ARE CRIMINAL REMEDIES THE RIGHT WAY TO AVOID A REPEAT OF THE FIRESTONE TIRE DISASTER?

On November 1, President Clinton signed into law a bill that is designed to prevent another "Firestone Tire" disaster. Called the "TREAD" Act ("Transportation Recall Enhancement, Accountability, and Documentation"), the bill was assembled and passed in record time. It received overwhelming support in both the House and the Senate, even though it has been blasted publicly by consumer groups and somewhat more privately by the automobile industry. While TREAD is not obviously a bad law, its reliance on criminal law, rather than civil remedies, reveals tensions in America's current approach to product safety.

After the hearings in Congress concerning the Firestone recall and the failure of anyone--the auto industry or the government--to detect the problem with the Firestone tires placed on Ford Explorers prior to the time of the recall, the Senate and the House each generated legislation in response to what its members had learned. Senator John McCain produced a bill that focussed on improved cooperation between the federal government and foreign governments in the area of recalls, and that criminalized the "knowing" manufacture of a defective automobile or automotive product that causes death or serious injury.

To put it mildly, the second part of McCain's bill -- its criminal penalty section -- was political and legal dynamite. The field of products liability is already deeply divided over the definitions of "knowing" and "defect." When car companies make design choices they are always trading off lives against costs, and sometimes juries have punished them for using this "cost-benefit analysis" to the tune of $100 million-plus punitive damages verdicts. These verdicts have been bitterly criticized by corporate America. The car companies--and their executives--were aghast at the idea that, as a result of the McCain Bill, the same sort of reasoning could become the basis for criminal penalties and jail time.

The theory behind TREAD is that if the government has enough information, it will be able to intervene and limit the damage caused by a defective automobile. TREAD does not try to improve the chances that a product will be safer by threatening the manufacturer with jail time if the product is defective. Instead, TREAD tries to reduce the costs of defective products to society by getting them off the road as soon as possible. It does this by threatening the manufacturer with jail in order to get full and accurate information about defects that may have already occurred. This theory -- which uses the criminal law to incentivize disclosure, but not to incentivize developing safe products in the first place -- is the reason consumer groups thought that the law was too weak.

With TREAD, Congress followed a relatively conventional path. It is easy and commonplace to make lying to the government a federal crime. For example, it is a federal crime to lie on a tax return. And Congress has already used similar laws to make individuals, and not just corporations, criminally liable for lying to the Food and Drug Administration. The question is, will TREAD achieve its goal of increasing public safety?

There are a number of reasons to be skeptical. First of all, the law criminalizes only false statements that are specifically designed to mislead the government. In large, complex organizations that store documents in diverse locations, and divide tasks among different employees, it may be very difficult to prove that any one person knew enough about what was going on to form the specific intent (of misleading the government) required for prosecution and conviction.

Second, even if it were possible to attribute a specific intent to a particular employee of the company, it will most likely be a middle or low-level employee, not an executive. High level officials may set the "tone" for a company, but they rarely direct specific acts, especially when those acts involve gathering large amounts of disparate data. And it serves little purpose to jail a clerk who may have submitted one false statement when the culpable person may, instead, be the executive who knew of and rewarded a pattern of wrongdoing within the company.

Third, the law is ambiguous as to whether it covers false statements made in the absence of knowledge that a product contains a defect. Firestone's position is that it never knew of even a possible defect at the time, and still does not know that the tires are defective, and so the company's failure to report would not -- at least in the company's view -- have been captured by the law. Moreover, based on this view, Firestone presumably would not have complied with the disclosure law even had TREAD been in effect at the time -- and the disaster still would have occurred.

Fourth, one very likely result of criminalizing individual conduct relating to product defects is that safety agencies will find companies less willing to talk to them after an accident. This is because each employee will be worried that anything they say might be used against them later in a criminal trial. Hence, the task of determining whether a defect exists in a product might turn confrontational just when cooperation is needed.

The recent SabreTech case is a good example. SabreTech was the shipping company that improperly packed the "oxygen generators" that caused ValuJet Flight 592 to crash in 1996. After the FAA investigated the crash and determined its probable cause, federal prosecutors brought criminal charges against three low-level SabreTech employees for lying on safety records. No executives were charged, and a jury acquitted the employees.

Finally, it is interesting to note that the goal that TREAD is trying to achieve--to get as much information as possible to the government--was apparently achieved without the threat of criminal sanctions. Before 1980, the National Highway Traffic Safety Administration sent investigators to into the field to sample tire failures reported to repair shops. It sent questionnaires and surveys to insurance companies and manufacturers. It did not depend on the manufacturer to come forward with information under the threat of punishment. But of course NHTSA's budget was cut severely between 1980 and 2000 -- and as a result, we have no idea whether the agency, without criminal sanctions, could have averted the Firestone tire disaster.

What TREAD attempts to do is well-intentioned. It also fits the tenor of our times: it is cheap and it is punitive. Whether it will work is another question entirely.