Honda steadies ship
SM BLVD. — Honda of Santa Monica has been put on probation by the Department of Motor Vehicles after the dealership’s sales employees were convicted of defrauding customers out of hundreds of thousands of dollars.
The dealership, which was owned by Kramer Motors Inc. when the fraud occurred, will have its license placed on probation for five years. Under terms of a settlement agreement between the dealership and the Los Angeles District Attorney’s Office, Honda of Santa Monica also has paid $75,000 in penalties to the DMV. In addition, the dealership will undergo six audits by DMV investigators over the next five years to ensure customers are not being ripped off.
“They will have to open their books to auditors to make sure they are not repeating the same mistakes,” said DMV spokesman Mike Miller, adding that the audits will not necessarily be announced or scheduled with dealership representatives. “It’s a checks and balances... reviewing the contracts, going line by line to make sure the customers understand what they are paying for.”
The probation, audit and penalties are part of a civil settlement that was reached earlier this year between prosecutors and the dealership.
The settlement is separate from the criminal cases levied against six former Honda of Santa Monica sales representatives who scammed customers by tacking on charges of “theft etch” to their contracts without their knowledge. Theft etch marks a vehicle’s parts with traceable numbers in the event of a theft. The price for theft etch ranged from $50 to $250. On some contracts, the feature looked like a DMV fee, and in at least one case, the customer was told it was a DMV fee. It was not, Miller said.
Under the terms of the criminal settlements, multiple felony counts of grand theft that the defendants originally faced were reduced to misdemeanors for negligence, according to the DA’s office. Four defendants who settled in March will be required to pay nearly $10,000 in fines. They also will be on probation for the next three years. The other two employees, who played minor roles in the scam, in April pleaded no contest to misdemeanor counts. They have been ordered to pay $100 in restitution fines and are currently on probation.
The DMV is considering revoking each individual’s license, Miller said.
As part of the settlement, Honda of Santa Monica also will create business practices that will ensure sales personnel who have binding authority with new car contracts have checks and balances to make sure that similar violations don’t happen again. Those practices could involve several employees up and down the chain of command reviewing contracts before they’re signed or ensuring that sales people review contracts line by line to ensure that customers are aware of the fees they’re paying.
Honda of Santa Monica representatives couldn’t be reached for comment Monday.
In the past, they have told the Daily Press that the employees in question were fired immediately after the scam was uncovered. A new sales team has been hired.
According to the prosecutor’s felony complaint, at least 33 customers were bilked out of nearly $30,000 between 2001 and 2002, when all of the defendants worked in the finance and sales departments at the dealership, located at 1720 Santa Monica Blvd.
Under the civil settlement, an estimated 1,500 customers who were ripped off can expect to be reimbursed in the coming months by Sonic Automotive, Inc., the current parent company of Honda of Santa Monica. Those who might be eligible for restitution are customers who purchased or leased a vehicle from the dealership between April 7, 2000 and Oct. 31, 2002.
Sonic Automotive Inc. has hired an outside firm to serve as an administrator in handling the reimbursements, which will determine how much each customer will receive. The reimbursements range from $100 to $1,000, with the average claim being $400. It’s estimated that Sonic Automotive Inc. will pay back about $829,000 in reimbursements.
The North Carolina-based automotive company paid the DA’s office $548,000 in civil penalties and costs associated with violating provisions of the Business and Professions Code. Of that amount, $73,000 is for costs of the investigation.
The DA’s office launched its investigation into the dealership in July 2002, after an employee tipped investigators off to the alleged scam. The dealership was raided by investigators, including FBI agents, who seized boxes of files and computers from the finance and sales departments on Sept. 25, 2002. The investigation was concluded last year when the DA’s office filed a felony complaint against six former employees, alleging they overcharged customers to pad their own commissions.
Originally published in the Santa Monica Daily Press print edition on May 9, 2006. Read the original PDF.