Carvana executive faces criminal charges in Illinois

A Carvana Co. executive is facing dozens of criminal charges tied to the company's alleged motor vehicle licensing and records violations in Illinois.

In mid-May the Illinois Secretary of State filed several motor vehicle-related charges against Paul Breaux, who is identified on Carvana's investor relations website as a vice president and the company's general counsel since August 2015. Illinois court records show regulatory officials in a May 13 filing charged Breaux with 27 counts of failure to transfer vehicle titles by a dealership and 50 counts of improper use of titling and registration.

Breaux, who has been ordered to appear in an Illinois court on Nov. 1, denies any wrongdoing.

"The State of Illinois has charged me because Carvana delivered a car to a customer's home," Breaux said in a statement provided by Carvana. "This is surprising and confusing both because it feels extremely anti-consumer and because I proactively met with several Illinois officials in 2017 to describe this exact practice and they did not then nor have they since raised any concerns, during which time we've delivered tens of thousands of cars to Illinois homes and provided exceptional customer experiences."

Carvana first came under legal scrutiny in the state in February, when the Illinois Secretary of State's police department began investigating what it described as a slew of consumer complaints about the company's vehicle titling and registration procedures. The regulatory agency is holding Breaux liable for Carvana's alleged actions in Illinois because he is a legal representative for the company and bears a degree of responsibility for maintaining its licensing agreement in the state, Illinois Secretary of State Police Director Elmer Garza told Automotive News.

"In this particular case, we had over 100 complaints against [Carvana] for failure to transfer title, which resulted in an inspection, which resulted in the other charges," Garza said. "Most of that stuff is records violations pertaining to their licensing agreement with the state."

Regulatory officials in the May 13 filing also charged Breaux with two counts of failure to comply with licensees' requirement to keep records and make inspections; one count of failure to comply with licensees' requirement to document evidence of right to possession; one count of failure to comply with licensees' requirement on records for new and used vehicles; and one count related to maintaining records for special plates.

In a separate filing on May 12, the agency charged Breaux with two counts of Carvana operating as an unlicensed used-vehicle dealer.

In Illinois, failure by a dealer to transfer a title is a Class B misdemeanor that carries a penalty of up to six months in county jail and a maximum fine of $1,500. Improper use of titling and registration is a Class C misdemeanor that carries a penalty of up to 30 days in county jail and a maximum fine of $1,500, plus any mandatory court costs, Illinois Secretary of State spokesman Dave Druker told Automotive News.
The next action in the Breaux cases is set for Nov. 1 in the 18th Judicial Circuit Court in Illinois' DuPage County, west of Chicago. Breaux is required to appear, according to court records.

Background

The charges against Breaux were filed shortly after regulators suspended Carvana's dealer license on May 10.

In its reasoning for the suspension, the Secretary of State's office alleged its police department's early year investigation had found a pattern of the online used-vehicle retailer failing to properly transfer titles for vehicles it sold and misusing the issuance of out-of-state temporary registration permits.

That suspension was stayed on May 26 but reinstated July 18, prompting Carvana to file for injunctive relief against the agency. A judge in DuPage County on July 29 blocked the agency from further revoking Carvana's dealer license. Carvana is now allowed to sell in the state under certain restrictions.

The next public hearing in that matter is set for Dec. 8, also in the 18th Judicial Circuit Court.