This week, SubPrime Auto Finance News secured the affidavit connected with an FBI investigation of a South Carolina Mitsubishi dealership containing scathing details about store management manipulating trade-in values, down payments and income figures in an elaborate fraud scheme that might have impacted at least eight finance companies.

Investigators said witnesses who claim to be a former manager and another employee at Hoover Mitsubishi asserted that two other managers along with the store owner executed the fraud scheme that allegedly ran from November 2013 through last August.

The affidavit indicated the specific finance companies allegedly impacted included:

— AmeriCredit
— Santander
— Global Lending Services
— Exeter Finance
— PNC Bank
— Ally Financial
— Skopos Financial
— Veritas Credit Union

The FBI said in the affidavit that one witness told investigators Veritas Credit Union, which is based in Canton, Miss., “was particularly taken advantage of because Veritas Credit Union blindly matched any financing offer submitted by Hoover Mitsubishi.” The witness added one of the conspirators would “produce and submit fake approval documentation of a competitor to Veritas Credit Union, thereby compelling them to match the offer.”

How the fraud happened

According to the affidavit, the fraud orchestrators prepared two retail installment contracts, with one of the documents containing details about a “phantom” trade-in or down payment. One document was retained in the store’s accounting department and the other stored in a closet somewhere else at the dealership.

FBI investigators learned from a witness that the dealership misled the finance companies by manipulating manufacturer rebates on new models to appear as a customer’s down payment as well as inflating the applicant’s income. The witness said a manager would use a computer at the dealership to produce false cash receipts to fulfill finance company stipulation as proof of down payment, according to the affidavit.

When a trade-in allegedly was involved, the FBI affidavit indicated the applicant’s average interest rate would be lowered by 5%, but Hoover Mitsubishi kept much of that amount to increase gross profit.

Another cooperating witness told FBI about personally paying a store employee to fabricate false proof of residency for potential customers. That witness acknowledged having paid $20 per instance for the employee to generate a fabricated South Carolina Electric and Gas bill to show customer lived at the same residence a co-signor.

This process happened approximately 10 to 15 times during the timeframe of the alleged fraud, according to the affidavit.

The first witness “believed that many customers would never have been provided a loan had it not been for the doctored paperwork.”

The FBI learned from the witnesses that Hoover Mitsubishi retailed 50 to 60 vehicles monthly with approximately 30 of those units connected to the fraud schemes. “Between 2014 and 2018, (the witness) stated that both he and almost every employee of Hoover Mitsubishi benefitted financially from the schemes,” according to the affidavit.

The affidavit included an example of how one of the eight finance companies targeted in the scheme might have added fraudulent paper to its portfolio.

The document stated on approximately Sept. 5, 2016, PNC Bank funded the contract for a vehicle purchased retailed by the Hoover Automotive Group. PNC Bank bought the paper valued at $53,236.

“Approximately six months after the loan was granted, the borrower informed PNC Bank that the income reported on his car loan application was deliberately inflated by the Hoover Automotive Group,” the affidavit said. “In addition to more than doubling his income, the loan application also reported the borrower owned his residence, which was not true.”

Not all applications were approved

The FBI shared through the affidavit a pair of instances where additional due diligence during the underwriting process stopped a contract from being funded.

On approximately Sept. 25, 2015, the affidavit indicated Regional Acceptance declined to fund a contract worth $20,258.50 for a 2015 Mitsubishi Outlander Sport via a delivery Hoover Mitsubishi tried to complete. Regional Acceptance is a subsidiary of BB&T Bank that typically caters to consumers in the subprime credit space.

“After reviewing the loan application and supporting documents to include a suspicious pay stub, Regional Acceptance Corporation contacted the borrower to verify income. The borrower advised he had not provided a pay stub to Hoover Mitsubishi,” the affidavit read.

After contacting one of the alleged conspirators, “Regional Acceptance Corporation ultimately concluded the pay stub was fabricated by Hoover Mitsubishi personnel because the style of the pay stub was similar to that of other borrower’s pay stubs submitted previously,” according to the FBI document.

Investigators recounted another instance earlier in 2015 involving Capital One Auto Finance.

On approximately May 27, the affidavit said a customer attempted to secure financing for a vehicle purchase through Hoover Mitsubishi, which sent documents to Capital One stating the applicant resided at the same residence as the co-applicant.

“However, when the bank contacted and interviewed the applicants for a pre-funding interview, it was learned applicants did not reside together. The bank concluded the information was intentionally distorted in order to qualify for the loan,” the affidavit stated. “In this matter, no loan was provided due to misrepresentation on the loan documents and potential fraud.”