DA’s office investigating possible fraud charges
By BYANDYFIXMER AND CAROLYN SACKARIASON Daily Press Staff Writers
Sub: DA’s office investigating possible fraud charges
By Andy Fixmer and Carolyn Sackariason
Daily Press Staff Writers
When Brett Fung shook hands with a car salesman on the showroom floor to lease a new Honda Civic hybrid, he thought Honda of Santa Monica was giving him a good deal.
That was before he got to the finance department.
It was there that Fung was told the deal he struck couldn’t be honored. If he wanted the car, he would have to put down another $1,000, pay $50 more each month and extend the life of the loan for another year.
Fung also had to agree to a $1,600 extended service contract, which he didn’t want, in order to get favorable financing, he said.
“They said to me ‘You have to trust us because this is the way it has to be done,’” Fung said. “They always said the right thing and did the right thing to make you think everything was fine.”
Honda of Santa Monica is being investigated by the Los Angeles County District Attorney’s Office for allegedly cheating customers like Fung out of thousands of dollars over a span of about four years.
529, Dozens of investigators with the Los Angeles County District Attorney’s Consumer Protection Division seized boxes of files at Honda of Santa Monica’s finance and sales departments in a surprise raid on Sept. 25, 2002.
On the same day of the raid, a class-action lawsuit was filed against the dealership in downtown Los Angeles Superior Court alleging several customers were ripped off by the dealership, located at 1720 Santa Monica Blvd.
District attorney spokeswoman Sandi Gibbons said the investigation is ongoing. Since the raid, many of those involved have been fired. The dealership’s general manager, its finance department manager and sales manager have been replaced, according to Honda of Santa Monica officials. Some of them are named in the lawsuit. Gibbons wouldn’t say if criminal charges would be filed against them because the investigation isn’t finished.
“I don’t know what happened, and I don’t want to know,” said Nasser Nouri, the dealership’s new sales manager who started in November. “I can’t believe what they did here. But the people I have here now are very good. It’s by the law, by the book.”
“I don’t know what happened, and I don’t want to know. I can’t believe what they did here. But the people I have here now are very good. It’s by the law, by the book.” — — NASSER NOURI New sales manager
Representatives from Sonic Automotive Inc., a North Carolina-based company that owns car dealerships across the country including Honda of Santa Monica, didn’t return phone calls Friday.
5C7, The lawsuit alleges the dealership defrauded its customers by adding false state taxes and fees, lying to customers about interest rates and tricking customers into making extra payments on vehicles they wanted to buy or lease.
One scam added a fictitious state tax called “VT Registration.” Customers were told the fee was for Department of Motor Vehicles registration, the suit alleges. However, the state has no such fee.
Those customers, like Fung, had allegedly been given favorable deals in the showroom only to have the dealership’s finance department renegotiate the deals afterwards. Such a practice is forbidden by state law, according to the lawsuit.
Fung, an Encino resident who has leased four vehicles from the dealership over the past year, said each deal changed every time it went from the showroom floor to the finance department.
Fung said he was told he would have to agree to an extended service contract in order to be approved for the loan because he had “shaky credit.” In total, the service contracts added more than $4,000 to the sales price of the vehicles. Extended service contracts and additional accessories directly benefit Honda of Santa Monica and its employees through commissions and revenue for the company.
Fung said he was told by Ali Hussain, former head of the finance department, that the contracts would be refunded to him after the dealership received approval from the bank. But on each deal, there were no refunds.
547, That was until the district attorney’s office launched the investigation. About a month after the raid, Fung met with Sonic Automotive representative Melanie Colton, who flew from her offices in Florida to Los Angeles in November to meet with Honda of Santa Monica customers. She spent five hours with Fung going over his contracts in the computer because the dealership documents were seized by the DA, Fung said. She ended up giving him about $5,000 in settlements for “extras” and bogus fees billed by the dealership. She also apologized profusely, Fung said.
“She showed me too much,” Fung said. “When I went there, I didn't know I was being ripped off.”
When Fung asked for the refunds from Hussain he said he was told the dealership was still working out the details on the service contracts with Honda. Hussain, who is named in the lawsuit, would throw in a few free oil changes to help make up for the inconvenience, Fung said.
“He always did the right thing, said the right things,” Fung said, adding there was never any paperwork on the extras. “I was beginning to believe the guy.”
Still, Fung believed everything was on the level. That is until he received an anonymous call at home. His caller ID indicated it was Honda of Santa Monica calling. A man who wouldn’t give his name told Fung he was being “royally ripped off.”
6C2, “I shrugged it off a little bit,” he said.
But then the dealership was raided. Fung began looking closer at his contracts and he started noticing the discrepancies. There were two separate contracts for the same vehicle with different figures. The price of the extended service contract would be lower on one contract than on the other. But on the second contract with the lower price, the interest rate on the loan would be higher so the bottom line would remain the same.
Fung was charged 7.75 percent interest on one deal, but for another vehicle he purchased months later, he was charged over 11 percent. Fung said his credit rating, which might cause the interest rate to rise, hadn’t changed.
About two months after the raid, Fung got about $4,000 in refunds for the extended contacts from the dealership. However, other extra charges and refunds on another service contract haven’t been repaid, he said.
Fung is now talking to an attorney about involvement in a class-action lawsuit.
“I’ve since talked to everyone and found out what they were doing,” Fung said. “And I’m not so nice anymore.”
“I’ve since talked to everyone and found out what they were doing,”
“And I’m not so nice anymore.” — Fung said
Other customers allege fraud
Holly Ciampi of Pacific Palisades experienced similar treatment by the Santa Monica dealership over a 2001 Honda Passport she leased from the dealership in July 2001. The saleswoman worked it out so that with a certain down payment Ciampi could have the vehicle for $300 a month — the highest she said she was willing to pay, she claimed.
But the finance department allegedly increased the down payment and jacked up the monthly payments $50 because she was told her vehicle required LoJack, a silent alarm that gives law enforcement officers the location of a stolen car.
8F7, Ciampi said she was told by finance department employee Hamid Khaki that without the system, she would have to pay $50 a month more to her car insurance provider. Khaki is named in the lawsuit.
But two days later she found no insurers would give a LoJack discount, and the dealership refused to take the device off her lease. They told her it couldn’t be done because of the interest rate on her loan.
Ciampi said the dealership repeatedly sent a LoJack installation technician to her workplace and home after she refused to have the device installed. She also said bank representatives said there was no reason the lease amount couldn’t be decreased. They told her the interest rates wouldn’t prevent the dealership from lowering the lease amount, she said.
Eventually, the dealership gave Ciampi $945 of the $2,200 she had spent on the LoJack system that was never installed on her vehicle.
“I need to bring 20 people with me when I go to buy a car," she said. “I’m a salesman’s dream.”
Better Business Bureau rates dealership
The Better Business Bureau of the Southland gave Honda of Santa Monica an unsatisfactory rating for failing to settle eight of the 13 complaints against it.
An unsatisfactory rating indicates a pattern in which customer complaints cause concern.
“The company has simply chosen to ignore us,” said Lana Luckett, a senior trade analyst with the bureau. “And we have advised the consumers that they should pursue it by other means.”
Honda of Santa Monica applied for membership to the bureau in November, and their application is still pending. Luckett said that’s good news for consumers.
“One of the requirements to becoming a new member is that you cannot have any unanswered complaints against you,” she said. “So all of these people’s complaints will have to be settled before their membership will be approved.”
Nouri, the dealership’s new sales manager, assures customers that whatever happened with the prior management team is history.
“We are the best dealership now because of what happened,” he said. “We go the extra mile to make sure they are OK. Now, customers clearly understand the agreement.
“When I fall asleep, I want to sleep comfortably,” he added.
Originally published in the Santa Monica Daily Press print edition on January 20, 2003. Read the original PDF.