GM Sued For Mail and Wire Fraud, $10 Billion At Stake

GM hit with $10 billion lawsuit that accuses the automaker of mail and wire fraud.

Posted in News

— General Motors has been hit with an expanded class-action lawsuit that accuses the automaker of mail and wire fraud over its handling of deadly ignition switch defects.

The lawsuit makes claims against the "New GM" (after it exited bankruptcy in 2009) of violations of the Racketeer Influenced and Corrupt Organizations Act, or RICO.

According to the U.S. Department of Justice:

"The purpose of the RICO statute is the elimination of the infiltration of organized crime and racketeering into legitimate organizations operating in interstate commerce. However, the statute is sufficiently broad to encompass illegal activities relating to any enterprise affecting interstate or foreign commerce."

The GM lawsuit is for all persons who owned or leased a GM vehicle at the time "New GM" took over in July 2009 and who have owned their vehicle through 2014. Further, the lawsuit includes anyone who bought a GM vehicle after "New GM" took control.

The racketeering lawsuit says GM concealed the ignition switch defects from government investigators and the public for over 10 years, all while the switch caused accidents, injuries and deaths.

Additionally, the lawsuit says "New GM" promised in the sale agreement it signed in taking over "Old GM" that it would comply with the federal Safety Act with respect to "Old GM" vehicles. The complaint says GM failed in its agreement by not recalling millions of cars years before it did.

The GM lawsuit affects owners of all GM models regardless of their having a defect, due to the alleged diminished value of GM vehicles.

The complaint includes examples of GM-branded vehicles that have suffered loss in value, including the 2011 GMC Denali that has a diminished value of $2,965 as of April 2015. Additional models named are the 2010 and 2011 Chevrolet Camaro, 2009 Pontiac Solstice and the 2010 Cadillac STS which have diminished values ranging from $1,235 to $2,900.

The lawsuit is seeking $500 per vehicle, and with as many as 20 million GM vehicles affected, the total is more than $10 billion.

The RICO lawsuit specifically addresses alleged facts of the case for GM's actions after it exited bankruptcy in 2009, because a federal judge gave GM a free pass for its actions prior to 2009.

In April 2015, Judge Robert Gerber said the law is on the side of "Old GM" based on the bankruptcy agreement that says "New GM" can't be held liable for the actions of "Old GM."