NHTSA Whistleblower Settlement Results In $24M Payment For Uncovering Kia, Hyundai Safety Violations

U.S. National Highway Traffic Safety Administration (NHTSA) issued it’s first-ever whistleblower settlement reward this week, paying $24 million to a former auto industry insider who uncovered information about efforts by Kia and Hyundai Motors to intentionally conceal serious safety defects in more than a million vehicles.

The federal automobile regulators issued a press release this week, announcing the landmark $24 million whistleblower payment to a former Hyundai Motor Company employee, identified only as “Kim”, who brought forward evidence that Hyundai intentionally concealed fire and crash risks linked to the engines in Optima, Sorento and Sante Fe vehicles.

The whistleblower informed the NHTSA in 2016 that Hyundai was failing to address design flaws in its Theta II engines, which were prone to seizing up and catching fire. This led the NHTSA Office of Defects Investigation opened a formal investigation into both Hyundai and Kia Motors, who are both separate brands but share the same parent company and commonly overlap in similar designs, engineering and part suppliers.

On November 27, 2020, NHTSA officials concluded the investigation of Hyundai Motor America, Inc. and Kia Motors America, Inc. after reviewing more than 3,000 customer reports of fires believed to be caused by faulty oil pans, catalytic converters, fuel leaks, oil leaks, and issues related to the Theta II engines. They determined both Hyundai and Kia Motors reported false information and delayed reporting known safety defects in approximately 1.6 million vehicles equipped with Theta II engines, which were found to contain leaking anti-lock brake hydraulic control units which could cause the vehicles to catch on fire even when the engines are turned off.

As a result of the untimely recalls and providing false information to auto safety regulators, NHTSA obtained a consent order which forced the automakers to pay $210 million in fines. Kia also had to pay a civil penalty of $70 million, which included an upfront payment of $27 million and an obligation to expend an additional $16 million on specified safety performance measures.

The investigation also resulted in a Hyundai and Kia Motors recall of 1.6 million Sorento, Optima and Sante Fe vehicles to fix the potential leaking of brake fluid within the antilock brake system (ABS) module, which could lead to a short circuit and cause a fire within the vehicle’s engine compartment, either while driving or parked.

The former Hyundai employee, Kim, has been awarded $24 million of the civil penalties imposed on the auto makers, which under the whistleblower program allows a whistleblower to receive between 10% and 30% of collected monetary sanctions over $1 million.

The Motor Vehicle Safety Whistleblower Act was passed by Congress in 2015, allowing employees or contractors of an automobile industry corporation to safely report a wide variety of topics to regulatory officials, including potential vehicle safety defects, noncompliance with the Federal Motor Vehicle Safety Standards, and violations of the federal requirements.

Under the program, the confidentiality of whistleblowers is provided and individuals are protected from retaliation by their employers to encourage them to report violations and noncompliance issues.