This has to be the most convoluted fraud involving vehicle finance that DealersEdge has come across
"Equity skimming" is a new term to us but it forms the basis for criminal charges against 20 people alleged to be involved in a complex fraud at a Utah car dealership and several auto leasing companies. Most of the people charged in the scheme claim they are unwitting victims of the fraud in which they were recruited to be "straw buyers" of vehicles that were to be leased to individuals with damaged credit.
According to a lengthy report in The Spectrum, the ringleaders recruited individuals with good credit histories to purchase luxury vehicles and lease them at a profit to supposedly wealthy clients with poor credit.
The alleged straw buyers understood that the rent-to-own contracts they agreed to were for doctors and other business owners adversely affected by the economic downturn - clients who were recovering economically and were reliable but still unable to secure loans for themselves.
The lawsuit alleges the vehicles were instead subleased without the buyers' knowledge for short-term rentals in Las Vegas under the direction another company, Vegas Highline Management Group, LLC, which was owned by the masterminds.
The short-term rentals actually involved less-reliable clients than those that were promised to the straw buyers. The promised lease payments eventually stopped coming in, leaving the straw buyers liable for loans on vehicles they have been largely.
"It is illegal to straw buy. It's called equity skimming," said a spokesman for Utah's Motor Vehicle Enforcement Division. "If the car is not actually yours, under the law you can't lease it out or sublease it without the consent of the lien holder."
The criminal charges allege that the ringleaders, who include a former dealership F & I manager, falsified loan documents and signatures to secure the loans, and shopped them out to a variety of lending institutions simultaneously.
While the three organizers of the scheme are charged with bank fraud and a long list of other crimes, the Deputy County Attorney handling the prosecutions said the other 17 people charged with communications fraud and equity skimming of a vehicle are people who regard themselves as victims and may be willing to provide further testimony about the operation.
"They are claiming they were victims but we see them as both (suspects and victims)," he said, adding that officials in Arizona and Nevada are pursuing independent investigations.
One couple said they purchased 12 vehicles with Executive Auto, including a Maserati, Porsche, several Mercedes Benzes, BMWs, a Bentley and a Land Rover. Four of the vehicles have been recovered, one of them after it was seized during a criminal investigation in New York. The couple are suing to recover the more than $750,000 in loans they signed for.