The Fresh York Times
April 17, 2014
Fresh York authorities show up to be getting closer to filing charges in connection with an investigation into accusations of kickbacks being paid to salesmen at high-end car dealerships in the Fresh York area. The investigation is part of a broad national crackdown on businesses seeking to turn a quick profit by exporting luxury cars from the United States to China.
Two weeks ago, in an indication that the investigation has progressed, Prestige Motors, one of the largest luxury car dealers in the Fresh York region, fired or suspended a half-dozen executives after an internal inquiry by the law hard Drinker Biddle & Reath, said two people briefed on the matter but not authorized to speak publicly. The activity was a response to the investigation being led by Fresh York State’s attorney general, Eric T. Schneiderman, whose office has begun contacting some of those Prestige employees.
The investigators are looking at several dealerships in Fresh York and Fresh Jersey that sell Mercedes, BMWs, Range Rovers and Porsches to determine whether sales executives sold fresh cars to businesses engaged in exporting luxury vehicles to China. Fresh cars can be resold in China for as much as three times the sticker price here because of the high request in cities like Shanghai and Beijing for luxury vehicles, said the people briefed on the matter.
The investigation centers on accusations that some sales executives at luxury auto dealerships took bribes or other payments from these exporting businesses, which typically pay local residents to serve as “straw buyers” who claim to be buying the cars for themselves. The straw buyers come to the dealerships with wallets total of cash to purchase cars that typically retail for $55,000 to $75,000 and are supposed to be sold only for domestic use.
It is not clear what laws, if any, the export businesses are violating. In some cases, the authorities have claimed that car export firms violated United States law by using deception to purchase cars and also sometimes submitting falsified shipping documents to conceal the fact the cars were freshly purchased. Lawyers for the firms counter that there is nothing inherently illegal in buying a car in the United States and shipping it overseas and that government lawyers were effectively getting involved in a commercial dispute inbetween auto manufacturers and export firms.
Matt Mittenthal, a spokesman for Mr. Schneiderman said, “Our investigation is ongoing,” adding that “it is not yet clear which laws are being violated.”
Mr. Schneiderman’s office, along with agents from the Secret Service and the Department of Homeland Security, began investigating the activities at Fresh York-area car dealerships last fall. Several months earlier, the Secret Service began a broad national crackdown in a half-dozen states on automotive firms that specialize in exporting freshly purchased luxury cars to China and other overseas countries.
Representatives from the two federal agencies recently met with lawyers in Mr. Schneiderman’s office to discuss the investigation and are still determining whether to pursue the matter in a criminal or civil court, said another person briefed on the matter but not authorized to discuss it. The inquiry by Mr. Schneiderman’s office, if it results in criminal charges, would be a significant escalation in the government crackdown, and potentially put a further chill in the profit potential of this type of business.
To date, most of the deeds have involved civil forfeiture brought by federal prosecutors in Florida, Fresh York, Fresh Jersey, Ohio and South Carolina. In those states, the authorities have seized cars and frozen the bank accounts of the export firms in an attempt to squeeze this gray market export business, which is believed responsible for sending as many as 35,000 fresh luxury cars a year from the United States to China, Russia and other countries.
Theresa Boylan, a spokeswoman for Prestige Management Services, which operates seven Prestige Motor dealerships in northern Fresh Jersey, declined to confirm the firings and dismissals or Mr. Schneiderman’s investigation. But she said the company, which also has dealerships in Colorado and Connecticut, “continues to look closely at its business operations and will take adequate act in any situation involving improper export sales.”
This month, the export firms scored a legal victory when a federal judge in Ohio ordered the federal government to come back money and cars it seized in September from a car export business based in Los Angeles involved in reselling freshly purchased luxury vehicles. Judge Sandra S. Beckwith, of the Federal District Court for the Southern District of Ohio, said that prosecutors had failed to produce sufficient evidence of wrongdoing by the car export company to justify the asset freeze.
But government authorities suspect that some of the money being used by the export companies is coming from foreign buyers looking to launder money made in illegal activities. The authorities also contend that the car export business subjects dealerships in the United States to potential penalties from foreign auto manufacturers that have placed thresholds on where their cars are sold around the globe and the prices they are sold for.
Reports of auto salesmen taking cash payments to look the other way at the activities are not limited to dealerships in the Fresh York area. A person who works for an export rock hard, but declined to be identified because it might expose his rock-hard to potential liability, said dealers in other states asked him for cash payments of $Five,000 to overlook the fact a car was being sold to an exporter.
Others in the export industry said the government’s yearlong crackdown was kicking off to have an influence on overseas request and had caused some wealthy buyers in China to back away from transactions.