Bank Fraud in Automotive
Dealerships
ACFE Computer Crimes and Fraud Seminar
May 11, 2010
Gil Van Over
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President of gvo3 & Associates
AFIP Certified Mentor
Associate Member of NADC
Member of DealerTrack’s Compliance
Advisory Counsel
• Writes for Dealer Magazine and Dixon
Hughes’ Strategic Newsletter
Bank Fraud
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Falsifying Credit Applications
Power booking
Falsifying Down Payment
Forgery
Employee Theft
Falsified Credit Applications
Power Booking
Case Study #1
• Sarasota 500 LLC - owns
dealerships in Florida
– Seven cases dating back 10 years
– Forged customer signatures
– Altered credit applications
– Falsified down payments
– Power booking
Case Study #2
• Alan Vester Auto Group – owns
dealerships in North Carolina
– Class Action Lawsuit
– Case involves customers who
purchased used cars since 2002
– Falsified down payments
Case Study #3
• Al Long Ford, Inc - Michigan
– Case filed by Lender – Michigan
First Credit Union
– Falsified down payment
– Falsified income and employment
on credit application
– Plaintiff was awarded $361,000 for
Fraud and Breach of Contract
Case Study #4
• Hargrove and Toadvine – Owners
of Car Connection – South Carolina
– Falsified income
– Power booking
– Defendants pled guilty to conspiracy
to commit bank fraud - serving 40
months in prison and ordered to pay
$421,000 in restitution
gvo3 Audit Findings
• Falsified down payments
– Review notes in deal jacket of
possible fraudulent activity
– Review receipts and rebate forms for
proof of down payment
• Falsified credit applications
– Compare information provided on
written credit application to
information provided in electronic
programs such as DealerTrack or
Route One
gvo3 Audit Findings
• Falsified credit applications
– Compare information given on credit
application to proof of income stips
– Review proof of income stips to
ensure they are not fraudulent
• Forged signatures
– Compare signatures of all deal jacket
documents looking for consistency
– Review notes in deal jacket indicating
documents need signature
gvo3 Audit Findings
• Fraudulent paystubs
– Review paystubs for authenticity and
accuracy
– Validate income
– Call employer for proof of employment
– Audit dealer employee desktop
looking for payroll programs
• Power booking
– Compare book out sheets confirming
the options and mileage are correct
Case Study #5
• Hernandez and Gutierrez-Bonilla
Owners of Downey Motorcars California
– Investigation dates back to 2005
– Fraudulent credit applications
– Identity theft
– Owners double financed the same
vehicles with multiple lenders
Case Study #6
• Michael Holley – Owner of
multiple dealerships in Florida
– Defrauded customers by failing to
payoff trade-ins
– Defendant pled no contest to grand
theft - serving 2 years in prison, 43
years probation and ordered to pay
$167,000 in restitution
Case Study #7
• Dayton Diaz – Sales Manager for
Rick Case Acura – Florida
– Identity Theft
• Sold personal customer information
– Defendant pled guilty to mail fraud
conspiracy – possible 2-3 year
prison sentence
Case Study #8
• Davina Smith - Employee at
Drive Time Auto Sales - Florida
– Identity Theft
• Stole over 200 social security
numbers from customers
– Smith facing fraud and identity theft
charges in Florida
• Smith facing similar charges in
Georgia
Case Study #9
• Shawn McDonald - Salesman
for Hub City Ford – Florida
– Identity Theft
• Stole over 30 customer’s identities
• Charged with grand theft and personal
use of information
Case Study #10
• Melissa O’Donnell – Accountant
for Faulkner Auto - Pennsylvania
– Used company funds to pay for
personal debt
– O’Donnell was sentenced to 6 to 23
months, 5 years probation and
ordered to pay over $116, 000 in
restitution
gvo3 Audit Findings
• When conducting a walk-through,
look for suspicious activity that
could result in employee identity
theft
Best Practices to Avoid
Bank Fraud
• Conduct background checks on
potential new hires
• Implement policies and procedures
that forbids bank fraud
• Train employees on policies
• Require employees to sign
acknowledgement form regarding
policies
• Immediate termination for any
employee who does not comply with
policies
Best Practices to Avoid
Bank Fraud
• Require that all stips sent to a lender be
retained in the deal jacket
• Make a manager sign the book out sheet
confirming the options and mileage are
correct
• Periodically verify that the credit application
information on the paper document is
consistent with the information provided to
the lenders via DealerTrack, Route One
and/or CUDL
• Do not permit any consumer to sign a blank
document, including credit applications and
contracts
• Conduct periodic audits of deal jackets to
ensure compliance
Consequences for
Committing Bank Fraud
• Fines and Restitution
• Federal Prison
• Suspicious Activity Report filed
by lending institutions
Suspicious Activity Report
Suspicious
1
Activity Report
FRB:
FR 2230
OMB No. 7100-0212
July 1, 2003
FDIC:
6710/06
OMB No. 3064-0077
Previous editions will not be accepted
after December 31, 2003
OCC:
8010-9, 8010-10
OMB No. 1557-0180
OTS:
1601
OMB No. 1550-0003
NCUA:
2362
OMB No. 3133-0094
TREASURY:
TD F 90-22.47
OMB No. 1506-0001
ALWAYS COMPLETE ENTIRE
REPORT
(see instructions)
Questions?
www.gvo3.com
312.962.9065
[email protected]