If this doesn’t make you think about how your dealership does business, I don’t know what will.


News broke this week about a dealer and 9 of his employees that were indicted by a federal grand jury for conspiracy to commit wire fraud as a result of deceptive advertising, fraudulent sales practices, and falsely reporting sales to the manufacturer. Besides the owner of the dealership, the GM, GSM, finance manager, 2 sales managers, BDC manager, and others were named. The indictment claims that these individuals conspired to "devise a scheme and artifice to defraud and to obtain money from the purchasers of automobiles by means of false and fraudulent pretenses, representations and promises, and for the purpose of executing such scheme utilized interstate wire communications" (specifically, deceptive and misleading radio and television ads). The document also accuses the defendants of cheating lenders by using "false job and income information on various credit applications" for customers.


According to the media stories, each defendant faces up to 20 years in prison if convicted.


This debacle began in 2006, started to unravel in 2008, and resulted in regulatory actions by the state, lawsuits by over 500 customers, and ultimately the bankruptcy and closure of the dealerships. Understandably, the dealer paid a steep price for these shenanigans. But here’s where it gets ugly – 4 years later the federal government has decided to go after the dealership’s employees as well.


Do I have your attention yet?


There’s no telling if this grand plan was the dealer’s brainchild or was cooked up by creative sales department personnel. It doesn’t really matter – they’re all in hot water now. So these employees, who obviously moved on with their lives after the dealership closed, are now facing devastating consequences.


Think about it, even if these guys and gals get off - was it worth being criminally charged, having their reputations ruined, paying legal fees, losing their livelihood and likely having to change professions, and who knows what else?


You may be thinking that this dealership engaged in a really outrageous ad campaign that would never happen at your store – and you’re probably right. It’s likely that your dealership doesn’t engage in ridiculous marketing campaigns like this dealer did – most wouldn’t even consider it. But understand this: the legal climate has dramatically changed and the government is showing in no uncertain terms that they are fed up with deceptive practices at auto dealerships.


Automotive compliance experts have been saying this for quite some time and perhaps now more people will begin to pay attention: the good old days of trying to fly under the radar or considering fines a cost of doing business are behind us. The game has changed and car dealerships and their employees who choose to step over the line have a bullseye squarely on their backs and are at great risk.


Here’s some food for thought:


  • If you think that only your employer is responsible for any illegal activities that occur at the dealership and you are not – you are mistaken.
  • If you think that since your competitors also engage in deceptive practices you have a valid defense – you are mistaken.
  • If you think that a fine or a slap on the wrist is the worst that can happen for unethical or illegal practices – you are mistaken.
  • If you think the government only goes after “really bad operators” – you are mistaken.
  • If you think that fudging a credit app or lying to a customer is OK because “we’ve always done it this way” – you are mistaken.
  • If you think that this will never happen to you – I hope you’re right.


If there’s any questionable activity happening in your store - like deceptive advertising, “creative” credit application completion, payment packing, bait and switch, yo-yo financing, or whatever – you may want to look closely at your dealership’s culture and consider what could happen if the government decided to investigate your store. The downside is worse than ever.


So I ask again, is your job worth going to prison for?


Good luck and good selling.

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Comment by Ralph Paglia on September 17, 2012 at 4:10pm

Jim, thank you for a well written and thought provoking article... For those that react with "That could never happen to me", let me attest from personal experience to the fact that over the 30 years I have worked in the car business, I have seen numerous cases where people I worked with have been prosecuted, arrested and served time in prison for actions they took OR SIMPLY ALLOWED TO HAPPEN.  

For example, I worked with a Sales Manager by the name of Dan Mourneau while selling cars in San Diego.  Dan "curbed" a used VW Beetle that he bought from a customer when the dealership would not provide an acceptable ACV... Dan and a salesperson resold the used VW and signed odometer statements that the mileage shown was true and original.  The vehicle had been "rolled back" by the previous owner that traded it in at the dealership.  Dan served 6 months in California State Prison for odometer fraud.  

On another occasion, I saw a Finance Manager create a second contract showing a much higher down payment than the customer had actually paid. This was to allow the customer to get a better loan rate from their credit union... John Downing, the Finance Manager was charged with bank fraud and was put on probation for several years and banned from working in a car dealership.  I could go on and on, but let's just say that Jim's article is not an exaggeration, nor is it far fetched... People who do the wrong thing, or let those wrong things happen in dealerships can and will be held accountable.  

Two of the best car guys I ever met, the Daly Brothers (twins) came to work for me in Phoenix in 2005 after one of them was released from prison and both of them were banned from working in any car dealership in California for forging customer signatures on routine documents.  These highly talented automotive professionals made the mistake of doing something that seemed harmless enough, and saved them the time of getting customers back into the dealership to sign ATFI, Demonstrator Statements and other routine documents, but ended up getting them convicted of Forgery, one of them going to prison and both of them basically run out of the highest car sales state in the country.  Yes, it can happen to you if you DO THE WRONG THING!

Comment by Keith Shetterly on September 17, 2012 at 3:14pm

GREAT point Kevin.

Comment by Doug Davis on September 17, 2012 at 2:44pm

It is about time. Honest people should be pleased to see this and welcome more prosecutions. Since when should any segment of commerce be exempt from committing fraud?
For those of us that insist on doing things the right way, it just levels the playing field.
I was at a store for over five years and left because the new GM initiated these kind of activities. I'm totally unsympathetic.

Comment by Jim Radogna on September 17, 2012 at 1:09pm

Thanks to all for your kind words! Hopefully more folks will start to pay attention to these issues.

Comment by Tom Gorham on September 17, 2012 at 11:47am

Thank you Jim!  I agree with Keith, "It's the best blog I've read all year!"  It resonates with some of things we discussed together at AutoCon.  Their are many who should heed your advice.

Comment by Mike Myers on September 17, 2012 at 11:19am

Jim, thank you for sharing this on dE. We were happy to send it out yesterday for all to read. It's scary how a lot of what you said I've seen with my own eyes in the retail world. I would like to see a follow-up article to elaborate on some more specifics. Possibly how many other dealers, were there convictions, guidelines for safe practice, etc???

Comment by bryan w shufelt on September 17, 2012 at 11:09am
We had suzuki for a while, and they use to hold dealers like this up and say why arent you selling more cars like these guys, they would hammer dealers and say just give up your store so real dealers can sell cars. They would send letters out and tell you how weak you were! ... Suzuki had a bunch of guys out there doing bad business ( not to mention they were selling crap for product and they knew it!) ....This is what you get when you dont do it the right way.Suzuki wanted to hear nothing about it not being good business!!!
Our rep always told us to punch cars that were not sold, we would not do it and that would upset them! This is not the only bk Suzuki dealer, there is a lot of them, and not the only crook either!! The guy in huntsville AL was selling 300 new Suzuki's a month...hes out of business too, Suzuki keep telling us he was smarter than the rest of us, I looked at his business talked to his people and told Suzuki he was selling cars at a loss and could not keep this up, they said agian I did not know what I was talking about, guess they were wrong!!! Guys like the one in this article are the ones who make it worse for the rest of us!!
Comment by Doug Davis on September 17, 2012 at 10:40am

Everyone gets to play.  The Dealer, GM, GSM, two Sales Mangers, a F&I Manager, Billing Clerk, Funding Clerk and even the Factory Rep for fraudulent RDRs.  

Comment by Mark Hergert on September 17, 2012 at 10:01am


I like your post over the past 25 years of being in the retail end of the automobile business there have been multiple opportunities to color outside of the lines to sell a car or to try and get ahead financially by unethical conduct, so to answer your question is NO. every individual will have to have his own set of moral and ethical values when conducting business. Never think that the dealer will bail you out if your caught with your paints down because they will not back you up when the tough get's going. Just do the right thing and protect the integrity of the auto business. Happy Selling! http://autocreditdealermarketing.com


Comment by Al Mosher on September 17, 2012 at 9:11am

Another great article, Jim!!! Thank you for sharing.

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