The Truth About Cars » fraud http://www.thetruthaboutcars.com The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Fri, 01 Aug 2014 10:42:01 +0000 en-US hourly 1 http://wordpress.org/?v=3.9.1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars editors@ttac.com editors@ttac.com (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » fraud http://www.thetruthaboutcars.com/wp-content/themes/ttac-theme/images/logo.gif http://www.thetruthaboutcars.com Tales From The Cooler: The Land Of The Crooked Car Buyer – Part Two http://www.thetruthaboutcars.com/2013/01/tales-from-the-cooler-the-land-of-the-crooked-car-buyer-part-two-2/ http://www.thetruthaboutcars.com/2013/01/tales-from-the-cooler-the-land-of-the-crooked-car-buyer-part-two-2/#comments Sun, 20 Jan 2013 14:02:39 +0000 http://www.thetruthaboutcars.com/?p=474367 Welcome to Part Two of our exclusive series on the rollicking world of Los Angeles luxury car buyers defrauding automakers, banks and dealers. In Part One we looked at Lemon Law scofflaws and odometer clockers. Today we will examine the crooked schemes that can be used to obtain the vehicle of your dreams. We will begin with […]

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Fraud Rule Number One: no matter how cute your girlfriend may be, do not include her in the picture on your fake ID.

Welcome to Part Two of our exclusive series on the rollicking world of Los Angeles luxury car buyers defrauding automakers, banks and dealers. In Part One we looked at Lemon Law scofflaws and odometer clockers. Today we will examine the crooked schemes that can be used to obtain the vehicle of your dreams. We will begin with the case of robber Baron Haghighi, who last month tried to con a few cars out of several Southern California high-line dealerships.

Mr. Haghighi has been running fake check scams in the state of Washington since the 1990s and was recently released from prison. Apparently thinking that Cali dealers would fall for his ruse as had several Washington retailers, he presented himself as an Egyptian entrepreneur wanting to purchase several vehicles, in one case a fleet worth nearly $400,000. I am going to write you a check, said Haghighi, here is a letter from my bank verifying my funds. Composed on the letterhead of the Bank of Alexandria, the document is priceless:

…We hereby verify to you, with full bank responsibility, the availability of funds in the amount of Thirteen Billion United States Dollars ($13,000,000,000.00 USD) on deposit in our bank….(the funds) are to be maintained on deposit in our bank as of the date of this letter until 2010…

Haghighi and his rubber checks were dismissed from the LA stores with a flip of a wrist and a yawn from their sales managers. Los Angeles dealers see so many attempts at customer fraud they can identify dullards like this clown in about five seconds.

Exports

Although Haghighi was a novice in a city of seasoned crooks, his aim was likely the same as the pros: to dispose of the scammed vehicles in the lucrative car markets of China or Russia. This is part of the sea change in the past few years in criminals’ motivation to defraud banks and automakers out of cars -  the strategy has switched from perps actually driving the vehicles to today’s tactic of disposing of them overseas. The money that can be made on these so-called “floaters” is flat-out stupid. A 2011 Mercedes-Benz C-Class recently purchased for $22,000 at a California auction sold to the end user for $46,000 in the Chinese gray market. The new Ford F-150 SVT Raptor is currently commanding three times its MSRP in China, or over $160,000.

Most luxury automakers penalize dealers for exporting new vehicles outside the United States, but there are always stores looking for the quick buck. The greedy sales manager who gets a call from someone looking to buy five BMW X5s at full MSRP and all of them black – the most popular color for exported vehicles – knows the cars are likely floaters but might do the deal anyway and pray the factory never finds out. The buyers then typically sell the units to their overseas connections for a percentage of the profits.

 

Los Angeles is a hotbed of export activity due to its proximity to ports and because sales tax is not collected upfront of leases in California, allowing those exporters who do not pay cash to shell out only for license and title fees. In some cases, they have no intention of ever making the payments, leaving dealer, bank and automaker all pointing fingers at each other as to who is to blame for the swimming Bimmers.

Identity Theft

Though still the most common car acquisition scam, the number of cases of perps using identity theft to obtain a vehicle is on the decline thanks to the rise of companies like LifeLock that monitor credit bureau inquiries, and vigorous enforcement of the law. Driving around town in a stolen car nowadays also exposes you to the latest license-plate recognition technology used by law enforcement. Identity thieves nowadays are either amateurs who swipe relative’s documents and are usually quickly apprehended, or professionals who are looking to launch the vehicle on a slow float to China.

The pros are hard to catch by dealerships and banks, as they can create phony driver’s licenses in the victim’s name that are undetectable by stores’ fraud-fighting devices, have verifiable sham employers, and can throw down Academy Award-worthy acting performances.

The professional crooks are unfazed by the fact that most Los Angeles car dealers require a thumbprint from all buyers as part of their efforts to combat fraud. This process has led to a few instances of amateurs suddenly claiming they need to use the restroom and fleeing the dealership.

Sub-Leasing

This is the most complicated of car scams, and to banks the most frustrating.  It begins with a confidence man finding clients with bad credit and promising them he will get them financed on a new vehicle – for a fee of course.  He then recruits and pays a credit “mule,” a person with an excellent FICO score, to apply for a car loan or lease and actually take delivery of the vehicle with the agreement the con man will make the payments. He then hands the car off to the first customer and charges him several hundred dollars per month more than the negotiated payment. The crook makes one or two payments to the bank to throw them off the scent before he skips out. Meanwhile he keeps collecting the higher payments and the mule is getting collection calls from the bank.

Leave it to a group of criminals from the city of Glendale – LA’s fraud capital- to attempt the ultimate combo platter of automotive ploys. During a two-year period in the mid-2000s the gang stole over 200 vehicles by utilizing sub-leasing and ID theft. They subsequently reported the cars stolen, collected on the insurance proceeds, and donated the vehicles to their own fake charity which then shipped them to Russia. This overambitious bunch of bandits was eventually caught.

Falsifying Credit Applications

This scam is as old as the finance office – customers lying about their income, bank account balances or employment on a credit application in order to appear more credit-worthy to an automotive lender. Though traditionally done at the encouragement of dealership personnel (“Let’s just put down that you make $4,000 a month, OK?”), car buyers themselves are often guilty of fibbing. Both client and dealer may now access a number of websites that can produce fake account documents to fool a bank. Dealers caught in this act can face prison time plus lenders have long memories and a culpable dealership may have a hard time getting future loan applications approved.

Legend has it that one of the pioneers of producing bogus bank statements and W-2 forms to inflate a customer’s net worth and income was Houston’s Landmark Chevrolet (“Landshark Chevrolet” to the locals) during the 1980s, one of the chain of dealerships once owned by the notorious and now-bankrupt Bill Heard Enterprises.

(Houston is arguably the runner-up auto scam capital behind LA due in part to its dealerships’ history of hiring the type of shady, desperate employees that white collar fraudsters seek out. Consider the characters that have made the news in the past few weeks alone: a Houston Chevrolet dealership sales manager was shot and killed by a salesperson, the owner of another Chevy store was charged with the sexual assault of a 16 year-old girl, and a salesman was stabbed and shot on the lot of his Honda outlet. The city’s car scammers are also clueless: two men were recently arrested after renting an Altima from Hertz and then trying to sell it with a forged title claiming the car’s owner was named Marcus Hertz.)

 

Car Brokers

Compounding the fraud problems in Los Angeles is the fact that scammers will often hide behind car brokers. These operators, also known as “buyer’s agents,” charge dealers a fee of between $200 and $2,000 for the privilege of working with their clients. There are about 200 of these “bird dogs” in the LA area and they account for about 5% of luxury auto sales. Many brokers provide a valuable service to non-English speaking customers and to celebrities or shoppers who don’t want to endure the car buying process.

The problem lies in the fact that a few of the brokers are basically pond scum. Weak state licensing requirements means that literally anybody can become a car broker in California. Banks report that over 50% of the consumer fraud in Los Angeles can be traced to these companies. Working through a broker means the swindler never has to set foot in a dealership, and the broker is often their accomplice in an identity theft or falsified credit application scheme. One car broker was recently caught submitting the same fake bank statement on behalf of numerous clients.

Dealership managers grumble about brokers but know that if they do not work with them their neighboring dealer will. Sacramento lawmakers will likely never ban these parasites as they consider car dealers to be the root of all evil, so why pass any law that might help them? In addition, in 1965 the United States filed suit against General Motors and its Los Angeles Chevrolet dealers, accusing them of restraint of trade by conspiring to refuse to work with brokers and “discount houses,” and that suit still hangs over dealers’ and distributors’ heads like smog in the LA Basin.

Free Parts Cars For All

Finally, a LA dealership recently discovered that a returned loaner car had its engine replaced with one that had been thrashed. It turns out the con artist persuaded a buddy who owned the same brand of automobile to have it serviced at that dealer and obtain a loaner car of the same model as his with the bad engine. After swapping the motors and other parts, they returned the loaner.

The dim-witted delinquent who recently asked a dealer for a loaner with a specific VIN sequence, probably to insure the car had the correct engine, transmission or trim level needed for the replacement parts for his friend’s old vehicle, was thrown out on his ear.

Ta-Ta from La-La Land…

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Tales From The Cooler: The Land Of The Crooked Car Buyer – Part One http://www.thetruthaboutcars.com/2012/12/tales-from-the-cooler-the-land-of-the-crooked-car-buyer-part-one/ http://www.thetruthaboutcars.com/2012/12/tales-from-the-cooler-the-land-of-the-crooked-car-buyer-part-one/#comments Thu, 20 Dec 2012 14:53:10 +0000 http://www.thetruthaboutcars.com/?p=470611   I recently stood on the showroom floor of a Los Angeles-area luxury car dealership as their sales manager pointed out a middle-aged couple browsing the lot. “We will never sell them a car,” he said. “In fact, we are going to politely ask them to leave.” Why? “One of our salespeople recognized them. They […]

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I recently stood on the showroom floor of a Los Angeles-area luxury car dealership as their sales manager pointed out a middle-aged couple browsing the lot. “We will never sell them a car,” he said. “In fact, we are going to politely ask them to leave.” Why? “One of our salespeople recognized them. They are professional Lemon Law scammers. They have hit two other dealers but they are not going to hit us.”

Welcome to Southern California where car buyers are often criminals, ripping off automakers and their captive finance arms to the tune of over $50M a year. These sophisticated white-collar crooks are skilled at using fraudulent means to obtain a vehicle, such as ID theft or sub-leasing cons, or by using fraudulent means to dispose of a vehicle, such as engineering bogus Lemon Law claims or by rolling back a car’s odometer to avoid lease-end excess-mileage charges.

The targeted vehicles are almost exclusively from Audi, BMW, Lexus, Mercedes-Benz and Porsche brands. These automakers and their banks report that around 50% of their fraud cases nationwide occur in Southern California. The Los Angeles melting pot attracts the best and worst class of people, including some clever organized crime groups. Add to this the perception that you are nobody if you are not driving the latest luxomobile in LA and I say you got Trouble in RX City. It is said that all automotive trends start in Southern California and consumers defrauding automakers is one of them.

Some of the outlaws are extremely adept at their chosen crimes and some are hilariously inept. In Part One of Two installments in this exclusive series we will look at the car disposal criminals, starting with a scheme currently sweeping the Southland: The Lemon Law Scam.

In the past, only folks who fell on hard times and were behind on their car’s lease payments would attempt this rip-off; now bandits plan the gambit upfront as a means to drive a new luxury car every year. These unethical individuals also boast high credit scores; in other words they are a bank’s worst nightmare.

The con works like this: go lease a high-end automobile for the longest term, the least miles and lowest down payment you can negotiate. For example, you can lease a 2013 BMW 535i for 39 months at 10,000 miles per year for as little as $585 per month with a few hundred dollars down for title, and license fees. That’s a cut-rate payment for a $55,000 ride and you are now cruising Colorado Boulevard in style.

Enjoy driving your Beemer for a year or so or until you decide you want the latest Lexus. At this point you are buried in your lease deeper than Jimmy Hoffa as it would cost mega-thousands of dollars over the value of the vehicle to pay off the contract.

It is now time for the twist: you or a technician friend tamper with the mechanics of the car to make it eligible to be a Lemon Law buyback for being unrepairable. In California, a defect that cannot be repaired in as little as two visits to the dealer, or if the vehicle is in the shop over 30 days, can be eligible for Lemon Law status. Thus, a stuck dashboard warning light, a balky seat belt buckle or leaking brake fluid can make you the poor victim of the evil carmaker. All it takes is a little tinkering.

Next, hire one of scores of LA lawyers like this one who specialize in Lemon Law cases. Under the threat of a lawsuit, the attorney will negotiate with BMW of North America for them to buy your car back and pay off the lease and will often score a few extra dollars for your “hardship.” Once the case is settled, you head over to your local Lexus store and repeat the process.

One Lemon Law attorney discusses the tampering issue on his website but does not specifically discourage the practice:

…OWNERS BEWARE! What consumer’s don’t know is what the car manufacturer’s DO know about owners tampering with their vehicle’s to “create” a California Lemon Law case…Typical “tampering” of cars include repeated incidents of dash warning lights for various vehicle systems, including, but not limited to: SRS/airbag, “CHECK ENGINE”, traction control, brakes, ABS, and more…Making matters even MORE serious, auto dealers now have special “tamper-seal” for electrical connectors and devices that are invisible to the eye. The newest generation even has a “imprint” film, that takes fingerprints…

The lawyer’s assessment of automakers’ countermeasures is a few years out of date. The latest defense tactics must not be revealed here as the crooks no doubt have Google Alerts set for the words, “tamper” and “Lemon Law.”

Customers caught tampering with their cars find their claims denied and are advised to never set foot in that brand’s dealerships again. Like with most fraud, prosecution by carmakers or their banks is uncommon – accusing a car owner of fraud and losing the case would result in a public relations disaster.

Odometer Fraud

Before we discuss the Angelenos who roll back their odometers to defraud automakers, allow us to make this statement:

America is losing the war on odometer fraud and the situation is growing worse.

The National Highway Traffic Safety Administration has been claiming since 2002 that there are 450,000 cases of odometer tampering annually in the United States, while CarFax reports the number of instances has jumped 57% in the past four years. Contrast this with the fact that less than 20 people per year are actually convicted of the crime and this indicates that the enforcement of odometer laws is not a priority with state and federal agencies.

The vast majority of people apprehended for odometer fraud are either individuals or owners of independent used car lots. Most of the clockers caught are either still plying their trade like this man or receive a slap on the wrist like this dealer. The latter, who also covered some odometers with electrical tape to fool buyers, has been allowed by the court to return to the wholesale car business.

Speaking of dumb criminals, this father and son team from Florida would never make it in California – their placing fliers on vehicles at an auction offering their “odometer services” was incredibly dim-witted and not up to the sophisticated standards of Southland scammers.

The recent explosion in the number of odometer fraud cases can be directly tied to the easy availability of digital odometer rollback devices. For a few hundred dollars, anyone can buy a “mileage correction” contraption from a number of firms on the Internet, even on eBay and amazon.com. The so-called “CAN” device below is offered by a company in China:

 

“BENZ CAN Filter By installing this small pcb inside the EIS module, you can make mileage corrections on NEW MB cars of w221/w164/w204/w212……, and scanner can not find original mileage from EIS module”

Makers of these devices claim their tools can fool a car’s Engine Information System (EIS), thus making the mileage adjustment permanently undetectable; the automakers claim this is not true – at least that is what they say publicly.

Our Los Angeles dodgers plot their ploy upfront, much like the Lemon Law liars. They are high-mileage drivers, but enter into a low-mileage lease to get the cheapest possible payment. On most brands this means 10,000 miles per year, though Mercedes-Benz Financial offers 7,500 mile leases, making them more vulnerable to this scheme.

During the term of their lease, the lessees never have their car serviced at a dealership or shop that will record their odometer reading, thus outfoxing CarFax and the bank. By reversing their odometers prior to lease end, the offenders will then not be charged excess mileage penalties by the bank, which is typically 25 cents per mile. Thus on a three-year term a scammer can avoid $7,500 in charges based on driving 20,000 miles per year on a 10,000 mile lease.

One luxury automaker’s captive finance arm recently filed the rare lawsuit against a customer, accusing him of clocking his odometer just before the termination of his lease. The defendant lives in the city of Glendale, considered by automakers to be the epicenter of fraud in Southern California. In this closely-watched case, the bank is more interested in sending a message to the tight-knit criminal community rather than recouping the thousand of dollars in diminished value of the car.

Stay tuned for Part Two of our series on LA’s conniving auto buyers, where we will explore identity theft, sub-leasing, crooked auto brokers, and how you can obtain your very own parts car for free.

It is never boring being in the automobile business here in the City of Anglers…

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The Story Behind The Goosed Suzuki Sales Numbers http://www.thetruthaboutcars.com/2012/09/the-story-behind-the-goosed-suzuki-sales-numbers/ http://www.thetruthaboutcars.com/2012/09/the-story-behind-the-goosed-suzuki-sales-numbers/#comments Fri, 21 Sep 2012 12:57:31 +0000 http://www.thetruthaboutcars.com/?p=460456 Last month, Bertel reported on a Wall Street Journal story that revealed that BMW USA officials inflated sales figures in their zeal to overtake rival Mercedes-Benz in US sales. The automaker was offering dealers cash to basically sell the cars to themselves, under the guise of the units being used as customer demonstrators. The WSJ […]

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Last month, Bertel reported on a Wall Street Journal story that revealed that BMW USA officials inflated sales figures in their zeal to overtake rival Mercedes-Benz in US sales. The automaker was offering dealers cash to basically sell the cars to themselves, under the guise of the units being used as customer demonstrators. The WSJ piece was met with laughter in the halls of car companies, as the practice is common to most automakers. The hilarity has officially ended: a former American Suzuki sales rep was just indicted for wire fraud for conspiring with a dealer to inflate sales figures.

On Thursday a Spartanburg, South Carolina federal grand jury indicted ex-Suzuki automobile dealer Joe Gibson and eight of his former employees for conspiracy to commit wire fraud. The charges were straight out of The Scumbag Car Dealer Handbook: falsifying information on customer loan applications, deceptive sales practices and misleading marketing, specifically for ads offering new cars for $44 a month. Gibson went bankrupt in 2008 after hundreds of angry clients filed lawsuits against the store.

Also charged was ex-American Suzuki field rep Brian J. Sullivan. According to the indictment, defendants did, “devise a scheme and artifice to defraud and to obtain money and other things of value from American Suzuki Motor Corporation.” In other words, on the last day of the month Sullivan might call dealer Gibson and say something like, “Hey Joe, buddy, I need you to report 12 of your SX4s and 4 of those Forenzas today. Don’t forget you will get $750 per and please come up with better names for the bogus buyers than last month – my boss wondered why someone named “General Robert E. Lee” bought that XL7.” Gibson would input the sales and get the cash incentives, Sullivan would hit his quota and American Suzuki would report their inflated sales numbers to their bosses in Japan and to the press. All was well – except for the fact they had just committed wire fraud.

Whether using names of friends, family or those plucked from the phonebook to use as ghost owners, or classifying the cars as “demos,” the vehicles are still brand new and still on the ground, and thus should not be counted in carmakers’ numbers.

The indictment also referred to the act of falsifying sales as “punching” a car, a term derived from the old days of physically punching a “report of sale” card into a computer. Over the years, the term has gone from “burning” to “dumping” to “flushing” to “punching” and car dealers probably know a dozen more.

Sullivan may be the first automobile company manager to ever be indicted for directing retailers to fake sales numbers. The repercussions of this case might resonate through automakers and put a stop to a practice that is as ancient as the hills. The book Arrogance and Accords devoted an entire chapter to American Honda’s “flushing” of sales cards in the 1980s and 1990s.

 

 

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Suzuki Dealer, District Manager, Indicted For Fraud http://www.thetruthaboutcars.com/2012/09/suzuki-dealer-district-manager-indicted-for-fraud/ http://www.thetruthaboutcars.com/2012/09/suzuki-dealer-district-manager-indicted-for-fraud/#comments Thu, 20 Sep 2012 16:20:06 +0000 http://www.thetruthaboutcars.com/?p=461081 Two high-volume Suzuki dealerships in South Carolina are at the center of a federal fraud case, as a dealer and Suzuki district manager are among those indicted on three counts of conspiracy to commit wire fraud. Paul M. Gibson, who operated two Suzuki dealers in South Carolina, as well as Brian J. Sullivan, the Suzuki […]

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Two high-volume Suzuki dealerships in South Carolina are at the center of a federal fraud case, as a dealer and Suzuki district manager are among those indicted on three counts of conspiracy to commit wire fraud.

Paul M. Gibson, who operated two Suzuki dealers in South Carolina, as well as Brian J. Sullivan, the Suzuki district manager responsible for Gibson’s stores and 8 other defendants, were indicted. The charges center on claims of false advertising and fraudulent loan documents.

Automotive News reports that 

“Ads promised, among other things, that customers could drive a new Suzuki “for life” for payments of $99 per month or less, according to the indictment. Other ads said that customers could have a new car for six, nine or 12 months for minimal payments, trade in the car after a set term, “and obtain a new car at no cost,” the indictment alleged.

“…dealerships advertised low monthly payments, while staffers told customers that Suzuki would provide the dealership with funds to pay, on behalf of the customers, the difference between the higher monthly payments listed on retail installment sales contracts and the low promotional rates customers agreed to pay. 

Customers who attempted to trade their vehicles in after the stated time period would attempt to do so only to find out that they couldn’t obtain a new car under the previously promised terms. The indictment also alleges that the dealership and its employees falsified loan documents, while telling customers to ignore the doctored papers

“…the contracts listed vehicle values far in excess of the market values of the cars in question. When customers asked about the inflated values and corresponding high monthly payments, the defendants told the customers to “totally disregard any of the numbers on the contracts because they would never be obligated to pay anything more than the agreed, low monthly promotional amounts,” the indictment said.”

Should the defendants be found guilty, they could each face a maximum of 60 years in prison and a $750,000 fine.

 

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