Anthony Panarella's dream of becoming a car dealer came true in August 2014 when he bought Nissan of New Rochelle in New York. But within a year, it turned into a nightmare.
The state attorney general's office found that his store had defrauded nearly 300 customers by deceptively charging them for an unwanted anti-theft product.
Panarella was in the dark about what he called an inherited problem, he said.
"This was a huge lesson for me," Panarella, 38, told Automotive News. "I learned you need to properly vet the people who work with you every day."
The dealership, about five miles north of New York City, sells about 1,900 new and used vehicles a year. Before he bought it, Panarella was general manager of Nissan of Queens for eight years.
The New Rochelle dealership "didn't have the best reputation in the world" when he bought it, he said, and he had a lot to learn.
"I'm a first-generation car dealer. I am a little green in some areas," he said. "I inherited a regime of people who have worked in this building for 12 to 13 years. It's imperative to dig deep on who's working at a business. This was a lesson learned."
The store's finance and insurance managers were illegally charging customers for a theft-deterrent product called Total Loss Protection, which customers did not want or agree to buy, the New York attorney general's office found.
In many cases, the fee for the product, which ranged from $215 to more than $5,000, was added to the final sale price without the consumer's knowledge or consent, the attorney general's office said.
After charging for the product, the dealership did not even do the work — etching the vehicle identification number onto a window — that was promised, investigators said.
Customers were also told there'd be a guaranteed credit of $3,000 or $5,000 toward the purchase of a new vehicle if theirs was stolen. But conditions and limitations rendered the credit essentially useless, the attorney general's office said. For example, the credit would not be applied if it eliminated the dealership's profit on the sale.
When the attorney general's office alerted Panarella to the fraud 18 months ago, he cooperated with the investigation, he said.
As part of the settlement with the state, Panarella agreed to pay a total of $276,127 to the 298 consumers defrauded, plus $22,084 in fines, penalties and costs to the state.
The settlement also calls for the dealership to change its sales practices by:
Fully disclosing that all after-sale services or products are optional and the price is negotiable.
Explaining all after-sale services or products offered.
Adding an after-sale service or product to the final bill only with the consumer's knowledge and full consent.
Panarella said his changes go beyond those mandated by the settlement.
When he learned of the fraud, Panarella terminated four F&I managers. He created a human resources department to provide better vetting of potential employees. He hired a company to train staff on complying with laws and to devise procedures to make operations more transparent.
For example, the new procedures let customers know if the dealership has run their credit and they ensure that staff members secure proper documentation from customers to minimize fraud and identity theft, he said.
He will also issue a personal letter of apology to the customers involved.
Panarella said the experience was a "very quick and expensive lesson for a new dealer."
He declined to reveal the cost of creating a human resources department and hiring a compliance company, but said it's "priceless" if it rebuilds the store's reputation and repairs his shattered dream.