Two years later and no charges have been filed in alleged fraud case
SM BOULEVARD — After more than two years of investigating an alleged consumer fraud scam at Honda of Santa Monica, prosecutors are still collecting evidence. They expect to file charges in the coming months, officials said Friday.
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. The suit alleges several customers were ripped off by the dealership, located at 1720 Santa Monica Blvd.
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. Some of them are named in the lawsuit. Honda of Santa Monica is owned by North Carolina-based Sonic Automotive, which owns car dealerships across the country. Sonic reportedly bought Honda of Santa Monica in 1999 from Kramer Motors Incorporated, which is also named in the class-action lawsuit.
Deputy District Attorney Dana Aratani declined to say who would be charged in the case until the investigation is complete.
“We’re getting things together in the next few months,” he said. “These kinds of things take a long time, but we are mindful of getting this case going and making our charging decisions soon.”
Aratani, who works in the DA’s consumer protection division, said his office is still gathering evidence from thousands of pages of documents both on paper and in the computers seized from the dealership. Aratani said investigators just recently found more evidence inside additional computers.
“We took a lot of computer information,” he said. “The amount of storage we found was amazing.”
DA spokeswoman Sandi Gibbons said last month that it’s not unusual for complicated cases like this one to take up to five years to prosecute. However, Gibbons told the Daily Press the day of the raid that she expected the investigation to take “weeks.”
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.
Dan Hoffman, the attorney handling the civil case, said the lawsuit has been put on hold.
“We are waiting for the criminal side of it to be resolved,” he said.
One scam allegedly used at Honda of Santa Monica added to purchases 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.
Customers who have signed onto the lawsuit allege they had 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.
Overcharging for a car allows the dealership to pocket a higher profit. In itself, it isn’t illegal to strike a deal where the buyer and seller agree. In this case, however, the fraud allegation stems from deceptive practices surrounding the sales. Extended service contracts and additional accessories directly benefit Honda of Santa Monica and its employees through commissions and revenue for the company.
The suit says that since 1998, the dealership would require customers to first lease cars for four months before buying them. The dealership would then collect two sets of payments — one for four months of leases, and the other for the subsequent purchase.
Some customers allege that they were tricked into extended service contracts, which would add thousands of dollars onto the purchase price.
Honda of Santa Monica officials have said in the past that they have replaced nearly the entire finance and sales departments and have instituted safeguards to ensure that no more scams will occur.
The Better Business Bureau of the Southland has lifted its “unsatisfactory” rating of the dealership Honda of Santa Monica and on its Web site states, “Our complaint history for this company shows that any customer complaints brought to the company’s attention have been properly addressed.”
Originally published in the Santa Monica Daily Press print edition on November 15, 2004. Read the original PDF.