"What Toyota told shareholders was going on and what was actually going on were two different things," says Frank from the firm of Murray, Frank & Sailer in New York City. "For years Toyota knew it had problems even though they were holding the company out to be the best thing since sliced bread."
"They had all this information in front of them and they said everything was fine anyway. That's 'willful blindness' and it is an indication of fraud"Frank's firm has filed a 57-page class action complaint on behalf of Robert Moss, a private investor who purchased shares in Toyota and, as Frank describes it, "lost money, not a lot, but still lost." Like many other Toyota investors, Moss is "justifiably upset."
"You think they're a good company that makes a good product. Every year they are selling more vehicles. Then you find out that they have being lying to you. People get upset," says Frank.
The class action complaint filed by Frank is in itself an impressive review of Toyota's recent troubles and a good read for journalists or anyone who may fit the class member definition.
In 2006 Toyota was pounding its chest, making aggressive sales and income projections that the company purported would overtake GM as the largest and most profitable carmaker in the world. Eight months later, a newspaper report revealed that the National Highway Transportation Safety Administration (NHTSA) had received 40 reports of unintended acceleration in Toyota vehicles.
Toyota repeatedly denied that there were any significant safety issues related to its vehicles. In the face of mounting pressure, the company actually went on a PR campaign proclaiming the integrity of the Toyota brand.
A veteran attorney with thousands of securities litigation hours under his belt, Frank says Toyota's state of denial is definitely actionable.
"Rarely are you are going to find a document that says we have to lie to get our numbers up," says Frank. "More likely you find—my God—they had all this information in front of them and they said everything was fine anyway. That's 'willful blindness' and it is an indication of fraud."
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At the moment Toyota faces four securities fraud class actions in the US, all of which will be consolidated at a hearing in California in April. Lawyers for plaintiffs with the largest alleged losses usually are appointed as lead counsel for the group.
Marvin Frank is the managing partner at Murray, Frank & Sailer. Frank graduated with a B.A. from the City College of New York in 1969 and an M.B.A. from Bernard M. Baruch College in 1974. He received his J.D. degree magna cum laude from New York Law School in 1991. His firm specializes in securities litigation.