Colonial Automotive Group, one of the nation's largest dealership groups, will pay a $1 million fine in a settlement with the Massachusetts attorney general to satisfy an allegation that it cheated the state's unemployment system amid the coronavirus pandemic.
The 16-store Acton, Mass., group near Boston is alleged to have violated the state's False Claims Act by furloughing numerous sales employees who then collected unemployment even as they were asked to complete some work without pay. Colonial Automotive late last week entered into an assurance of discontinuance agreement promising to enact new policies that prohibit the practice.
Massachusetts Attorney General Maura Healey alleged that after the state ordered dealerships' showrooms closed in spring 2020, Colonial sold about 366 vehicles in April and about 455 in May — sales attributed to furloughed employees who were also collecting unemployment benefits. The state said that Colonial's furloughed workers, who were collecting unemployment, were directed to call prospective customers, set up appointments, deliver vehicles and finalize customer sales while not being paid by Colonial.
"Colonial Automotive planned and carried out an illegal scheme to cheat our unemployment system and avoid paying its workers in order to maximize its profits during the COVID-19 crisis," Healey said in a Jan. 15 statement. "This is a brazen attempt at exploiting workers and the state's unemployment system, and we will take action against those who defraud our state agencies and try to steal taxpayer dollars."
As part of the settlement, Colonial agreed it would compensate furloughed employees for their completed work in accordance with state employment laws. The company also must amend any employment and wage reports with the state's unemployment division. The fine will be paid to the state's general fund.
Representatives of Colonial could not immediately be reached for comment. A Colonial spokesperson told WCVB in Boston that it denied the allegations.
"We did not require any employees to engage in sales activities while furloughed," the group said in a statement provided to the station. "We do not feel we are involved in any violation of law and settled with the Commonwealth to put the matter behind us."
Colonial ranks No. 84 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 11,664 new vehicles in 2019. Its dealerships represent the Chevrolet, Cadillac, Chrysler-Jeep-Dodge-Ram, Ford, Honda, Mazda, Nissan, Subaru and Volkswagen brands.