This November, the NHTSA put the auto industry on notice. The U.S. National Highway Traffic Safety Administration (NHTSA) Whistleblower Program has issued its first ever whistleblower award. Whistleblower Kim Gwang-ho received $24.3 million for providing information about Hyundai and Kia engines. Mr. Kim alerted the NHTSA that the automakers failed to address a design flaw in their Theta II engines. The design flaw made the engines prone to seizing up; the engines could even catch fire.
The NHTSA collected $81 million in penalties from Hyundai and Kia. In turn, Mr. Kim received 30 percent ($24.3 million) of the money collected. This is the maximum percentage that the NHTSA Whistleblower Program can award under law. And it’s the largest award ever in an automotive whistleblower case.
The Engine Design Flaw That Mr. Kim Revealed to the NHTSA
Mr. Kim learned of the engine design flaw while working as a Hyundai safety engineer in Seoul, South Korea. Hyundai was not addressing the seizing and fire risks in their Theta II engines. In 2016, Mr. Kim flew to Washington, D.C. to alert the NHTSA.
Internal corporate records provided by Mr. Kim proved that Hyundai and Kia were lying to conceal the danger. Hyundai delayed recalling millions of vehicles with the Theta II engines. Moreover, Hyundai provided inaccurate information about the nature of the design flaw to NHTSA.
In 2020, NHTSA imposed a $210 million penalty on Hyundai and Kia. This is the largest penalty in the agency’s history. NHTSA also required that Hyundai and Kia make extensive safety enhancements.
The NHTSA Whistleblower Program
Congress passed the Motor Vehicle Safety Whistleblower Act in 2015. This law created a whistleblower reward program in the Department of Transportation (DOT). The program awards whistleblowers who provide information to safety regulators about vehicle defects.
The statute allows NHTSA to award up to 30 percent of any collected monetary sanctions to a whistleblower. To receive an award, a whistleblower must contribute information that leads to an agency action with penalties of over 1 million dollars. The whistleblower must be connected to the motor vehicle industry at the time they learn of the misconduct.
The law was modeled after other whistleblower programs, such as the Securities and Exchange Commission’s whistleblower program. Like the SEC Program, the NHTSA Whistleblower Program protects whistleblowers from retaliation and protects their confidentiality.
NHTSA’s Deputy Administrator, Dr. Steven Cliff, commented:
Whistleblowers play a crucial role in bringing information to NHTSA about serious safety problems that are hidden from the agency. This information is critical to public safety and we are committed to awarding those who bring information to us.
The Whistleblower Award that Almost Wasn’t
Mr. Kim came to the NHTSA only months after Congress enacted the Motor Vehicle Safety Whistleblower Act. While the NHTSA Whistleblower Program started in 2015, the DOT has been slow in placing implementing regulations. In March, Senators Blumenthal and Markey called on NHTSA and Transportation Secretary Buttigieg to draft the needed regulations.
In their press release announcing this award, the NHTSA noted that it is still “in the process of drafting regulations for its whistleblower programs.” Despite this delay, NHTSA concluded that it can pay whistleblower awards even without the final rules in place. Thankfully so; Mr. Kim has now been justly compensated for the great risk he took to protect owners of defective cars.
The NHTSA Whistleblower Program Is One of Many Key Tools for Combatting Fraud
Mr. Kim’s story underscores the importance of whistleblowers in rooting out fraud and misconduct. Put simply, whistleblower programs like this one help regulators uncover fraud. For example, the SEC’s Whistleblower Program has reached $1 billion in awards to whistleblowers since the program started in 2012. Now that the NHTSA Whistleblower Program is underway, it can make a similar impact on the auto industry. Above all else, whistleblowers can help ensure there are safer cars on the roads.
You can read more about U.S. Whistleblower Programs, like the NHTSA’s and SEC’s, here. If you are considering submitting a tip, complaint, or referral to a whistleblower program, we suggest that you contact us for a free, confidential consultation.