Ford Motor Credit Co. claims it is owed $112 million from Reagor Dykes Auto Group and owners Bart Reagor and Rick Dykes, for “hiding what may be one of the largest floorplan financing frauds in the history of the U.S. from Ford Credit,” the captive said in a motion filed Jan. 7.
Ford Credit claimed that the dealer group allegedly falsified sales information to the captive, obtained advances under false pretenses, and sold more than 1,100 vehicles without repaying their floorplans, the motion says.
An accountant with the West Texas dealership chain had testified in August 2018 that 185 vehicles were “double floored,” meaning that one Reagor Dykes dealership obtained financing for a vehicle, then the same vehicle was transferred to another Reagor Dykes dealership and financing was secured.
“Ford did eventually detect VINs that were double-floorplanned, in a retrospective analysis,” Frank McKenna, chief fraud strategist at PointPredictive, told Auto Finance News.
Detection time for these fraud schemes is often delayed because lenders typically analyze dealership performance retrospectively over the past three to six months, McKenna said. “They look at defaults or perform audits on large blocks of loans to see if everything represented was truthful,” he said. “Fraud can perpetuate for long periods of time because there is a significant lag in between when the fraud occurs and the investigation or audit takes place.”
The transfer of vehicles between dealerships owned by the same entity may have allowed the dealership to address discrepancies or to claim one-off errors, thereby going undetected by the lender’s on-site inventory audits, Richard Gottlieb, a partner in the financial services group at Los Angeles-based law firm Manatt, Phelps & Phillips LLP, told AFN.
In a separate practice, the dealership allegedly delayed sales dates by 55 days enabling it to obtain floorplan financing for 147 vehicles it had already sold, according to Ford Credit’s lawsuit. Reagor and Dykes have until Jan. 29 to reply to Ford Credit’s motion. Ford Motor Credit declined to comment.