LOS ANGELES - Mitsubishi Motor Sales of America has been fined $275,000 by the state of Florida and put on probation for four years to settle charges that the company's field managers filed several hundred false sales reports in the state from September 1999 to August 2000.
Without admitting any wrongdoing, Mitsubishi also agreed in an Assurance of Voluntary Compliance to open its sales records to Florida investigators every year and to tighten its sales-reporting practices. The assurance was approved Feb. 22.
The Florida attorney general's office began an investigation into Mitsubishi's sales practices after Automotive News reported on Sept. 18 that company managers may have reported thousands of false sales nationwide, including in Florida, in an 18-month period.
In the scheme, managers wishing to inflate sales for a given month would select vehicles from a dealership's inventory and electronically file retail delivery records on them using fictitious names as the purchasers.
The false sales often came at the end of a month, when pressure to hit volume targets grew intense as Mitsubishi strove to maintain its claim of being 'the fastest growing Japanese car company in America.'
When the vehicles were eventually sold to legitimate customers, however, the false retail delivery records, or RDRs, were not backed out. That caused the real customer to lose valid warranty coverage.
'By reporting the sale of vehicles still on dealer lots, the regional managers were able to make themselves look better in any given month,' said Florida Attorney General Bob Butterworth. 'They put consumers at risk because the retail delivery report triggered commencement of the manufacturer's new vehicle warranty.'
Larry Schuchman, an investigator for the Florida attorney general, said his office found that 301 sales out of 1,070 sampled, or 28 percent, were bogus.
Mitsubishi executives said last week that the investigation proved that the extent of any falsification was 'minimal' by representing 'less than 1 percent' of Mitsubishi's 21,270 sales in the state during that period.
'Although the investigation confirmed our belief that the number of inaccurate sales reports was extremely small, even one false sales report is one too many,' said Pierre Gagnon, Mitsubishi executive vice president, in a prepared release.
Before signing the agreement, Mitsubishi had adopted several data-checking processes to ensure that further sales falsification does not occur, said Ellen Gleberman, Mitsubishi general counsel, in a telephone interview. Such measures include prohibiting field staff from entering RDRs.
'We have done everything to be forthcoming with this, to show that false sales reporting will not be tolerated. We have changed our processes,' Gleberman said.
A pattern of fraud
But Schuchman said Mitsubishi is attempting to downplay the scale of the deceptive practice.
Time and manpower restrictions limited investigators to looking at RDRs filed by Mitsubishi field staff only, he explained. But he said he was confident an examination of dealer transactions would find even more fake sales, although not necessarily at the same high ratio.
Once a pattern of fraud was found, there was no need to investigate the full roster of sales, since no consumer had yet been harmed, he said. The potential for harm was down the road when the warranties would expire prematurely.
'If push came to shove, we could have demanded copies of all 21,000 sales jackets from dealers, but we didn't think that was necessary. We had enough data in hand to identify what the problem was,' Schuchman said.
Mitsubishi did not respond directly to Schuchman's comments.
Although a voluntary compliance agreement has been signed, the investigation of Mitsubishi sales practices may not be over, Schuchman said.
'The culpability of any dealerships has not been resolved. There is still the potential out there for future investigation,' he said.
Investigators in Georgia, which also had expressed interest in investigating Mitsubishi, did not return several phone calls last week.