U.S. eyes bankruptcy link in GM ignition defect probe, report says

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March 22, 2014 – 3:48 pm ET

WASHINGTON (Reuters) — Federal authorities are investigating no matter whether Basic Motors hid an ignition switch defect when it filed for bankruptcy in 2009, The New York Occasions reported on Saturday.

The Justice Department’;s investigation of the automaker consists of a probe of whether or not GM committed bankruptcy fraud by not disclosing the ignition difficulty, a individual briefed on the inquiry advised the Times on Friday, the paper said.

Authorities also are investigating whether GM understated the defect to federal safety regulators, the Occasions explained. The ignition switch issues led to the recall of 1.6 million automobiles final month.

GM has handed more than paperwork to federal investigators in New York, the particular person, who was not identified, advised the Instances.

The automaker cannot comment particularly on the Justice Division investigation, spokesman Greg Martin mentioned in an e-mail on Saturday. “We are cooperating fully with authorities on numerous fronts and we will carry on to do so,” he stated.

The investigation is currently being run by FBI agents and federal prosecutors who worked on the fraud case against Toyota that ended in a $ 1.2 billion settlement final week, the paper mentioned.

On Wednesday, GM was hit with a lawsuit demanding that the organization be held liable for allegedly concealing ignition problems just before its 2009 bankruptcy.

GM is a different legal entity than the one that filed the 2009 bankruptcy that shook the U.S. economic system. The so-referred to as new GM is not responsible below the terms of its bankruptcy exit for legal claims relating to incidents that took place before July 2009. These claims must be brought towards what stays of the “outdated” or pre-bankruptcy GM.

But the proposed class action, filed in federal court in California, mentioned plaintiffs need to be allowed to sue over the pre-bankruptcy actions “due to the fact of the lively concealment by Previous GM and GM.”

The lawsuit also mentioned GM was accountable for reporting to the federal government any security-associated difficulties for automobiles made before its bankruptcy.

It is a single of a number of lawsuits filed against the company since the recall was announced.

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