Ex-dealership staffers face prison

8 plead guilty to conspiracy and other charges after federal crackdown

Several former sales staffers at a Birmingham, Ala., Nissan store face federal prison time as part of a federal crackdown on fraudulent practices in car dealerships.

The Federal Trade Commission and 32 law enforcement agencies have taken 252 actions over the past year against dealerships and other related businesses for such crimes as deceptive advertising and odometer fraud.

For the first time, the crackdown covered what the FTC calls "add-on" products: services or products a dealer or other third party adds to the vehicle lease or finance contract. FTC officials said, for instance, they had reached a settlement with a dealership and company promoting biweekly payment plans.

The FTC pledged more actions.

"Protecting consumers in the auto marketplace remains a top priority for the FTC," Jessica Rich, director of the FTC's Bureau of Consumer Protection, wrote in an opinion piece released simultaneously with the crackdown announcement. "If auto dealers are not following the rules of the road, we will step in to apply the brakes."

Eight former employees of Serra Nissan have pleaded guilty to felony charges including conspiracy to fraudulently boost loan approvals and car sales. They were D. Scott Burton, 36, Abdul Islam Mughal, 48, and Gerald Shepard, 56, former sales managers; Jeffrey Green, 33, and Michael Wilkinson, 56, former finance managers; and former salesmen Terry Henderson, 39, Dwight Perry, 44, and Roland Riley, 28.

All were charged in the conspiracy to defraud financial institutions, Nissan North America and Serra Nissan customers between August 2010 and October 2013 by fraudulently increasing vehicle sales in order to boost personal profits. Shepard and Mughal also pleaded guilty to bank fraud.

Two phone calls to Nissan Serra seeking comment were not returned.

"My office and attorney offices across the country have begun to take a look at some, not many, but some car dealerships that are engaging in unlawful practices to boost their bottom line at the expense of customers," said Joyce White Vance, U.S. Attorney for the Northern District of Alabama, during a press conference about the crackdown. "They victimize consumers with loans they cannot afford."

"If auto dealers are not following the rules of the road, we will step in to apply the brakes."
Jessica Rich
Federal Trade Commission

The eight face sentencing between May and July. The maximum penalty for the conspiracy count is five years in prison and a $250,000 fine. The maximum penalty for bank fraud is 30 years in prison and a $1 million fine.

"These are not crimes I would expect to see probation," Vance said at a press conference. "They will carry fines, but they will have personal liability. It is possible the dealership could have liability, too."

The Serra Nissan employees involved in the conspiracy used various ways to carry out their fraud and obtain auto loans that otherwise would not have been approved, a Department of Justice statement said. Methods included:

• Creating or altering documents to submit to lenders to show inflated income for prospective buyers.

• Directing finance managers and salesmen to submit fraudulent documents to lenders to misrepresent proof of a customer's residency.

• Presenting "straw buyers," who could qualify for a loan to lenders when the actual buyer could not qualify.

• Listing accessories not included on a vehicle so a lender would increase its loan amount.

Vance said providing auto loans to people with poor credit or low income is "akin to the fraud in mortgage lending." For that reason, she teamed up with federal authorities in a nationwide push to continue the crackdown.

"These are practices dealers do to boost their bottom line without any concern for the purchasers' income and family's well being," Vance said. "I find that to be most offensive."

You can reach Jamie LaReau at jlareau@crain.com -- Follow Jamie on Twitter: @jlareauan

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