Dealer Fraud

A Riverhead car dealership owner has been charged with filing fake warranty claims for vehicle repairs that were never performed, Suffolk police said.

As part of the scheme, police said, Riverhead Suzuki owner Peter Moutafis used vehicles bought at the dealership with extended warranties without the owners’ knowledge to create bogus records of mechanical failures.

Police said Moutafis, 35 of Manor Park, then falsely billed warranty companies for repair work done by the dealership, also known as Moutafis Motors and Prestigious Motors.

Moutafis, of 181 Cranford Blvd., surrendered to Seventh Precinct detectives yesterday and was charged with insurance fraud, grand larceny, falsifying business records, and possession of a forged instrument, police said.

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A 33-year-old Erin Mills man and a Sarnia woman are each facing 15 charges under the Motor Vehicle Dealers Act after damaged cars were sold to unwary buyers.
A joint investigation Ontario Motor Vehicle Industry Council (OMVIC) investigators and Halton Regional Police led to yesterday’s arrests. The OMVIC regulates the car dealer industry in Ontario.
The investigation was sparked by a complaint in late 2007 about a man who advertised a car for sale on the internet. When he met a prospective customer on Glen Erin Dr. in Mississauga, the man showed the car and indicated he had been the original owner. He provided a false Used Vehicle Information Package to the customer, which had been altered to conceal the car’s true history, police said.
The car being sold had been in a collision and “written-off” by the insurance company. The man had purchased the car from an auto-recycler.
Further investigation revealed that the man had sold vehicles in this manner some 15 times in the last nine months to buyers from across Ontario.
Andre Campbell and Sarnia resident Derby Lane are each facing 15 counts of being an unregistered car dealer. If convicted, the pair face fines of up to $10,000 and potential jail time.
In Ontario, all motor vehicle dealers and salespeople must be registered under the Motor Vehicle Dealers Act (MVDA) before engaging in the business of buying, selling or leasing vehicles. In the industry, unregistered individuals selling vehicles are known as “curbsiders” and are subject to prosecution.

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A Desert Hot Springs, Calif., resident was arrested for allegedly defrauding his insurance company of $26,000, the California Department of Insurance reported. Robert Andrew Nelson, 44, was arrested in Cathedral City, Calif., on April 28 on charges of filing a false police report and knowingly presenting a fraudulent insurance claim.

CDI said n Oct. 28, 2007, Nelson reported that his 2005 Expedition was stolen from his driveway in the middle of the night, wrecked, and returned to his driveway. Nelson claimed that he hosted a gathering of about a dozen acquaintances at his home and went to bed at 8 p.m. on October 27, while his guests remained at his home. He claimed he did not hear his Expedition being driven back to his home on three wheels, but found the damaged vehicle when he awoke the next morning. Nelson filed a claim with his insurance company, which paid out $26,000 in replacement costs for the vehicle.

The insurance company was subsequently contacted and informed that Nelson struck a vehicle in the early morning of October 28. A police report and an additional witness also named Nelson as the driver of his vehicle at the time of the collision, CDI said.

CDI investigators revealed that a witness heard Nelson’s vehicle strike another car in the early morning of October 28. The witness followed the Expedition to Nelson’s home. Another witness claimed to have watched Nelson walking near his vehicle and into his home following the crash. According to another witness, there were no additional cars present at Nelson’s home on the night of October 27, when he claimed he hosted a get together, CDI said.

If convicted, Nelson could face a two to five year prison sentence and fine of up to $50,000.
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The owner of a Scranton used car dealership was charged Thursday with selling vehicles he did not own and for not paying taxes to the state Department of Transportation, police said.
Albert Walta, owner of Scranton Motorcar Co., 626 W. Lackawanna Ave., was charged with felony and misdemeanor counts of theft following a two-month probe by the state police’s vehicle fraud investigation unit.

The 45-year-old Dunmore man’s business practices came under fire in early July when a customer, Joe Schappert, told police Walta sold him a Chevrolet truck on consignment and gave him a check that later bounced, according to a criminal complaint filed in Lackawanna County Court.

After troopers confronted him, Walta said he was in the process of getting a $180,000 loan to repay Schappert, along with other customers to whom he sold vehicles. He allegedly told police he is $70,000 “in the hole” on vehicles he sold, but has not paid off.

Two weeks later, troopers discovered Walta failed to pay another customer, Jonathan Pedrick, the $16,523 he was owed for a 2004 Chevrolet Colorado pickup truck he traded in, according to the complaint.

Further investigation revealed Walta did not pay state sales taxes on three vehicles he sold, police said.

The dealership was closed Thursday and a real estate sign bearing the word “available,” stood in the parking lot.

Troopers believe as many as 20 people bought vehicles from Walta that he did not own.

Efforts to reach Walta were unsuccessful. He is scheduled to appear in Lackawanna County Court on Wednesday for a preliminary hearing.

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A car dealer was sentenced to two years in jail and fined $7 million in court yesterday for defrauding Ottawa of that amount in a long-running GST fraud.

Michael Wolfe, who smiled bravely to his family after the sentencing, was taken into custody at B.C. Supreme Court,  but was released later after bail was granted pending an appeal.

A jury found Wolfe guilty under the federal Excise Act of all but two of nine counts related to a GST scheme in which millions of dollars in GST rebates were claimed on 1,600 vehicles imported by Wolfe’s then-dealership, Port Chevrolet Oldsmobile in Port Coquitlam.

Crown prosecutor Les Mackoff called it the largest GST fraud scheme ever prosecuted, but defence lawyer Kimberly Eldred said she believed there had been a larger one in Ontario.

The fraud involved two co-accused, Sameer Mapara, former owner of the Rags to Riches used-car lot, now serving a life sentence for first-degree murder for a shooting on that lot, and Port Chev Olds former fleet manager, Jay Grant. Charges against both were stayed.

Mapara had the firm front the money for the imported cars for which he said he had lined up Asian buyers. Because they were exports, they were exempt from the GST.

But as Madame Justice Kirsti Gill pointed out, “GST was claimed on vehicles that did not exist.”
Some $8 million was collected in rebates over a two-year period.

There was no evidence Wolfe — son of Evan Wolfe, finance minister in former Social Credit premier Bill Bennett’s cabinet — benefited personally from the money, other than the benefit that went to Port ChevOlds, Gill said.

She noted that Wolfe’s role was that of a facilitator and those responsible for planning the scheme “will not or cannot be prosecuted.” She said it wasn’t clear where the money went.

She also noted Wolfe, 58, was “visibly humbled” and had no previous criminal record.
But she said she was bound by the Excise Tax Act to impose the mandatory minimum fine of $7 million, which equalled the amount of GST evaded.

She noted that if Wolfe had been charged under the Criminal Code, restitution likely wouldn’t have been that large.

Gill ruled Wolfe has until Aug. 31, 2014 to repay the amount but added it’s unlikely he will ever be able to do so. It’s not clear how much of the money will be repaid.
Eldred said she plans to appeal.
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Car dealers sell you two separate things whenever you buy a car or truck, unless you pay cash for the full purchase price. They sell you (1) the vehicle itself and (2) the means to pay for it. You probably test drove the car. But did you “test drive” the financing? If you merely looked at the monthly payment, it is as though you kicked the tires, but failed to look under the hood.

It is important to remember that you pay one amount for the “wheels and steel” and you pay another amount for the lease or loan. Unless you pay cash, each of these items is a separate profit center for the seller. Many consumers who come to see us are surprised to learn that, just as the cash price of the vehicle is negotiable, so are terms of the financing.

It’s a good idea to take a calculator and scribble pad to make your own notes. That way you have your own record of what was said. If you were responding to an ad, keep a copy of that ad. Once you decide on a car, have the terms of the window sticker right at hand. Decide before you go whether you want to lease or buy, and the total you want to pay over a set period of time. When you are in the midst of deciding between black or tan interior, you may not notice a bait and switch.

You might deal with the salesman on the lot and the “F&I guy” (finance & insurance) in the office. The F&I guy loves to speak in terms of “win-win” situations. That’s when things can start to get slippery. Here’s a checklist to help you “test drive” the financing:

1. Is your credit application accurate? Never sign it in blank.

2. Is the contract labeled Lease or Retail Installment Sales Contract (loan)?

3. What is the cash price of the vehicle?
How is that different from the total amount you will pay?

4. What was the highest and lowest interest spread the bank is willing to offer?

5. If there is a rebate, where is that stated on the contract?

6. Does the contract list the add-ons and accessories you are paying for?

Are these all things you wanted, at the price you negotiated to pay?
In a lease, these should be in a box labeled “Itemization of Gross Capitalized Cost”

7. If you have a trade-in, are you being given a credit or being charged a negative?

And how much? Is that what you negotiated?

8. Cross out any mandatory arbitration clause in the contract.

If it is a “take-it-or- leave-it” requirement, note that in writing or walk away.

9. Calculate not just the monthly payments, but the number of months.

Look at the total figure you are agreeing to pay.
Do you know enough about your job, family and future finances
to know you can still pay that monthly amount at the end of the term?

10. Is the VIN on the contract the same as the VIN on the car you actually test drove?
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A class action against Autowest Dodge and its parent Auto Nation was certified as a class action last week in San Francisco Superior Court. We are the attorneys representing the class. The case involves the failure of the dealer to disclose the itemization of capitalized cost in the precise manner required by law. The class also claims the dealer altered the leases after the consumer signed it and left the dealership.
The unauthorized alteration of documents after they are signed is a kind of forgery. Leases are filled out at the dealership in triplicate, or even quadruplicate. The consumer of course thinks the forms are identical. What a shock it is for consumers to discover the bank got more information that they did.
Some consumers did not keep their leases or cannot find them to compare the documents to those produced by the dealer and/or the bank. While this case can be proved otherwise, consumers are well advised to keep all such documents as a routine matter, even after the lease has expired.
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Under the new Car Buyers Bill of Rights, dealers cannot misrepresent the cost of after-market items, such as service contracts, surface protection, debt cancellation insurance (GAP protection), and theft protection products. Some dealers in the past falsely told buyers theft protection cost only, say, $3/month, when really the cost was $35/month. The dealer hid the true cost in what the dealer said would be the monthly payment on the loan. This practice is known as loan packing. To guard against loan packing, dealers have to set out specifically the cost of each after market item in writing, such as theft protection.

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A new California law prohibits car dealers from selling used cars as “certified” if they had been wrecked or in a flood unless properly repaired or the odometer was rolled back. Certified cars may not be sold “as is.”Under the new law, cars damaged in a wreck or flood and not properly repaired cannot be sold as certified. If the repairs did not make the car safe or if the accident or flood damage, in spite of the repairs, substantially impaired the use of the vehicle, it cannot be sold as certified. Previously, wrecked and poorly repaired cars were sometimes sold as “certified.”

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Car sales and leases are not sealed with a handshake these days. After hours of haggling, you’ll be told: “Sign here. And here. And here. And here.” Of course, you should get an exact copy of every document signed or initialed at the dealership before taking delivery of the vehicle. Too often, consumers are so excited to escape the high-pressure atmosphere, they hurriedly stuff their papers in the glove box and drive away. Meanwhile, the dealer is completing its own file.
Just what does the dealer keep for itself? Altogether, those items make up the Deal File, sometimes called the Deal Jacket. It contains internal documents that reflect the transaction, parts of which consumers never get to see. The file might include things like the credit application, a four-square page or other paper trail of promises, the ‘recap sheet’ or sales summary, vehicle invoice, finance papers, DMV information, repair history, inspections, trade-in calculations and separate agreements relating to after-market items. Even the front of this folder may have handwritten notes or other key information. Last but not least, the Deal File reveals how much profit was made on the transaction.
Fraud, if there is any, is likely to show up here. An experienced lawyer can peel back layers of deception by doing the math, applying intuition and noticing numbers that do not add up. It is sometimes shocking. Clearly car dealers are entitled to make a profit – that’s what they are in business to do. Yet, the Deal File can disclose profit centers that have nothing to do with the car it self, like a “theft protection” product that costs $37 and is rolled into the vehicle price at $1,400, or a service contract that costs the dealer $250 and is charged to the buyer at $2,500. At some point it becomes unconscionable. We even see instances where the Deal File shows a finance department is cheating its own sales personnel out of commissions just by moving extras from one line item to another.
The California Court of Appeals issued a decision in a case called Lewis v Robinson Ford Sales, Inc. using evidence of the Deal Files to certify a class action for violation of the Rees Levering Act, an important California Truth-in-Lending law. At first the appellate court was going to leave the decision unpublished. A number of other consumer advocates, urged the court to publish the case. The court agreed. Among other things, the case clarifies the evidentiary value of “Deal Files” as standard documents in the automotive industry and recognizes that vehicle transactions “can be evaluated through the deal jacket” for violation of consumer protection laws.

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