ESG Enforcement Tracker

Key facts:

On 15 January 2025, the DOJ charged HML, a Japanese corporation headquartered in Tokyo and a subsidiary of the Toyota Motor Corporation, with conspiracy to defraud the US, violating the Clean Air Act by submitting fraudulent documents, committing wire fraud, and unlawfully importing and selling non-conforming heavy-duty diesel engines into the US.

On the same day, HML agreed to plead guilty to engaging in a multi-year criminal conspiracy and admitted that, between 2010 and 2019, it:

1. submitted false applications for engine certification approvals;
2. altered emission test data;
3. conducted tests improperly;
4. falsified data without conducting any underlying tests;
5. submitted fraudulent carbon dioxide emissions test data, resulting in false fuel consumption values being calculated for its engines; and
6. failed to disclose software functions that could adversely affect engines’ emission control systems.

Collectively, these failures resulted in HML selling over 105,000 non-conforming engines between 2010 and 2022.

HML’s guilty plea forms part of a global resolution, which includes separate civil resolutions of environmental, customs and fuel economy claims by the federal government and State of California. The global resolution requires HML to pay a criminal fine of US$521.76 million, the second largest in the history of the Environmental Protection Agency’s (EPA) mobile source programme, serve a five-year probation, during which it will be prohibited from importing any diesel engines it has manufactured into the US, and implement a comprehensive compliance and ethics programme and reporting structure.

HML also agreed to a forfeiture judgment of US$1.087 billion. HML’s future payments relating to its civil settlement obligations, including future payments as part of a civil class action settlement brought by private plaintiffs, will be credited towards the criminal forfeiture judgment.

Additionally, it is required to pay a civil penalty of US$525 million, which is the fourth largest civil penalty in the history of the EPA’s mobile source programme. Other provisions of the civil agreement include implementing a mitigation programme relating to emissions, instituting a recall programme to modify non-conforming engines, funding mitigation projects and enforcement costs in California and resolving California False Claims Act claims.