False Claims by GM harmed California’s largest public pension system
SACRAMENTO – California Attorney General Xavier Becerra today announced a $5.75 million settlement against General Motors (GM), resolving allegations that GM made false and misleading statements to investors, including the state’s largest pension system, regarding the costs the company would incur due to its ignition switch problems. For years, GM knew its ignition switch issues were causing crashes and would result in massive recalls, but GM concealed the problems from investors and failed to build reserves for the losses it knew were coming. These actions artificially inflated GM's stock price, causing the California Public Employees’ Retirement System (CalPERS) to lose millions of dollars.
“General Motors cheated California twice – first by concealing a fatal flaw in its vehicles, then by concealing the facts about the flaw in its financial disclosures, which affected the retirement investments of public servants across California,” said Attorney General Becerra. “This settlement finally holds GM to account.”
In 2014, GM recalled over nine million vehicles in the U.S. in response to faulty ignition-switch issues that in some cases caused the sudden termination of a vehicle’s electrical systems, including its power steering and power brakes. The defect ultimately led to a reported 124 fatalities and 274 injuries. GM employees knew about the problematic ignition switches in 2005 but didn’t disclose the problems to the National Highway and Traffic Safety Administration (NHTSA) until February 2014.
Today’s settlement marks Attorney General Becerra's second settlement to hold GM accountable for its defective ignition switches. In 2017, he announced a $120 million multistate settlement with GM for violations of consumer protection laws, of which California received $7 million.
This case reaffirms Attorney General Becerra’s legacy in protecting California’s public pension systems from deceptive practices by major corporations. In 2020, Attorney General Becerra announced a $7 million settlement involving multinational bank and financial services company HSBC for overcharging CalPERS in foreign currency trading. In 2019, he announced a $150 million settlement against Morgan Stanley, an American multinational investment bank, for misleading investors including CalPERS and the California State Teachers' Retirement System (CalSTRS). And in 2017, Attorney General Becerra announced a $125 million settlement with the Royal Bank of Scotland (RBS), an international financial conglomerate, over misrepresentations about residential mortgage-backed securities sold to CalPERS and CalSTRS.
A copy of the settlement is available here.