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Bank Fraud in Automotive Dealerships

Bank Fraud in Automotive Dealerships. ACFE Computer Crimes and Fraud Seminar May 11, 2010. gvo3. & Associates. Gil Van Over. President of gvo3 & Associates AFIP Certified Mentor Associate Member of NADC Member of DealerTrack’s Compliance Advisory Counsel

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Bank Fraud in Automotive Dealerships

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  1. Bank Fraud in Automotive Dealerships ACFE Computer Crimes and Fraud Seminar May 11, 2010

  2. gvo3 & Associates Gil Van Over • 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

  3. Bank Fraud • Falsifying Credit Applications • Power booking • Falsifying Down Payment • Forgery • Employee Theft

  4. Falsified Credit Applications

  5. Power Booking

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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

  19. gvo3 Audit Findings • When conducting a walk-through, look for suspicious activity that could result in employee identity theft

  20. 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

  21. 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

  22. Consequences for Committing Bank Fraud • Fines and Restitution • Federal Prison • Suspicious Activity Report filed by lending institutions

  23. Suspicious Activity Report

  24. Questions? www.gvo3.com 312.962.9065 gil@gvo3.com

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