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Justice Department May Hit General Motors With Wire-Fraud Charges

The U.S. Department of Justice may pursue criminal charges for wire fraud against General Motors, accusing the company of promoting deceptive or false information regarding its failure to recall millions of vehicles equipped with faulty ignition switches, sources close to the matter told The Wall Street Journal. The faulty switches are now being linked to more than 100 deaths, WSJ reported yesterday (June 9).

GM Chief Executive Mary Barra declined to comment on the Justice Department’s rumored actions, but told reporters in Detroit the discussion of potential charges is “speculation.” Ahead of the company’s shareholders meeting yesterday, Barra confirmed GM is cooperating with prosecutors.

Bob Hilliard, who is serving as the lead attorney in the GM cases, released a statement yesterday after hearing news of the potential wire fraud charges.

"GM was intent on deceiving the public through use of the wire (communication via electronic transmissions) by knowingly withholding critical info from NHTSA," Hilliard wrote in his prepared statement. "'Knowing' can mean deliberate indifference."

A similar case was brought against Toyota early last year which resulted in the automaker paying a record $1.2 billion criminal penalty. Sources speculate the amount of penalty brought against GM, if any, will likely exceed $1 billion.

In a recent interview, Manhattan U.S. Attorney Preet Bharara told The Wall Street Journal the Toyota case was a “watershed moment” for automakers. “From time to time, it’s important for there to be systemic reform not only in a company but throughout an industry” he added.

If the Justice Department decides to move forward with the criminal charges, GM may have its hands full as it continues damage control following continued mishandling of supplier relationships.

Despite talks of criminal charges, Seeking Alpha reported a jump in GM shares early Tuesday after reports surfaced of Fiat Chrysler CEO Sergio Marchionne pushing GM toward a merger with help from hedge funds.

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