The Federal Bureau of Investigation has uncovered a fraud scheme perpetrated by a Charleston, S.C.-based dealership, Hoover Mitsubishi, spanning nearly five years, according to an affidavit filed with the U.S. District Court for the District of South Carolina.
The affidavit implicates the dealership’s general manager, finance manager, and owner, along with a former general sales manager, listed as a cooperating witness (CW1).
The scheme involved the four parties falsifying “phantom” trade-ins to incentivize the sale of contracts to auto lenders for borrowers with no or poor credit, according to testimony by CW1. The affidavit notes that the average customer’s interest rate was lowered by 5 percentage points as a result of including the phantom trade-in.
Further, involved parties would falsify customers’ pay stubs and inflate their income, list manufacturer rebates as down payments, and produce false cash receipts, thereby making loan applications more favorable to lenders.
“CW1 states that he believed most, if not all, of the subprime customers would never have been provided a loan,” the affidavit said, adding that CW1 believed that Ally Bank, Americredit, Exeter Finance, Global Lending Services, PNC Bank, Santander Bank, Skopos Financial, and Veritas Credit Union, among others, were affected by the fraud.
In addition, a second cooperating witness (CW2), listed as a salesman with the dealer from 2012 to 2018, corroborated CW1’s testimony, adding that he personally paid other Hoover Mitsubishi employees to falsify proof of residency forms to show that would-be borrowers lived at the same residence as a co-signer.
Both cooperating witnesses said that Veritas Credit Union was especially affected by the fraud because of an outstanding arrangement with Hoover Mitsubishi that had the credit union blindly matching any competing financing offer submitted by the dealership, which were also falsified.
CW2 estimates that of the 50 to 60 contracts sold each month, approximately half involved one or more of the fraud schemes.
