaker's public statements about the adequacy of its recent recalls "appear to be misleading.

The lawmakers said the findings stem from a preliminary review of documents provided to the committee by Toyota and NHTSA.

Toyota said it was reviewing the letter from Waxman and Stupak and continues to cooperate with the committee.

The US Department of Transportation said NHTSA was well versed in electronic throttle issues and had the expertise to conduct those types of investigations.

Documents obtained by Reuters on Monday show US safety regulators considered a wider probe of acceleration risks on Toyota vehicles and further safety steps as early as 2007, two years before Toyota launched the first of its sweeping recalls.

But NHTSA ended its probe of the issue in October 2007 without finding a defect at Toyota. It took that step despite privately acknowledging consumer warnings of "extremely dangerous" risks and the prospect that more Toyota vehicles could be affected by acceleration problems.

The documents were provided to the Oversight and Government Reform Committee by NHTSA as part of that panel's probe.

 

MORE HEADACHES

 

A 2009 document obtained by congressional investigators that was released on Sunday showed Toyota's Washington D.C. staff trumpeting over $100 million in savings from convincing regulators to end their 2007 probe of sudden acceleration complaints with a relatively cheap floor mat recall.

The document seems certain to add to the high-stakes debate about whether Toyota missed or ignored complaints about sudden acceleration in its vehicles and whether US safety regulators were tough enough.

Toyota, which has lost $30 billion in market value since its recall crisis intensified on January 21, reiterated that it was conducting a top-to-bottom review of all its operations.

“Our first priority is the safety of our customers and to conclude otherwise on the basis of one internal presentation is wrong,” the company said.

But the US Department of Transportation said the document highlighted Toyota's slow response to the safety problems.

“Unfortunately, this document is very telling,” said department spokeswoman Olivia Alair in an emailed statement. (Reuters)