Kia sues New England dealerships over alleged fake car sales

Kia America has accused a New England car dealership of falsifying retail records and pocketing hundreds of thousands of dollars in ill-gotten sales incentives.

In a federal lawsuit filed in New Hampshire last month, Kia alleged that Dan O'Brien Auto Group and its senior management submitted hundreds of fraudulent retail delivery reports for vehicles that were not actually sold to the clients.

The lawsuit names six current and former O'Brien dealers from New Hampshire and Massachusetts, as well as the auto group's CEO Dan O'Brien and COO Tom Kuhn. Leveling allegations of racketeering, fraud, conspiracy and related allegations, Kia accused dealers of mixing inventory to hide the alleged deception.

Defense attorney Paul Harris, who represents Dan O'Brien Auto Group, said the accusations are false.

“What this dealership did is perfectly legitimate,” he said in a telephone interview.

What does Kia's lawsuit say?

From January 2019 to July 2021, there was a “substantial gap” between the number of new vehicles O'Brien Kia dealerships had in stock and the inventory they should have had if their sales reports were accurate, according to the complaint.

“At times, this gap exceeded 350 new Kia vehicles,” the automaker said.

The alleged ruse was revealed in June 2021 when a Kia auditor visited O'Brien dealerships in Norwood, Massachusetts, and Concord, New Hampshire, according to the complaint. Audits reportedly revealed dozens of vehicles previously reported as sold.

Kia estimated its damages at more than $500,000, citing “at least” 280 retail delivery reports believed to contain false information. And the automaker says it's not the only one losing; Customers who ultimately purchased the cars in question also faced the possibility of truncated warranties and missed safety recall notices, Kia alleged.

Kia said it issued termination notices to each of the O'Brien Kia dealerships in January 2022 following the Norwood and Concord audits “and the dealers' failure to adequately explain why these vehicles were reported as having been sold.” By the end of 2022, all of Dan O'Brien Auto Group's franchised dealerships had been closed or sold, or were for sale, according to the lawsuit.

“On information and belief, O'Brien's decision to divest the dealerships was the result, in whole or in part, of his fraudulent and unethical business practices,” Kia alleged.

Today, O'Brien's operations have dwindled to a single location in Methuen, Massachusetts.

“It was simply a matter of errors and oversights”

In a related federal case in Massachusetts, Kuhn offered an explanation for discrepancies Kia said it found at the Norwood dealership.

“For a small number of transactions, we determined that data entry errors or recordkeeping oversights were made by dealership personnel and agreed that incentive payments should be re-invoiced by KIA for these transactions in accordance with to KIA's sales policies,” Kuhn wrote in a 2022 affidavit.

He added: “These were simply errors and oversights that happen at a high volume dealership such as O'Brien KIA. »

A federal judge in the same Massachusetts case blocked Kia's attempts to raise Racketeer Influenced and Corrupt Organizations Act (RICO) claims against the Norwood dealership, Harris pointed out.

Defense attorney accused Kia of trying to “go shopping” after Massachusetts case was settled last year and said he intends to file a motion to dismiss the lawsuit of New Hampshire.

This is not the first run-in with the law

However, this is not the first time Dan O'Brien Auto Group has been accused of fraud or deceptive business practices.

Over a six-month period in 2021, O'Brien's Chrysler Dodge Jeep Ram dealership in Methuen falsely submitted at least 2,668 warranty claims to its franchiser for defective airbag inflators that it did not actually have replaced, according to Kia's lawsuit. However, in a separate complaint, the dealership alleged that former employees were responsible for the alleged warranty fraud.

Then, in 2022, New Hampshire Attorney General John M. Formella announced a $1.25 million settlement to resolve allegations of unfair and deceptive practices at the O'Brien Kia dealership in Concord.

According to the attorney general's office, an investigation sparked by consumer complaints found that dealership employees “persuaded consumers to purchase vehicles they could not afford using deceptive sales practices; falsely inflated consumer income information on loan applications; and forged a customer's signature on loan documents.

Kia cited the settlement and alleged warranty fraud as it launched the latest attack on the O'Brien dealerships: “Making false claims in order to obtain money they were not entitled to was one way to do business for the Dan O'Brien Auto Group. .”

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