Legal Briefing: Toyota Whistleblower's Hot Docs Are Just Hot Air
On Close Examination, Biller's Docs Don't Show Much
One subplot of the Toyota (TM) recall debacle has revolved around Dimitrios Biller, a former in-house counsel for the automaker who oversaw its defense of rollover lawsuits. Biller, who is now suing Toyota over wrongful termination, claimed to have four boxes of damning documents showing how his ex-employer hid discoverable evidence, particularly the potentially very useful technical data in the "Books of Knowledge." U.S. Rep. Edolphus Towns (D-NY), chairman of the House Oversight and Government Reform Committee currently investigating Toyota, looked at the documents, wrote a nasty letter to Toyota, and publicly released it, claiming the documents showed serious wrongdoing by Toyota.
Well, U.S. Rep. Darrell Issa (R-Calif.), the ranking Republican on the committee, claims Towns is wrong. After Issa and his staff spent 60 hours looking at the documents, Issa says the documents show that Toyota, during Biller's tenure, worked hard to improve its disclosure of records and that the documents otherwise fail to support Towns's characterization of them.
According to a National Law Journal article about the congressmen's spat, Todd Tracy, a plaintiff's attorney who had reopened 17 previously settled suits against Toyota on the basis of Biller's claims, has now seen Biller's documents and agrees with Rep. Issa. According to Tracy, one box contained 15 copies of the same deposition, one contained research about bringing a wrongful termination suit, and another contained 50 copies of Biller's resume, together with e-mails Biller authored. On the subject of hidden documents, Tracy had this to say about his many years of litigating against Toyota: "I never had trouble getting [discovery material from Toyota] at all."
In response to Rep. Issa's letter, Chairman Towns issued a statement saying, "Mr. Issa's comments do address the central issue. Toyota has been illegally withholding documents for years. We need to continue cutting through the smokescreen put up by Toyota and keep our eyes on the ball."
Toyota's Recall Repairs May Not Work
Far more troubling to Toyota's future is the claim by more than 60 people that their Toyotas had new episodes of unintended acceleration after being "fixed." The repairs' lack of success is perhaps not surprising, however, since it's clear Toyota doesn't really have a handle on what's wrong; some half of all complaints involve models not recalled, for example.
AIG Subsidiaries Settle Race-Discrimination-In-Lending Case
Getting fair treatment from banks has long been a problem for minorities when they apply for housing loans. The infamous practice of "redlining" led to the Fair Housing Act, but the Act did not eliminate the problems associated with discrimination. One modern example can be found in the practice of loan steering: Some banks offered more-expensive subprime mortgages to minority borrowers who would have qualified for cheaper loans, "steering" them to the more profitable loans far more often than they similarly steered white applicants. Loan steering, though despicable when done to anyone, is only illegal if a bank does it disproportionately on the basis of race or other impermissible basis. Banks have no duty to give you the most affordable loan you can qualify for, although the creation of a "duty of care" is one of the financial reforms that Congress has been considering.
To settle a Justice Department lawsuit, two American International Group (AIG) units just agreed to pay $6.1 million to settle claims of that steered minorities into high-cost loans more often than equally qualified whites.
Tribune Bondholders Sue Big Banks
Getting paid during a bankruptcy is tough if you're a bondholder; secured creditors like the banks stand ahead of you in line. To jump the line and try to recover, Tribune bondholders have sued the big banks -- JPMorgan Chase Bank (JPM) and several others -- charging that they knew the $8 billion in loans they gave the publisher to achieve the 2007 leveraged buyout of Tribune would doom the company to bankruptcy. If a court agrees, that would classify the leveraged buyout as a "fraudulent transfer," and the bondholders would jump ahead of the banks in the repayment line.
I'm sympathetic to claims that big banks knowingly facilitated borrowers' headlong rushes to financial ruin in order to capitalize on their bankruptcies through credit default swaps, but this claim rings a little false since it's not clear how the banks win from the bankruptcy. (I haven't yet heard that the banks have lots of valuable credit default swaps on Tribune debt.) More likely the banks were caught up in bubble fever; as I noted in an article late last month, leveraged buyouts circa 2007 are now viewed as badly overpriced, and the banks are taking hits from them.