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Automaker Pleads No Contest To Odometer Charges

December 15, 1987

ST. LOUIS (AP) _ Chrysler Motors Corp. pleaded no contest Monday to federal charges that it sold several thousand vehicles as new even though they had been driven by company employees with the odometers disconnected.

The company agreed to pay more than $16 million to owners of the vehicles as part of a settlement of current and potential class-action lawsuits. ..................CORRECTIVE Sent December 15, 1987 FOLLOWS...............

The Associated Press erroneously reported Monday that, as part of a settlement on behalf of consumers, Chrysler Motors Corp. agreed to extend warranties of cars driven by company employees with the odometers disconnected.

The extension of the warranties was announced prior to the settlement as was not part of it. .............................................................................

The automaker also extended the warranties of the cars involved at a cost of more than $9 million, bringing the overall cost of the settlement to more than $26 million, said Missouri Attorney General William L. Webster, lead negotiator in the case for the National Association of Attorneys General.

The settlement calls for Chrysler to pay at least $500 each to the owners of about 32,000 vehicles that have been identified as having been part of what the company called its Quality Assurance Program. That program involved company employees taking vehicles home to test drive them before shipping them to dealers.

The payments are expected to be made in about three months, after a final consent decree is signed, Webster said.

″This settlement emphasizes our determination to be more than fair with these customers,″ Chrysler Motors said in a statement. ″We want their trust and confidence in Chrysler and its products.″

As part of the settlement, the government dropped charges against Chrysler excecutives Allen F. Scudder and Frank J. O’Reilly, who managed the plants at which the cars involved were made, said U.S. Attorney Thomas E. Dittmeier. They were charged with conspiring to commit fraud.

Chrysler, the nation’s No. 3 automaker, entered the no-contest plea as the case was scheduled to go to trial Monday in U.S. District Court. It had pleaded innocent shortly after the indictment was returned in June.

″We have already said that testing of cars with odometers disconnected was stupid,″ Chrysler said. ″It makes no sense to go to trial to defend that practice.″

Under the plea, Chrysler Motors, Chrysler Corp.’s automotive subsidiary, neither contested nor admitted to the criminal charges in the 16-count indictment. The plea leaves the company subject to stiff fines.

An investigation began in late 1985 when Missouri troopers noticed odometers were not functioning on some cars they stopped for speeding.

The indictment accused Chrysler of defrauding dealers and the public by disconnecting odometers on millions of new cars used by company department heads since 1949, and later selling them as new.

The indictment alleged that 60,000 vehicles manufactured at Chrysler’s seven plants in the United States and two in Canada had their odometers disconnected as they came off the assembly lines between July 1985 and December 1986.

Cars, trucks and vans were driven by company department heads from days to weeks at a time, the indictment said. Dittmeier said at the time of the indictment that unregistered mileage varied from 50 to 400 miles.

The indictment also said that in several instances, vehicles were involved in accidents so severe their frames were bent. The company made cosmetic repairs, did not fix the frames and sold the vehicles without telling customers of their true condition, the government alleged.

The indictment charged the automaker with one count of conspiracy to commit mail and wire fraud, eight counts of mail fraud, six of wire fraud and one of conspiracy to commit odometer fraud.

Although Chrysler pleaded innocent, its chairman, Lee Iaccoca, called the practice ″dumb″ in a public apology a week after the indictment was returned.

The company said it has discontinued the practice, and Iacocca announced that a seven-year, 70,000-mile warranty would apply to the vehicles involved. Subsequently, Chrysler improved the warranty on all its new vehicles to that level.

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