-- On Aug. 21, GMAC Financial Services discontinued its floorplanning line of credit to Bill Heard Enterprises Inc. over what a Heard spokesman called a "financial matter." GMAC finances new-vehicle inventory at some of Heard's 14 dealerships in seven states.
-- One day later, the Georgia Governor's Office of Consumer Affairs filed an amended counterclaim to a lawsuit pending in an Atlanta court. The counterclaim accuses Bill Heard Enterprises and its dealerships of continuing their "long-standing pattern of attempting to deceive Georgia consumers in violation of the Fair Business Practices Act."
All 14 Bill Heard Enterprises stores sell General Motors vehicles, but some rely on independent lenders for floorplanning. The GMAC action covers all the stores the lender finances. Neither GMAC nor Bill Heard Enterprises would say how many stores are affected.
GMAC declined to comment on Heard specifically. "We do regular reviews of credit risks related to the wholesale financing of our business, and we take appropriate measure to mitigate risk," said spokesman Mike Stoller. "That has been happening and will continue to happen on a regular basis."
Heard's Town Center dealership in Kennesaw, Ga., lied to third-party lenders about customers' incomes to increase the likelihood that the vehicles would be financed.
Bill Heard's flagship Chevrolet store in Columbus, Ga., forged consumers' signatures on agreements without their knowledge or permission.
Town Center inflated the loaned value of vehicles by telling third-party lenders the vehicles carried extra features and options that they did not — an illegal practice known as "power booking."
In September 2007, Heard subsidiary Tom Jumper Chevrolet sent a direct mail advertisement informing recipients they might receive financing at interest rates as low as 3.9 percent. The ad went only to people with low credit scores who were unlikely to qualify for such terms.
Power bookingAmong more than a dozen fresh allegations made by the state agency: Bill Heard's Town Center dealership in Kennesaw, Ga., misrepresented to third-party lenders that options and extra features were added to vehicles that the dealership was trying to get financed for customers. The illegal practice is known as "power booking."
In power booking, a dealer artificially inflates the loaned value of a vehicle by telling the lender that there are features or options on the vehicle that don't exist. The bank then approves the loan for more than the vehicle is worth, with the difference going to the dealer.
According to court documents, Bill Heard Enterprises instructed its dealers to tell customers to lie if lenders called to verify the extra features.
The amended complaint quotes a former Bill Heard salesperson as saying: "You have to prep the buyer that when the bank calls, you know, whatever the bank asks you, you tell them, 'Yes, it's got that equipment. If it's got a hot tub in it, you got to tell them it's got a hot tub in it."
With group revenues of $2.13 billion in 2007, Bill Heard Enterprises, of Columbus, Ga., ranks No. 13 on Automotive News' list of the top 125 U.S. dealership groups based on new retail units sold.
Heard, who turns 74 on Sept. 8, told the Columbus Ledger-Enquirer in a rare interview in July that he planned to sell "two or three" of his dealerships because of slow sales. Last week, the newspaper reported that Bill Heard Enterprises has trimmed 400 employees out of 2,800 across the country.
In a written statement to Automotive News and other media last week, Bill Heard Enterprises blamed its financial condition on a combination of "adverse economic conditions, high gasoline prices and our traditional product mix" weighted toward trucks.
"We have been successful in this business for four decades, and we have navigated successfully through challenging economic conditions before," the statement said.
"Our plan is to increase our efficiency and productivity, tap the emerging fuel-conscious market with an appropriate product mix, reduce our already-competitive cost structure and restructure our business to compete effectively in current market conditions."
The company also must reply to the state of Georgia's allegations.
The state's latest complaint is an amendment to a July 2007 counterclaim to a lawsuit Bill Heard Enterprises filed in May 2007 under the Georgia Open Records Act. That lawsuit sought the names of individuals and dealerships that filed complaints against Bill Heard over a 2006 fake recall notice.
In October 2006, Bill Heard mailed fliers to about 10,000 Georgia residents labeled "urgent potential recall notification." The flier carried the logos of GM and its brands and urged recipients to call a toll-free number to schedule a free vehicle safety inspection.
Fake recallThere was no recall. GM sent Heard a letter saying he had breached GM's sales and service agreement and gave the dealership 30 days to correct or explain the breaches.
In the latest court filing, the Office of Consumer Affairs says Bill Heard Enterprises continued to disseminate "deceptive and misleading advertisements" even after the office took the matter to court.
Bill Heard Enterprises denies all the allegations. In its media statement, the company said it "will continue to work constructively with the Office of Consumer Affairs. We have consistently stated that we have policies and procedures in place that require and enable legal, ethical and fair business practices including advertising and finance."
Says William Cloud, a spokesman for the Office of Consumer Affairs: "At best, that response is eyewash."
He says the office has been close to an agreement with Bill Heard Enterprises twice in the past year. The dealership's representatives broke off the latest round of negotiations Aug. 21 — the same day GMAC yanked its credit.
"They have been the ones that have walked away from it — twice," Cloud says. "And we assume the directions were from the top."