Pennsylvania dealership to pay more than $2 million after bank fraud scheme
A Pennsylvania dealership has agreed to pay more than $2 million in fines and restitution in a bank fraud scheme.
As outlined in an agreement between dealer principal David Hallman and Scott Brady, U.S. Attorney for the Western District of Pennsylvania, Hallman Chevrolet in Erie, Pa., defrauded lenders throughout the region by systematically falsifying loan documents in hundreds of transactions between 2009 and 2015, the attorney's office said in a statement Friday.
An FBI investigation concluded that Hallman Chevrolet falsified down payments in more than 600 transactions. Coached by employees, the statement alleges, customers brought in what was mostly low-value costume jewelry to Hallman Chevrolet. The dealership would use the phony jewelry to give the appearance that a valuable down payment had been furnished by the customers.
Financial institutions working with the dealership saw these customers as more creditworthy than they actually were, "when in effect, the financial institutions themselves had unknowingly supplied their own loan funds to cover the fictitious down payment," the statement said.
As a result, those lenders experienced default rates more than double the industry standard and suffered loan losses approximating more than $1 million between 2009 and 2015, the U.S. attorney's office said.
The dealership, which goes by Dave Hallman Chevrolet on its website, "takes full responsibility for the conduct described in the agreement," according to a release issued by Erie lawyer Neal Devlin, who represented the dealership in the case. That release said Hallman Chevrolet entered into the deferred prosecution agreement on Aug. 1 as a result of the investigation "that identified certain illegal actions in the dealership's used car department."
"Since the investigation began, Hallman Chevrolet has taken significant steps to employ a compliance plan and philosophy that will prevent the sort of conduct that led to the investigation and agreement," the dealership's statement said.
Besides evidence of bank fraud, the investigation discovered Hallman Chevrolet failed to have a compliance program in place to prevent and detect unlawful behavior, according to the U.S. attorney. As of late 2017, the dealership has taken steps to improve its compliance and training procedures, the statement said.
In addition to a $1.4 million penalty, the agreement calls for Hallman Chevrolet to repay lenders $737,000 in restitution that will "disgorge Hallman of any profits realized from the bank fraud scheme."
"The perpetration of large-scale auto loan fraud schemes in western Pennsylvania must stop. The auto dealership industry is put on notice that substantial penalties await those who engage in such schemes," Brady said in the statement.
The U.S. attorney will defer any prosecution against Hallman Chevrolet for four years as part of the agreement but will seek to institute criminal proceedings against the dealership if the store violates terms and conditions of the agreement, the statement said.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.