Erie car dealer admits to fraud
An Erie car dealership has admitted to bank loan fraud and will be required to pay over $2,000,000 as part of a deferred prosecution agreement.
The U.S. Attorney for the Department of Justice, Western District of Pennsylvania, announced the agreement on Friday with Hallman Chevrolet.
Under the agreement, Hallman Chevrolet will pay a penalty of $1,400,000 and $737,000, according to a statement from the DOJ.
“According to the agreement… from 2009 to 2015, with knowledge and acquiescence of David Hallman, Hallman Chevrolet engaged in a bank fraud scheme and a conspiracy to commit bank fraud scheme, for which Hallman accepted responsibility,” the statement indicated.
“The parties entered into a comprehensive deferred prosecution agreement to hold Hallman Chevrolet accountable for its actions and to compensate lending institutions.”
“For over six years, Hallman Chevrolet defrauded financial institutions throughout the region by systematically falsifying loan documents in hundreds of transactions,” United States Attorney Scott Brady said. “The perpetration of large-scale auto loan fraud schemes in western Pennsylvania must stop.”
Brady said that this agreement will “put on notice” those who consider engaging in these schemes.
“In addition to the combined fine and restitution exceeding $2 million, the Policies, Procedures, Compliance and Ethics program required by this agreement should serve as a template for responsible, ethical conduct within the industry.”
Hallman engaged in “a fraudulent down payment scheme by manipulating bills of sale and bank lending contracts to hide from financial institutions the true source of customer down payments,” according to the DOJ. “During the scheme, Hallman Chevrolet customers were coached by Hallman Chevrolet employees to provide jewelry, most of which was low-value costume jewelry, to Hallman Chevrolet in return for Hallman Chevrolet making it appear valuable down payments had been provided by customers.”
That led “the financial institutions into making unsafe investment decisions… Financial institutions were led to believe customers used their own money for the down payments making it appear they were more credit-worthy when in effect, the financial institutions themselves had unknowingly supplied their own loan funds to cover the fictitious down payment. Through the scheme, Hallman Chevrolet earned sales and profits that were otherwise impossible.”
The DOJ said that the loan default rates to the financial institutions “were over double the industry standard” due “primarily to the fact that customers had paid no money of their own for the purchase of the vehicle and had little incentive, and no actual financial ability, to pay for the loan balance.”
Over 600 separate sales were falsified in this manner – with a total loss to the financial institutions of over $1,000,000.
Deficiencies in the company’s legal compliance program were also uncovered and have “substantially improved” since late 2017.
In addition to the penalty and restitution, the DOJ said that “Hallman Chevrolet must engage in a substantial corporate compliance and ethics program and a vigorous monitoring and audit regime” and explained that criminal proceedings could be undertaken if the terms of the agreement are not adhered to, noting that federal prosecutors will be permitted to use the stipulation of facts outlining the scheme in its prosecution.
“The FBI treats these types of crime very seriously,” Special Agent in Charge Robert Jones said. “We work to hold accountable those who undermine the integrity of these types of institution.”