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Kia sues New England dealerships over alleged fake car sales
Kia alleges Dan O’Brien Auto Group submitted hundreds of fraudulent retail delivery reports for vehicles that hadn’t actually been sold to customers.
Kia America has accused a New England car dealer of falsifying retail records and pocketing hundreds of thousands of dollars in ill-gotten sales incentives.
In a federal lawsuit filed in New Hampshire last month, Kia alleged Dan O’Brien Auto Group and its top management submitted hundreds of fraudulent retail delivery reports for vehicles that hadn’t actually been sold to customers.
The lawsuit names six current and former O’Brien dealerships in New Hampshire and Massachusetts, as well as auto group CEO Dan O’Brien and COO Tom Kuhn. Hurling allegations of racketeering, fraud, conspiracy, and related claims, Kia accused the dealerships of shuffling inventory around to mask the purported deception.
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Defense attorney Paul Harris, who’s representing Dan O’Brien Auto Group, said the accusations are false.
“What this dealership did is perfectly legitimate,” he said in a phone interview.
What does Kia’s lawsuit say?
From January 2019 through July 2021, there was a “substantial discrepancy” between the number of new vehicles the O’Brien Kia dealerships had on hand and the inventory they should have had if their sales reports were accurate, the complaint alleged.
“At times, that discrepancy exceeded 350 new Kia vehicles,” the automaker claimed.
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The alleged ruse came to light in June 2021 when a Kia auditor visited the O’Brien dealerships in Norwood, Massachusetts, and Concord, New Hampshire, according to the complaint. The audits purportedly turned up dozens of vehicles that had previously been reported as sold.
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Kia put its estimated damages at more than $500,000, citing “at least” 280 retail delivery reports that supposedly contained false information. And the automaker says it wasn’t the only one to lose out; customers who eventually bought the cars in question also faced the possibility of truncated warranties and missed safety recall notices, Kia alleged.
Kia said it issued termination notices to each of the O’Brien Kia dealerships in January 2022 as a result of the Norwood and Concord audits “and the dealerships’ failure to adequately explain why these vehicles had been reported as having been sold.” By late 2022, all of Dan O’Brien Auto Group’s franchised dealerships had been closed or sold, or were up for sale, according to the lawsuit.
“Upon information and belief, O’Brien’s decision to dispose of the dealerships was the result, in whole or in part, of his and his dealerships’ fraudulent and unethical business practices,” Kia alleged.
Today, O’Brien’s operations have dwindled to a single location in Methuen, Massachusetts.
‘These were simply errors and oversights’
In a related federal case out of Massachusetts, Kuhn offered up an explanation for the discrepancies Kia said it found at the Norwood dealership.
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“For a small number of transactions, we determined that data entry errors or record-keeping oversights had been made by dealership personnel and agreed that incentive payments should be charged back by KIA for those transactions in accordance with KIA’s sales policies,” Kuhn wrote in a 2022 affidavit.
He added: “These were simply errors and oversights that occur at a high-volume dealership such as O’Brien KIA.”
A federal judge in the same Massachusetts case blocked Kia’s attempts to raise Racketeer Influenced and Corrupt Organizations Act (RICO) claims against the Norwood dealership, Harris pointed out.
The defense attorney accused Kia of trying to “venue shop” after the Massachusetts case was settled last year and said he intends to file a motion to dismiss the New Hampshire lawsuit.
Not the first run-in with the law
Still, this isn’t the first time Dan O’Brien Auto Group has faced accusations of fraud or deceptive business practices.
Over a six-month period in 2021, O’Brien’s Chrysler Dodge Jeep Ram dealership in Methuen falsely submitted at least 2,668 warranty claims to its franchisor for defective airbag inflators it hadn’t actually replaced, according to Kia’s lawsuit. In a separate complaint, however, the dealership alleged former employees were to blame for the supposed warranty fraud.
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Then, in 2022, New Hampshire Attorney General John M. Formella announced a $1.25 million settlement to resolve allegations of unfair and deceptive practices at the O’Brien Kia dealership in Concord.
According to the AG’s office, an investigation spurred by consumer complaints revealed that dealership employees “persuaded consumers into purchasing vehicles they could not afford using deceptive sales practices; falsely inflated consumer income information on loan applications; and forged the signature of a customer on loan paperwork.”
Kia cited the settlement and alleged warranty fraud as it leveled the latest attack on the O’Brien dealerships: “Making false representations in order to obtain money to which they were not entitled was a way of doing business for the Dan O’Brien Auto Group.”
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