Fraud Articles: Car dealer charged with fraud
Source Name: Herald-Dispatch.com
A former Huntington car dealer is facing up to 90 years in federal prison and/or a $2.5 million in fines after he was indicted this week on charges of bank fraud, wire fraud and money laundering.
The 38-count indictment was filed Wednesday in U.S. District Court and states those crimes were part of a scheme to defraud BB&T bank out of more than $6 million.
The indictment charges Fred Davis, 53, of Lesage with 20 counts of wire fraud, 17 counts of money laundering and one count of bank fraud. The charges stem from his time as president of Davis Chrysler Plymouth Jeep Eagle, a business that was sold in 2003.
Huntington attorney Charlie Hatcher said he and a Pittsburgh firm will represent Davis in the criminal case. He said they hope to hold a press conference in the coming days to present their side of the story.
"It's a rather interesting story," Hatcher said. "Mr. Davis is innocent of these charges, and everyone knows that."
The Davis case is scheduled for an initial appearance and arraignment at 2 p.m. June 29 in Charleston.
The sole count of bank fraud outlines how federal agents believe Davis devised a scheme to defraud BB&T, which was the lending institution he used to secure the large amounts of money needed to purchase the automobiles he would later sell. The car dealer's line of credit ranged from $12 million to $19.9 million during the times of the indictment.
The indictment also states that Davis made monthly payments on his multi-million dollar residence in Lesage and acquired two Leer jets "during the course of the scheme to defraud."
Davis was named in a 2004 civil lawsuit filed by BB&T. That civil suit, which is still pending, outlines many of the same allegations charged in this week's indictment.
IRS Special Agent Millie Williams declined comment regarding specifics of the criminal indictment Thursday morning.
"It is an allegation of wrongdoing, and the final decision regarding the wrongdoing will be left with the court," she said.
Williams said the investigation is ongoing and there is always potential for additional charges. She did not have any personal knowledge of additional defendants, but she said "that is often the case" in federal investigations.
The indictment charges that Davis would sell some of the vehicles without paying down the dealership's debt with BB&T. That left the bank with an outstanding debt and no collateral. The indictment states that caused Davis to be in default of the agreement and be "deemed to be 'out-of-trust.' "
"Lenders consider an out-of-trust situation to be very serious," BB&T lawyers stated in the bank's 2004 civil complaint.
The banking fraud charge states that Davis defrauded BB&T by falsely representing or causing to be represented the following items:
That the dealership "had a good title to vehicles that were to be added to the (lending agreement), when in fact the vehicles had already been sold.
That the dealership "owned and had a good title to vehicles that were added to the (lending agreement) free from any other lien" or other debts when the vehicles were received from a Zanesville, Ohio, dealership, when in fact "payment for such cars was due" to the Zanesville dealership.
That some of the vehicles within the lending agreement "were 'at auction' attempting to be sold when in fact these vehicles had already been sold."
The indictment goes on to explain that federal investigators believe Davis committed wire fraud when a fax machine was used to add some vehicles to his inventory with the bank, even though the added vehicles, also known as "P cars," had already been sold and did not exist within the dealership's inventory.
Then the indictment explains that federal investigators believe Davis committed money laundering acts when he moved about $4.3 million, in which much of the money was used to pay off the "P cars" that his dealership did not own or possess.
Money laundering is also alleged in the indictment when it describes Davis moving about $440,000 from the dealership to other accounts, many of which he had direct access to.
By Curtis Johnson
- Hurricane warning issued for used cars »»
- You'll be liable if your bank accepts a bogus check, even if it 'clears' »»
- Report Alleges Massive Fraud in Auto Sales »»
- Used auto sales fraud »»
- Automotive Sales Industry »»
- Pair Sentenced For Internet Car Sales Scam Took More Than $60,000 inFour Months From Nearly 30 Victims Across U.S. »»
- Online auto sales scammers to serve time »»
- A $55,000 Net Scam Warning »»
- J.D. Power Releases Used Vehicle Sales, Certification Study »»