Sonic one of the fastest growing auto sales chain
A class action lawsuit is pending in Florida against the corporate owner of Honda of Santa Monica, alleging similar acts of fraud.
Charlotte, N.C.-based Sonic Automotive Inc. — which owns the Santa Monica dealership and nearly 200 others across the country — is fighting charges of fraudulently inflating contracts and tacking on fees at two dealerships in Clearwater, Fla.
Similar charges have been levied at the company locally by customers who have come forward claiming they were allegedly ripped off by Honda of Santa Monica. A class action lawsuit was filed against the dealership on behalf of several Honda of Santa Monica customers on the same day it was raided by the Los Angeles County District Attorney’s Office last fall. The investigation is ongoing, a district attorney spokeswoman said last week.
The stories told by customers at dealerships in Clearwater are nearly identical to the claims made by customers in Santa Monica, which accuse the company of jacking up interest rates and tacking on extras like theft protection plans for cars.
One customer at Clearwater Toyota claims he was cheated out of $537 when the dealer inflated the cost of his extended warranty. Others claim the dealership jacked up their interest rates even when they had good credit, according to reports in the Wall Street Journal and the Tampa Tribune.
That’s what happened to Encino resident Brett Fung, who has leased or bought four vehicles from Honda of Santa Monica in the past year. He said each deal Vehicle fees may cause pinch for Santa Monica Governor’s proposal hits cities with varying impacts changed when it went from the showroom floor to the finance department. In one instance, he was told he would have to agree to an extended service contract in order to be approved for a loan because he had “shaky credit.”
Fung said he 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.
The claims out of Florida that the dealerships had charged customers “add ons” also is similar to the story of Holly Ciampi of Pacific Palisades who claims she was duped into buying a silent alarm system called a “LoJack.”
Ciampi said when she leased a Honda Passport in July 2001, the deal made on the showroom floor was changed once it got to the finance department. Not wanting to spend more than $300 a month, Ciampi then learned that the Honda of Santa Monica finance department allegedly increased the down payment and jacked up the monthly payments $50 because the vehicle required LoJack. They allegedly told her she would have to pay higher insurance premiums if she did-n’t purchase the accessory.
Sonic representatives did not return calls seeking comment for this story.
The activities of Sonic dealerships in Florida attracted the attention of that state’s attorney general’s office, which has reportedly launched an investigation into Sonic — the nation’s third-largest car dealership franchise, according to news reports.
A Florida racketeering lawsuit filed on behalf of 17 car buyers accuses some of Sonic’s top executives of orchestrating a scheme to falsify loan applications, overcharge for extended service contracts and warranties and forge customers’ signatures on sales documents, according to an article posted on ConsumerVoiceUSA.com last year.
Fung said he believes Sonic officials must have known about the activities at the Santa Monica dealership.
“If you have one dealership that is doing better than your other ones, don’t you send someone down there to find out what they are doing that’s so special?” he asked. “Don’t you want to find out what’s so special that one dealership is doing so all the others can do it too?
“The more I think about it, the more I believe they had to know what was going on,” he added.
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.
Since the raid, many of those involved have been replaced, including the dealership’s general manager, its finance department manager and sales manager, according to Honda of Santa Monica officials. Some of them are named in the lawsuit filed by former customers. It is unknown whether criminal charges will be filed against the former employees because the investigation isn’t finished.
The class action lawsuit filed in downtown Los Angeles 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 allegedly 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.
The Florida class action suit alleges the dealership of sneaking hidden fees into loans, according to an article in the Wall Street Journal last year. State regulators in California, Washington and Florida have reportedly filed lawsuits that focus on loan rates, extended warranties and theft protection plans, according to the Wall Street Journal.
The suit also alleges as many as 10,000 customers at two Clearwater dealerships may have been illegally overcharging as much as $10 million, according to ConsumerVoiceUSA.com. The Web site article posted in March of last year also says the two dealerships — Clearwater Mitsubishi and Clearwater Toyota — are the targets of a state investigation and are suspected of defrauding at least 165 customers.
With $1.9 billion in revenues reported from June to September 2002, Sonic is the nation’s third-largest dealership chain behind AutoNation and United Auto Group, according to Hoovers.com.
Sonic also has been one of the fastest growing automotive sales companies in the country. Founded with five dealerships in 1997, the company has blossomed into a national brand name with 190 new and used car chains and more than 40 collision repair centers in 13 states.
Originally published in the Santa Monica Daily Press print edition on January 23, 2003. Read the original PDF.