Colorado regulators on Thursday began investigating allegations of fraud and deceptive sales tactics at two Denver car dealerships.
The probe of Don Massey Pontiac Buick GMC, 8120 W. Tufts Ave., and Phil Long Ford, 4600 S. Wadsworth Blvd., was prompted by a 9News investigation that hasn’t yet aired.
The state plans to issue subpoenas to banks and credit unions that process loans for Massey, looking for evidence that the dealership falsified car-buyers’ incomes to make the buyers eligible for bigger loans.
The state also will investigate allegations that both dealers deceived customers by selling them items such as extended warranties and security products without properly informing them.
The dealers said Thursday that they had not yet been contacted by regulators.
“We will investigate any allegation of wrongdoing at our dealerships,” said R. Carter Langston, spokesman for Sonic Automotive Inc., the Charlotte, N.C.-based owner of Don Massey. “If such an investigation reveals credible evidence of wrongdoing, we will take appropriate action.”
Privately owned Phil Long said in a statement that it has filed a police report regarding the leaking of confidential customer information to 9News, and it has requested an investigation by the Federal Trade Commission.
“We are in the process of contacting 10 of our customers and alerting them to this breach in security and looking at each transaction,” the company said. “We have reason to believe the files were taken to harm Phil Long Ford’s reputation.”
Colorado regulators were alerted earlier this month by 9News to the allegations from former salespeople and customers. 9News plans to broadcast the first day of a multipart series at 10 p.m. Monday, producer Nicole Vap said.
The Colorado Motor Vehicle Dealer Board, which regulates the industry, voted 5-2 Thursday to launch its investigation.
“The allegations concern consumers signing contracts with insurance products and vehicle warranties without their knowledge,” said David Dechant, senior director of enforcement for the Colorado Department of Revenue. “The second allegation concerns misleading paperwork being forwarded by dealers to financial institutions.”
Auto dealers say they don’t condone such practices, and many have put caps on profits earned from extras such as life insurance and extended warranties.
Sonic restricts prices on finance products and caps interest rates, Langston said.
“Our company’s highest priority is the fair and ethical treatment of every customer in every transaction. We believe that we have industry-leading policies and controls designed to ensure outstanding customer satisfaction,” he said.
Sonic, a public company and the nation’s third-largest auto dealer, has been accused of deceptive sales practices in the past.
Florida and North Carolina have investigated payment-packing and other allegations against Sonic. The chain’s flagship North Carolina dealership was the subject of a critical investigative report on “Dateline NBC” in December 2003.
Sonic and other dealerships also have been hit with class-action lawsuits in a number of states. Such a suit is expected to be filed in Colorado soon, said Duane Overholt, a former Sonic finance manager and industry whistle-blower.
Colorado’s quick response is unusual, Overholt said.
“They’ve taken affirmative action from the start. I’ve never seen that,” he said. “Most states hide it from the public so they can cut a deal.”
Staff writer Greg Griffin can be reached at 303-820-1241 or ggriffin@denverpost.com.
