Nissan accuses store owned by ex-dealer council chair of fraud

Nissan dealer Don Forman has been a brand champion for years, owning four stores, speaking in support of factory programs and serving as the 2011 chairman of the Nissan National Dealer Advisory Board.

But now Nissan North America is suing Forman's Tustin Nissan store in California and a number of its former employees, alleging that the dealership improperly charged Nissan for $3.74 million in warranty claims. In some cases, the suit alleges, the work never happened. Nissan wants to be reimbursed, with actual damages tripled, and also to receive punitive damages.

Forman is not named individually as a defendant in the suit, and the allegations do not concern Forman's other three Nissan stores in San Diego, Corona, Calif., and Las Vegas.

In an email to Automotive News on Friday, Nov. 20, Forman wrote that he was unaware of any improper warranty submissions by the store until notified by Nissan, and is fully cooperating in the investigation.

According to court documents filed in Tennessee Chancery Court for the 21st Judicial District at Franklin, Nissan alleges that Tustin Nissan filed more than 7,000 "non-compliant" claims between June 23, 2014, and March 20, 2015, representing 96 percent of all the store's claims for the period.

When asked whether the alleged fraud was limited to the nine-month period of the audit, Nissan North America spokesman David Reuter said the matter is an "ongoing investigation" and declined to discuss it.

According to the complaint, after a routine audit this year found three incorrect claims, Nissan launched an extensive audit of the store. It found such abnormalities as fictitious owner names on records, labor bills for employees that claimed to have logged between 300 and 400 hours of warranty work a week, and warranty work allegedly performed on vehicles that were not in the state at the time, the court filing says.

Nissan's complaint alleges that the sham claims were intentional and that they constitute a breach of the store's franchise agreement.

In his email, Forman said it is his understanding that of the approximately 7,000 non-compliant claims, "only 3.5% are alleged to be fraudulent. The rest of their allegations appear to alleged technical violations of the warranty submission process. Let me be clear that even 1 fraudulent warranty submission is not acceptable to us."

He added that "we greatly value the relationship we have with our corporate partners at Nissan North America, and are confident we have taken the necessary corrective measures and will address any concerns as the litigation progresses."