Dealer Practices to be Scrutinized by the FTC and CFPB

“Bottom-Feeders” to Be the First Scrutinized...

By: Thomas Hudson


When you are a lawyer, it seems that all your friends insist on telling you every lawyer joke they hear. One of my favorite recent ones: “What’s the difference between a lawyer and a carp?” The answer, after my obligatory “I give up” was, “One’s a scum-sucking bottom-feeder, and the other one’s just a fish.”

I immediately thought of that one when I read that Federal Trade Commission Chairman Jon Leibowitz, in a speech to the U.S. Chamber of Commerce, used the term “bottom-feeder” in describing the FTC’s agenda for the coming year in light of the creation of the Consumer Financial Protection Bureau (CFPB), with which the FTC will share enforcement authority over financial services companies.


Read the rest of this excellent article here: http://www.autodealermonthly.com/79/4078/ARTICLE/Dealer-Practices-to-be-Scrutinized-by-the-FTC-and-CFPB.aspx



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Former Automotive F&I Manager and Wife Face ID Theft Charges

The former finance manager of a General Motors dealership in Harlan, Ky., and his wife face theft and identity-theft charges in Harlan County Circuit Court this week for allegedly using customer names and personal data to obtain loans for cars he bought and resold for profit, according to the Kentucky State Police.

Paul Anthony Casolari, 42, the former finance manager at Creech Chevrolet-Buick Inc. in Harlan, and his wife, Christy Casolari, 32, both of Cumberland, Ky., have been charged with alleged thefts that took place from 2008 to 2010, police said. Harlan is in southeastern Kentucky about 15 miles from the Virginia border.

Paul Casolari obtained loans and bought cars using personal information from real customers, said Trooper Walt Meachum, a spokesman for the Kentucky State Police.

“He was getting loans using stolen identities,” Meachum said. “He would try to resell them quickly, but if he didn’t get them sold in time, he was making payments on them until he did sell them for profit.”

Christy Casolari took part in the alleged thefts with her husband, but she was not employed by the dealership, Meachum said.

Customers found out cars had been bought in their names when they checked their credit reports, Meachum said. He said police believe the alleged thefts involved “about eight” vehicles, and that multiple charges are linked to each vehicle.

Reached by phone, dealership owner Joe Creech declined to comment.

The Casolaris are scheduled to be arraigned, or formally notified in court of the charges against them, on Thursday, March 17. They were arrested Feb. 21 and freed almost immediately after posting bond, police said.

Paul Casolari faces 106 counts of forgery, plus 12 counts of identity theft, nine other theft-related charges, plus trafficking in stolen identities, according to court records. Christy Casolari faces similar charges, minus the forgery counts, court records show.

A court clerk said court records did not identify any attorneys representing the Casolaris, and the Casolaris could not be reached for comment.


AFI's take on this: It could have been A LOT WORSE. So he was using stolen identities to buy and flip vehicles. That's just the first step toward taking everything and skipping town. Maybe that was the plan anyway and they got caught before they could run.

This is just another example that identity theves will get caught, and if it happens to involve an F&I Manager - throw the book at 'em. We have to trumpet honesty and integrity in the F&I profession.

Yet another reason for F&I Managers to become AFIP Certified. Contact me at: AutoFinanceInsider@yahoo.com for contact information of a dynamic and vivacious agent who will prepare and proctor the AFIP exam for your F&I Managers.


Link to original article: from: LEX18.com (Lexington, KY)



Next Post: Rewriting the Rules of Credit


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Former Ford Dealers Hit by Bank Fraud Charges

Dealers facing up to 30 years in prison

This isn’t your everyday bank fraud story.

Authorities charge that the former owners of a Ford dealership in upstate Wisconsin defrauded a local bank in a scheme that lasted over four years and resulted in losses of over $2 million.

According to a press release from the U.S. Attorney’s office and reports in the LaCrosse Tribune and the Chippewa Herald, the accused men who are brothers, have agreed to plead guilty to charges stemming from a fraud that court documents say cost two banks more than $2 million.

You can’t blame this one on the lousy conditions in auto retailing.

The scheme allegedly began in January 2004 and wasn’t uncovered until August 2008.

Information filed by federal prosecutors indicates that the pair falsely claimed to be buying vehicles for their inventory. But it turns out that some of the loans were for vehicles the brothers never bought. In other instances, the pair were simply out of trust by failing to report to the banks that vehicles had been sold.

The fraud resulted in a $1,767,353 loss for Farmers and Merchants Bank and a $296,861 loss for First Bank.

The banks discovered the fraud in August 2008 and reported the matter to federal authorities in August 2008. The dealership is still operating but is under new ownership.

The former dealers each face a maximum penalty of 30 years in prison plus restitution.

A government spokesperson said that some funds have been repaid by selling personal property.

Wow.


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Everybody does it

Another "reality check" by Gil Van Over

I’ve read more than a few depositions over the last couple of years. Some of the questions asked by plaintiff’s attorneys shed light on the risks faced in a dealership’s operations. Today I will discuss the best rate discussion.

Background

This consumer sued the dealership under the state’s unfair and deceptive practices act alleging that the finance manager arranged for a straw purchase and inflated the vehicle’s book value to the lender in order to obtain a credit approval. The consumer was also countersuing the lender to get the deficiency balance waived.

Interrogation

Attorney: Ms. Finance Manager, do you remember my client?

FIM: No.

Attorney: You don’t remember completing this transaction?

FIM: No, it was over three years ago.

Attorney: Let’s look at Exhibit A. This is from the deal jacket your dealership provided. Would you agree it is a credit application?

FIM: Yes.

Attorney: Can you read the name in the ‘Applicant” box?

FIM: Joan Straw.

Attorney: Now let’s look at Exhibit B. This is also from the deal jacket your dealership provided. What is this form?

FIM: It is a retail contract.

Attorney: Can you read the name of the buyer in the top left box?

FIM: Tom Purchaser.

Attorney: Is Joan Straw listed?

FIM: No.

Attorney: Did Joan Straw sign the contract?

FIM: No.

Attorney: Can you explain why Joan did not sign the contract, yet applied for credit?

FIM: It looks like we put the car in Tom’s name. Maybe Joan did not qualify.

Attorney: Moving on. Exhibit C is a condition report from the repossession company. Exhibit D is the NADA book-out sheet from the deal jacket your dealership provided. Exhibit E is a sheet listing the differences in the options on the vehicle. Can you explain why the book-out sheet lists more options than the condition report?

FIM: Maybe the bank needed a higher book value to approve the loan.

Attorney: Why would you put the car in someone else’s name and inflate the value of the vehicle to the lender in order to get a credit approval?

FIM: Everybody does it to sell cars.

Solution

First, realize that “Everybody does it” it both a lame excuse and a blatant misstatement of the truth. Most dealerships do not encourage or allow straw purchases or power booking or other forms of potential bank fraud.

That does not mean that a rogue F&I or Sales Manager won’t periodically cross the line and put your dealership at risk.

Protect yourself by implementing a few common sense policies.

Expressly Forbid Bank Fraud – I just finished watching the NCAA men’s basketball championship game. Memphis coach John Calipari will forever be questioned about why he did not call a time-out with ten seconds left in regulation to review and set up his defense. As the leader, he potentially left a question in his player’s minds about what was expected to close the deal.

Do not put yourself in the same situation in litigation. Let there be no doubt about your policy with your employees. Make it known, through your actions and through your employee manual and through your F&I and Sales Procedure Manual that bank fraud is not acceptable or tolerated. Fire the next person who you find committing bank fraud.

Belt and Suspenders Auditing – The guy in front of me yesterday at the airport security check-in line had to take extra time to get undressed for the Magnometer. First, the belt. Next, the suspenders. The TSA agent asked the obvious question, “Why both?” the man’s answer; “If one breaks, the other one will hold up my pants.”

Set up your own belt and suspenders approach to auditing deals. Start with the billing clerk. Make it part of the checklist to briefly review credit applications for alterations or numbers being printed after the rest of the application is completed. Require that every used deal have a book-out sheet signed and dated by a manager that is affirming that the options listed are indeed on the vehicle.

The second level audits should be completed by the Office Manager or Controller or Compliance Officer. Randomly pull five deals per F&I Manager on a monthly basis and scrutinize the file for potential bank fraud issues.

Finally, get independent help. Periodically, but at least annually, have a sampling of files reviewed by your attorney, accountant or compliance consultant.


Gil Van Over is the President and founder of gvo3 & Associates, a nationally recognized F&I, Sales and Red Flag Rule compliance consulting and training firm (www.gvo3.com).


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Dealership Death Watch: Car Dealer Photos, Car Dealership Pictures, Auto Dealer Pictures

Nissan Dealership in Orange County Raided

District Attorney investigators are looking into accusations of identity theft. Thousands may be at risk, prosecutors say.

By: KIMBERLY EDDS
First published in The Orange County Register
Link to source article: Check out the video of the raid.

A Nissan dealership here was raided Monday by dozens of investigators from Orange County District Attorney's Office and the Orange police department as part of a months-long investigation in complaints of identity theft by the dealership.

The investigation into Douglas Nissan at 1140 W. Katella Avenue is still in its infancy, officials said at a press conference in front of the dealership, but there may have been thousands of fraudulent loans processed with the stolen identities of thousands of unsuspecting people in the scam. The vast majority of victims were Hispanic, prosecutors said.


GENERAL MANAGER: : Booking photo of Frank Ignacio Urbano, 54, of Anaheim. Urbano, a former part owner and general manager of Douglas Nissan in Orange, is charged with forgery, grand theft, and other counts in an alleged scheme to defraud banks and customers by artificially driving up the price of used vehicles.


Douglas Nissan remained open while uniformed police officers carted out more than 350 cardboard boxes packed with lease documents, dealer jackets, and loan applications. Potential customers wandered the lots of shiny new Altimas, Pathfinders and Titans. Salesmen patiently answered questions – about the cars – not the investigation. (I could only imagine - AFI)

“The only thing going on here is a big sale. Everyone knows that,” said a man who identified himself as a manager at the dealership, but refused to give his name. Other employees were pulled inside the dealership office when questioned by a small cluster of reporters and television cameras.

Prosecutors believe pilfered pay stubs, driver licenses and social security numbers were used to apply for – and get – fraudulent car loans at Douglas Nissan, said Susan Schroeder, a spokeswoman of the Orange County District Attorney's Office.

“This is something that frightens everyone – that their identity might be stolen and they're left holding the bad credit,” Schroeder said.

The multi-agency investigation – which included representatives of the Department of Motor Vehicles - began about three months ago after complaints of fraudulent loans being processed by the dealership flooded the District Attorney's office.

Anyone who believes they may have been a victim is asked to call the District Attorney's Office at (714)648-3626.

Comments?


More Pictures of Douglas Nissan:


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The Dangers That a Spot Delivery Brings to a Dealership

The following article does a good job of highlighting the dangers and fraud inherent in the misuse of conditional, or "spot" deliveries.

Spot deliveries: Slippery slope for dealers

By April Wortham, from Automotive News.


Bill Heard Enterprises Inc.'s Chevrolet empire was crumbling.



Rising fuel prices were gutting the dealer group's high-volume sales of SUVs and pickups.

As showroom traffic at Heard dealerships fell, so did the amount of customers getting into loans, says a former manager at one of the group's two Las Vegas-area stores.

The dealership began targeting what he calls the "credit-challenged customer."

It delivered vehicles to customers on the spot, sometimes at lower interest rates than those for which the customer was likely to qualify.

Handing over the keys before completing the financing is a sales tactic known as spot delivery.

It's a tempting tactic to move the metal in tough times, but as Heard Enterprises learned, it is a risky practice for dealers.

In the last days of the Las Vegas store, the bank rejected a submitted deal about 20 to 30 percent of the time. Some buyers had to return their vehicles.

Others had to re-sign with additional cash down or a higher interest rate. And some were switched into less expensive vehicles that met the bank's lending criteria.

"Those criteria seemed to be ignored a great deal of the time as the pressure was put on the managers to put vehicles on the street," says the manager, who asked not to be identified because he is searching for a new job.

"I think the philosophy was to throw enough stuff against the wall hoping some of it would stick.

As it got closer to the end, less deals were getting bought by the banks."

In September, Heard Enterprises filed for Chapter 11 reorganization, closing all 14 of its Chevrolet dealerships. While the case is extreme, it serves as a warning to dealers who routinely practice spot delivery.

Spot delivery is inherently risky

Done wrong, it can leave a dealer exposed to allegations of predatory lending and to the risk that comes with having millions of dollars in unfinanced inventory roaming the streets.

Yet spot deliveries are tempting for dealers who are trying to sell a car before the customer goes to a rival dealership. That's especially true now, as the number of Americans with tarnished credit grows and one sale can keep a dealership afloat.

There is no way to know for sure how many dealers use spot delivery, but Better Business Bureaus and attorney general offices in several states have fielded consumer complaints about the practice.

"Although the number of dealers spotting cars today has slightly decreased because of tighter lending practices, it is still a necessary evil in the subprime market for the long term," says Raul Vazquez, a dealer consultant and CEO of direct marketing agency Focus Inc.

Vazquez says it takes longer to get loans approved and funded for subprime customers. Yet most customers aren't willing to wait. Rather than watch a customer walk away, most dealers will hand over the keys right then and there, he says.

Dealers who offer spot delivery, he says, must be certain the terms of the sale will stick. "You have to know the lender guidelines. You have to have a sales manager who's watching the deals," Vazquez says. "There are too many guys out there that say, 'Let me put the car out there and maybe I'll get them into a loan.' You just can't do that, because it's too risky for the dealership."

Know the law

Several states regulate spot deliveries, and the rules can vary widely.

Contact your state attorney general's office or department of motor vehicles for details.

Don't leave decisions about when and how to spot-deliver vehicles to a sales manager or F&I manager.

Have a policy in place, and make sure all employees follow it.

Set limits. Auto loans can be approved in 10 days. Anything more than 30 days is asking for trouble. (30 days is freakin' crazy - AFI)

Communicate

Explain to customers that the vehicle purchase isn't final until financing is secured (use a bailment).

Just because they have the keys doesn't mean they own the car.

Put it in writing

Have the customer sign a form that clearly states what spot delivery means. The dealer and the customer also should sign a form stating that if financing cannot be secured the customer is under no obligation to sign another contract.

Deal with it

If a problem arises, tackle it immediately. Don't wait until the customer has gone to the attorney general or a lawyer.

Growing risk

The risk is growing. Almost every lender has tightened its guidelines, especially for subprime loans. Others have abandoned the subprime loan business. That leaves dealers competing for a shrinking pool of money.

On Oct. 28, Myers & Fuller P.A., a Tallahassee, Fla. law firm that specializes in dealer issues, sent a letter to its clients warning them against offering spot deliveries. Doing so, the letter states, could cause them to be considered in breach of contract with their floorplan lender, a situation known as "out of trust."

In essence, once a car leaves the lot, the dealer must repay his source of wholesale financing.

"It is important to understand what the phrase 'out of trust' means when used by a floorplan lender," the letter states. "It may mean that the lender considers any vehicle not in physical inventory on the dealership premises is deemed 'sold' and the lender demands immediate payment (yea...)

"This can occur with dealers who make many sales through spot deliveries and the lender changes the definition of 'sale' in midstream."

GMAC Financial Services LLC, Heard Enterprises' main financing company, denies that it is changing the definitions or rules.

When GMAC provides floorplan financing, the dealer has a window from the time a vehicle leaves the lot until payment is due, says spokesman Mike Stoller.

That window varies from dealer to dealer, but all dealers know exactly what their window is, he says.

It's not a new policy, and the window hasn't suddenly become smaller. But GMAC is "watching its risks" more closely now, Stoller adds.

In other words, dealers who might have gone unnoticed with sloppy spot deliveries in the past are under the microscope now, and GMAC won't hesitate to label them as out of trust.

'Yo-yo financing'

In fact, Stoller says, he wonders why any dealers would risk spot delivering now, unless they were sure that they could get financing.

"We're not outlawing spot delivery. They can do what they need to do to get by," he says. "But it just doesn't strike me as being very wise in this environment."

The current lending climate has exacerbated problems with spot delivery that until now were largely considered consumer issues.

Officials in state attorney general offices tell of dealers calling customers days, weeks, even months later to say that financing fell through.

The customer is usually given a choice: Renegotiate the loan, almost always at less favorable terms, or return the vehicle and pay for any damage or mileage incurred. In many cases the dealership already has sold the customer's trade-in vehicle, leaving the customer with little choice but to sign the new terms.

John van Alst, a lawyer with the National Consumer Law Center in Boston, says that in the cases he has seen, the dealer knew as the customer drove away that financing was unlikely to be approved.

In those cases, he says, the dealer intentionally misled the consumer with the intention of bringing the consumer back later in a disadvantaged position. It's why van Alst and other critics have another name for spot delivery: "yo-yo financing."

"They've already shown their friends and family that they've gotten a new car. And then the dealer brings them back in and forces them to agree to new and worse terms," he says, such as a larger down payment.

Differing opinions

Spot delivery is a necessary selling tool, says Michael Charapp, a Washington dealer lawyer and president of the National Association of Dealer Counsel. Something goes wrong only rarely, he says. Even then, it's usually because the customer made a mistake or lied on the credit application, not because the dealer sought to deceive.

In fact, the loan process is becoming more precise, not less, he says. Services such as DealerTrack and RouteOne allow dealers to submit digital credit applications to a network of lenders and learn almost instantly if a loan will go through.

Rosemary Shahan, president of Consumers for Auto Reliability and Safety in suburban Los Angeles, counters that those instant loan rulings are proof that the vast majority of yo-yo transactions are deliberate.

When dealers had to wait until the bank opened on Monday to fax over a stack of weekend sales contracts, there might have been an excuse, says Shahan. Not now. She says spot delivery is a "huge issue" that hurts dealers as much as consumers.

"It's like the industry is eating its young," she says. Consumers end up in cars they can't afford and take on more debt than they can handle. "People end up being so upside down that you drive them away from the market."

Weak waivers

Keith Whann, a dealer lawyer and former Ohio assistant attorney general, recommends dealers have customers sign what he calls an "acknowledgement of voluntary re-sign." (Bailment)

The form states that the customer understands the deal isn't final and that if financing can't be secured at the agreed-upon terms the buyer is under no obligation to re-sign the contract or purchase the vehicle.

Some dealers are deciding not to chance it. Emanuel Jones, a Georgia dealer who is buying Heard Enterprises' flagship Columbus store, says spot deliveries are part of the sales process. Banks aren't open seven days a week, but his Ford and Toyota stores are.

"However, when the credit market tightens," Jones says, "and you're still doing a lot of spot deliveries, you're going to run into a lot of problems. In my store we had to curtail a lot of spot deliveries for customers we thought were marginal."

Chrissie Thompson contributed to this report

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Sales Manager Admits Supplying Customers' Personal Data to ID Theft Ring

Have we even scratched the surface?

By Vanessa Blum | South Florida Sun-Sentinel

A former employee of a Plantation car dealership pleaded guilty today to mail fraud conspiracy, admitting he supplied personal data from dozens of customers to an identity theft ring.

Dayton Diaz, 26, of Miramar worked as a sales manager at Rick Case Acura in Plantation until September 2008. He sold information from roughly 75 customers, including their names, addresses and Social Security numbers, to another man for $9,000, federal prosecutors said.

That man, Fitzroy Carter, 30, of Plantation, used some of the stolen identification to purchase Hewlett Packard computers worth more than $130,000.

The computers were shipped to victims' home addresses.

Knowing the approximate date and time of deliveries, members of the identity theft ring would wait for delivery and claim the computers by presenting fake drivers licenses , prosecutors said.

South Florida Crime & Safety Another man charged in the fraud, Kearn Matthew, 26, of Lauderhill, also pleaded guilty today in Fort Lauderdale federal court.

Diaz, who has no prior criminal record, faces a likely sentence of two to three years. Matthew, who has two previous convictions for credit card fraud, could be sentenced to more than six years in prison.

Diaz's attorney, Jared Bossola, said his client is remorseful and has cooperated with law enforcement. (I'll bet he is).

"My client regrets this whole situation and regrets his relationship with those individuals who thrive off identity theft," Bossola said. "He basically succumbed to peer pressure."

Vanessa Blum can be reached at vblum@sunsentinel.com or 954-356-4605.


AFI's Take on This:

This is surely desperation on the part of Diaz, an unfortunate sign of the times in the car business today.

I heard this story at my dealer group's annual Laws & Regs "refresher meeting" that started promptly this morning at 8:30.

My dealer group barely slid in the minimum requierd annual training to enforce our bona-fide error defense.

On the 18th of December.

Talk about cutting it close.

It seems funny that when times are tight, the first thing that is postponed is paid training.

Oh well, at least something is better than none at all.

Everyone can't be self motivated, like are myself, and YOU, the readers of this blog.

We will define together the meaning of a well-run F&I Department.

I was told that Diaz had a one year old child. It is a shame.

I feel sorry for his child and the victims of his identity theft, but not for him. We are in the car business during trying times.

The strong and compliant will survive.

Sigh,

Now, I am going to continue my evening by finishing this bottle of very good Merlot and watching some old James Bond movie in Hi-Definition.

Cheers, AFI


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GM’s Top-Selling Chevy Dealer Out of Business

Seems like it always comes back to ethics and the principle of "reap what you sow". I wonder how many more dealers are up there on the cliff looking down - AFI

By Cliff Banks (embellishments by AFI)
WardsAuto.com

General Motors Corp.’s top-selling Chevrolet dealer group is closing all of its 13 dealerships this week, citing various reasons for the drastic measure.

Bill Heard Enterprises Inc. sold more than 40,000 new vehicles – most of them Chevrolets – in 2007 and was ranked 11th on the Ward’s Megadealer 100 this year with $2.2 billion in total revenue.

W.T. Heard Sr. opened the group’s first dealership in 1919 in Columbus, GA. The group had dealerships in Alabama, Arizona, Georgia, Florida, Nevada, Tennessee and Texas with more than 2,700 employees.

All 13 of Heard’s stores ranked on the Ward’s Dealer 500 list this year.

A statement released by the company cites rising fuel prices, truck and SUV-laden inventory and the overall economic slowdown as reasons for going out of business.

Within the last couple of weeks, GMAC Financial Services stopped financing the inventory for several of Bill Heard’s stores, hampering the group’s ability to floor plan and order vehicles.

It looks like it all comes down to ethics:

GMAC did not say why it did so, but several Heard stores have come under fire the last several years for a slew of allegations regarding violating business and ethical regulations in the states in which they operate.

GMAC reportedly threatened to pull its financing last year after Bill Heard sent 10,000 customers what appeared to be a recall notice but actually was a bid for service-department business. Probably sounded like a good idea at the time.

Georgia’s Governor’s Office of Consumer Affairs filed a $50 million deceptive-advertising lawsuit against the group’s four Georgia dealerships for the same offense.

It was the first lawsuit filed by the OCA in its 32-year history against a dealership, according to a report in the Atlanta Business Chronicle last year.

The report also claims Bill Heard has paid more than $280,000 in fines to the state of Georgia since 1991.

Other states, including Florida, Texas and Arizona have been investigating the false recall notice claims, as well.

In early September, Bill Heard closed its Scottsdale, AZ, store which opened to great fanfare less than two years ago. And last year, the company sold its dealership in Antioch, TN, which at one time was selling more than 1,000 new and used vehicles a month. (a grinder dealership for sure - AFI).

GM likely will reopen several, if not all, of Bill Heard’s stores once buyers are found and the deals completed. GM spokeswoman Susan Garontakos says the auto maker will look to find new owners to keep the stores running.

In 2005, GM named Bill Heard one of its “Dealers of the Year,” an exclusive list of auto retailers demonstrating strong sales performance and customer service. Each of the 110 dealers on the list received the 2004 Jack Smith Leadership Award.

WOW. No other comments.


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NJ car salesman pleads guilty to charges of fraud and identity theft

18 fraudulent loans were detected with a total value of $715,000

Link to source article.

Salvatore Rivello is expected to get five years in jail when sentenced, according to the details of a plea deal. On Sept. 3, he pleaded guilty to one count of second-degree theft by deception, four counts of third-degree identity theft and one count of fourth-degree deceptive business practices, according to police reports.

The dealership, Chrysler of Eatontown was under investigation by the New Jersey Motor Vehicle Commission when the fraudulent loans were discovered. As a result of the Commission’s investigation the dealership was closed and its license suspended.

Four of the loans in which Rivello was directly involved defrauded PNC Bank by using the identities of others without their knowledge or consent, according to a report published in the Atlanticville newspaper. Overall, four separate financial institutions were defrauded, including PNC Bank, Capital One Bank, Bank of America and North Fork Bank.

The Safeguards Rule imposed by the FTC in 1999 is supposed to require adequate protections for customer information and data so that it cannot be used in schemes like this one. It appears that the Safeguards system was either non-existent or ignored in this dealership.

"Rivello's fraudulent criminal conduct caused substantial pecuniary losses to financial institutions and victimized numerous innocent individuals," Monmouth County Prosecutor Luis A. Valentin said.

"The state prison sentence anticipated by the plea agreement will punish Rivello and, hopefully, deter those who would engage in similar conduct," Valentin added.

November 1st is the compliance deadline for a sequel regulation commonly known as The Red Flags Rule that will require that the dealership be able to identify the telltale indicators that a customer might be using a false identity to arrange for credit and purchase a vehicle.

J.R. Wilson of PatriotDealer.com tells us that this new regulation will include a self-revealing feature. Under the Safeguards Rule it almost always required that an investigator come to the dealership and examine dealership records to detect violations- as in the case mentioned above. Apparently this is not so with The Red Flags Rule.

Wilson expects that cases will be brought to the attention of the authorities by customers whose identities were used to apply for fraudulent loans and purchases. If it can be determined that the dealership was in violation of The Reg Flags Rule, they then could be subject to fines and penalties.


AFI's take on this:

Wow. Each time I read of a court dispensing justice to these criminals, I wonder how many more operators are out there that haven't gotten caught yet. How many other times do you think this guy has committed identity theft outside of the car business?

He probably has a house full of nice furniture, electronics, clothes and toys that other people are already getting collection notices for.

The old rule "you reap what you sow" should hit home to this guy in jail (no further elaboration). There will always be corruption in this world, but one has to wonder, how many more criminals are still out there? One would hope that each prosecuted case should bring this age of corruption closer to an end. Are the large corporate accounting scandals finally over?

I can't even look at my 401k.

Maybe I'll check the balances Jan 1st - after I take a xanax.


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12 Things That Keep You Awake at Night

August 19th 2008 by James Perrin.
Link to Source Article:


1. Your sales manager is sleeping with your receptionist (and her sister).

2. Your salespeople have stacks of credit applications in their office drawers.

3. The heat case your sales manager just threw off the lot works for the attorney general (and was a heat case because you packed her payment).

4. Your suppliers are sponsoring your service manager’s race car.

5. Your controller is secretly a compulsive gambler.

6. Your body shop manager has a thriving business doing side work in your facility.

7. Your F&I manager can get anything bought by filling out and signing a credit application.

8. Your technicians can save seconds of time by simply dumping the oil in the storm sewer.

9. Your manufacturer’s rep is being paid by your closest competitor.

10. Your spouse wants you to hire yet another in-law.

11. Wholesalers are appraising your used cars (because they have paid your used car manager enough to take a vacation to Aspen).

12. Your parts driver’s narcolepsy is about to act up.


Relax! It’s just a bad dream. Go back to sleep.


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NY car dealer hit with $150K fine for bait-and-switch promotion

Customers thought they had won valuable prizes until they read the fine print

The New York Attorney General wants a car dealer to pay customers for persistently using misleading promotions intended to lure them into the dealership. The customers, once inside the dealership, were also subject to other fraudulent and unfair sales practices, according to Consumer Affairs.com and the North Country Gazette.

Five Towns Mitsubishi must pay $115,000 in restitution to consumers and $35,000 in penalties and costs to the state.

The authorities received more than 50 complaints regarding the dealership’s business practices.

Five Towns was charged with mailing advertisements to thousands of consumers featuring a scratch-off ticket called Dash-for-Cash in which a consumer could win a cash prize, a free vehicle, a vacation, a free gas voucher or a $1,000 shopping spree. A winning ticket contained 3 like symbols in a row but it did not explain, what, if anything, the consumer won. Instead, they had to bring the ticket to the dealership in order to claim the prize.

Once at the dealership, customers found that nearly all of them had won the vacation or $1,000 shopping spree. However, the vacation and shopping spree prizes had minimal value due to either blackout periods or expenditure requirements, including shipping and handling costs.

In addition, the dealership was charged with:

–Obtaining signatures on contracts and finance agreements when customers mistakenly believed that they were filling out paperwork for vehicles they had won as part of the Dash for the Cash sweepstakes

–Offering false discounts off the sale price of a vehicle by selling it at a higher retail sale price, which essentially nullified the value of the discount offered

–Having customers sign documents with blank sections for figures and terms, and then later filling them out with terms that were not agreed upon

–Promising consumers that they could refinance at a better interest rate after making several car payments, or promising to pay one or more months of the insurance payments for the vehicle – and then reneging on those agreements

–Inserting additional cost items without consumers’ knowledge or consent, including VIN etching, service warranties, theft deterrent systems, GPS devices and other options.

Wow.

AFI's take on this:

I was just thinking about how else could you sell a Mitsubishi (bad thoughts), and was reminded of Gill Van Over's latest article in Dealer Magazine: Outside Sales Commit Inside Jobs. (June '08). It is about the compliance issues associated with hiring outside sales promotion companies.

Yes it seems that this dealership has a huge ethics issue. I wonder how the F&I department is run - signing bank contracts when they thought they were getting a free vehicle and packing all the back end products on top of that. No wonder car dealers seem to be thought of as no better than pond scum with stories like this continuing to break.

Shouldn't the vendor who supplied the scratch - off tickets bear some of the responsibility? Gil said in the article: "Like it or not, transgressions are your responsibility. It is your dealership; you simply are using contractors, not employees".

Sends shivers up my spine.

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District Attorney Charges Car Salesmen with Multiple Counts of Fraud

When negotiating the sale of a vehicle, just how much disclosure is really required?

A common sense ruling by a California Superior Court judge resulted in the dismissal of theft charges against three Toyota salesmen. The question that lingers, however, is why the charges were brought in the first place.

The case hinges on the difference between a lease deal and a finance deal when selling a vehicle. A vehicle lease may often carry a lower monthly payment than a straightforward car loan on the same vehicle. Yet, internally, the “price” of the vehicle, or “cap cost” in industry jargon, may be higher for the lease.

The judge had to decide: Are dealership sales reps obligated to disclose the difference to their customers?

According to a report in the Cerritos City News Service, a Los Angeles assistant district attorney said “yes” and indicted the three salesmen on charges of grand theft of personal property.

In dismissing the charges the judge said in a five-page ruling, "There is no evidence that the defendants' actions were illegal or were prohibited by state or federal statute. Defendants owed the victims no duty to offer them a lower price, or a particular price."

The prosecution claimed the men, while assistant sales managers with a Toyota dealership in Cerritos in 2004 and 2005, used misrepresentations - including the amount of monthly payments in a purchase - to persuade customers who wanted to buy vehicles to enter into higher-priced lease agreements instead.

"Although the prosecution introduced evidence that the defendants inflated the projected cost of the monthly purchase payments versus monthly lease payments, defendants were free to inflate the price in order to negotiate with the victims," the judge wrote in his ruling.

Link to source article:


AFI's Take on This:

When I was first trained to "sell" leases to customers two main advantages were given. First, it puts the customer in a shorter trade cycle. That idea seemed like a good one. Second, you could "hold more money" by increasing the price. The customer would not understand this. I did NOT feel comfortable with this because the lease was being used to get a higher price without the customer's knowledge. When I did a lease, I used the same price to the customer as a purchase price. We need to make higher grosses but I don't think we should play games or appear to be playing games with the customer. It is not just a question of what is legal but also one of what is ethically right.


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Car Salesman accused of stealing 33 identities

Shawn Lee McDonald was charged with grand theft and fraudulent use of personal information according to Crestview, Florida police and as reported in the Northwest Florida Daily News. He reportedly initiated 73 credit applications and received 20 credit cards. Link to source article:



McDonald sold his dealership's customer, Jim Dohse a Chevrolet HHR back in March. Allegedly while completing the transaction, McDonald stole Dohse’s personal information and started to make credit applications using his identity. When he was applying for credit, McDonald used the victim’s name and then requested a second card be issued where he was an authorized user.

What tripped up this ID theft scam quickly was that Dohse had invested in LifeLock
,a credit monitoring service that notified him every time someone applied for credit in his name. It was not long after the car purchase that a wave of credit applications were made in his name. This, of course, prompted him to contact the local police.

So far, McDonald is being accused of stealing 33 identities of dealership customers of Hub City Ford from which he made at least 73 credit applications, netting him 20 fraudulent credit cards. The police have identified charges to those accounts totaling nearly $8,000 from Overstock.com, almost $7,000 at a Marriott in Fairfield, California (must have been some vacation!) and even nearly $3,000 toward restitution at the Mobile County, Alabama district attorney’s office. Can anyone spell “background check?”

McDonald is also listed as President of a company called Premier Brokers, Inc. and courtesy checks drawn on some of the fraudulently acquired credit card accounts totaling $7,000 were also issued. We can only guess the nature of this company’s business activity, but it is interesting to note that McDonald even used the fraudulently acquired credit cards to order business cards for the venture..

LifeLock Identity Theft Prevention is credited with uncovering the ongoing and extensive scam.

The Crestview Police are asking anyone who thinks they might be another victim of identity theft in this case to come forward by calling 682-4157.

Throw the book at him.
AFI

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Controller for Toyota dealership arrested on theft charges

Some simple precautions can prevent problems like this

LEBANON TOWNSHIP — A five-year employee at a local car dealership has been arrested on charges of stealing almost a half-million dollars from the business, according to a statement from county officials.

Elizabeth L. Pearson, 33, of 28 Dennis Road, Bloomsbury, was arrested after a five-month investigation into money missing from Muller Toyota, 2019 State Highway 31 South, the Hunterdon County Prosecutor's Office said in a news release Friday.



"We're not making any commment on that," said Jim Pesce, general sales manager of Muller Toyota. (of course not).

The dealership had a forensic audit done and contacted the prosecutor's office's Major Crime Unit after receiving the results of it, authorities said. Police found that from June 2002 through September 2007, Pearson diverted more than $400,000 from accounts maintained by Muller Toyota to herself, authorities said.

Pearson, charged with second-degree theft by deception, second-degree misapplication of entrusted property, and third-degree forgery, surrendered to detectives today and was put in Hunterdon County Jail on $75,000 bail with a 10 percent option, police said. She had worked for the dealership for five years.

Anyone with information about the case can call Dan Hurley, deputy chief of
Investigations, at (908) 788-1492.

Let Justice be served.
AFI

Chrysler dealer, ad agency sign consent decree over deceptive ads

Customers will each get $550 settlement!.

A New Orleans-based marketing company and a Maine Chrysler, Dodge, Jeep dealership have signed a consent decree to prohibit ads that the state attorney general called "unfair and deceptive," according to a report in the Portland Press Herald.

Level 10 Marketing of New Orleans and the dealership did not admit wrongdoing in signing the agreement.

According to the Maine Attorney General, ads for a November 2006 car sale offered "vouchers" that suggested buyers could receive "$4,000 Instant Savings," but those savings were never realized. (any wonder?)

The agreement also said that the marketing company and dealership can't use other promises of savings without documenting those savings. Those promises, including offering cars for sale for "pennies on the dollar," savings of "up to 90 percent off original M.S.R.P," prices "slashed for immediate liquidation” or "wholesale pricing direct to the public.”

Twenty-two customers who purchased vehicles at the Chrysler Dodge Jeep sale will receive refunds of $550 each. The two companies also must pay a civil penalty of $6,250.

Level 10 designed the advertising flyer for the sale and provided a team of salespeople at the dealership to attempt to sell the cars.


INSIDERS ADVICE:

*If you are in the market for a vehicle and hear of a current sale such as the one above, call the dealership and make contact with a salesperson (if you are interested in that particular brand of automobile).

*Set an appointment away from the "festivities".

*Do research online and negotiate a fair deal with a DEALERSHIP EMPLOYEE ONLY.

*You should think twice about buying a car from a dealership that hires a promotional company who brings in it's own salespeople for the "event". It just sounds shady to me. How compliant do you think their F&I practices are?

AFI

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Why Background Checks are a Good Idea

Why background checks are a good idea: Dealership employee the subject of identity theft investigation

More than 200 customers could be at risk. A little pre-employment checking could have avoided trouble

A woman working at a Sanford, Florida, car dealership is accused of trying to steal the identities of customers. Authorities said more than 200 customers of the dealership could have been targeted, according to a report on WESH-TV.

The woman was pulled over by police for speeding last Sunday. Investigators said they found more than 200 Social Security numbers that were jotted on pieces of paper, in notebooks and on sales contracts for cars.

According to the woman’s family, she used to work for Drive Time Auto Sales. Police claimed she used her job at the dealership to steal identities.

The accused woman’s sister said she was surprised to learn of the investigation. She shouldn’t have been. It turns out the woman had an outstanding warrant in Georgia for similar identity theft and fraud charges.

Investigators said they spent all day May 5 running the 200 Social Security numbers through a national database to alert potential victims.

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Local Car Salesman Arrested, Charged With ID Theft

By Som Lisaius, KOLD News 13

His legal name is John Clement Savage III, but he almost has as many names as he does different faces. A suspected identity thief wanted in at least three states, most recently Tucson, Arizona, where he worked as a salesman at Quebedeaux Pontiac-GMC.



"Our concern is," United States Postal Inspector David Birch says, "we just want to make sure that all the victims have been notified or made aware. If there are other victims (we want to know)."

Dating back to last October, authorities say Savage--who then went by the name George Robert Harris--ripped off the identity of customers at the east-speedway dealership. Since then, Savage left the state and moved to Tennessee. That's where he was arrested and charged with multiple counts of identity theft.

Says Inspector Birch, "When he was arrested, he indicated he was in charge of shredding some information, customer information and he--instead of shredding it--kept it and used that information for his own benefit."

"He had my husband's drivers license. He had everything of my husband's. Our address, our home phone number, my name. Everything."

Naomi Rodriguez and her husband bought a GMC pickup at Quebedeaux last fall, just before he was deployed to Iraq. About two months later, Naomi started receiving all sorts of information about loans and new lines of credit.

Turns out, somebody had a hold of her husband's information. Information that savage reportedly stole while working for Quebedeaux late last year.

Says Naomi, "They still to this day have not contacted me with an apology or just letting me know we found out this happened to you, we are sorry--nothing. Not once have we been contacted by them."

We spoke with Quebedeaux's general manager this afternoon and he says he was unaware of any local victims. He did confirm that this man worked at the dealership for a short period of time, but said it would be premature to comment further without knowing all the facts.

(Cruelly covering their behinds - AFI)


As for Naomi Rodriguez, she realizes bad things happen. But based on her experience with Quebedeaux, she'll never look at this dealership the same.

"I'm really upset with Quebedeaux. I understand Quebedeaux is a victim also by him because he fraudulently worked there and I understand that; I respect that. But as a company when you know you have sensitive information you need to take full blown responsibility for things like this that happen."

(Exactly right! - AFI)

Says Inspector Birch, "As a customer you want your information protected. In order to apply for credit to purchase certain items at a dealership, you need to be able to provide that information and all it takes is one bad seed."

If you applied for credit at Quebedeaux between March and December of last year, authorities suggest taking a close look at your credit. If you suspect foul play, you're asked to contact the US Postal Inspectors or the Tucson Police Department.

Original article found here.


Wow. Actual examples really increase my awareness of identity theft. I hope this guy get's what he deserves.

AFI

Former Honda store GM pleads guilty to fraud charges in leasing case

My objective when I display content within this blog is to promote the federal laws and regulations that will help you to understand the operations of a compliant f&i department. There is much to learn from lawbreakers who get caught. AFI

U.S. Attorney pursues dealership manager over altered lease documents

Duane Clark, the former general manager of Chezik Honda in Kansas City, Mo., pleaded guilty in federal court to a wire fraud scheme that involved falsifying paperwork on car leases in order to obtain higher commissions for himself, according to a release from the U.S. Department of Justice.

READ THE REST OF THE ARTICLE:
http://www.AFItoday.blogspot.com

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