Tuesday, April 8, 2008

Car dealer accused of skimming millions

Dealer accused of skimming millions from bankruptcy accounts

(Hey, It was just a little float. He was gonna pay it back)

A British bank and a Virginia bankruptcy trustee have alleged that the dealer engaged in a massive fraud.

A bankruptcy trustee has filed a complaint against a well-known used-car dealer and his family seeking the return of more than $6 million that they spent on personal luxuries, including a Florida property, a housekeeper, and horse boarding and riding lessons, according to reports in the Hampton Roads Pilot.

The complaint filed in bankruptcy court alleges Charles Falk and his family enriched themselves in a massive fraud. The suit also names a former business associate.

In January, two finance companies affiliated with Falk Motor Co. filed for Chapter 11 bankruptcy protection, listing as much as $10 million in debts. Auto Finance Co. and AFC Automobile Receivables Funding II, or AFC II, are seeking to reorganize their finances through the bankruptcy.

A bankruptcy judge appointed a trustee to steer the finance companies through the process. After reviewing thousands of pages of financial records, the trustee discovered that Mr. Falk and his family members allegedly siphoned off nearly $6.5 million from accounts that were collateral for a loan from London-based bank NM Rothschild & Sons.

The bank initially believed that Mr. Falk took $2.8 million and spent it on personal items, such as building a Florida residence; horse boarding and riding lessons for his granddaughter; country club dues and meals; and maintaining and flying his private plane.

The trustee said in court papers that he has since found that Mr. Falk and his family improperly spent more than double the $2.8 million over two years on personal expenses.

In one example, one of the Falk finance companies paid the premiums on a $500,000 life insurance policy for a longtime employee. When the employee died, the company paid the $4,200 funeral bill, yet Mr. Falk himself was the beneficiary of the policy.

Mr. Falk, who founded his buy-here-pay-here business more than 30 years ago, is not himself listed as an owner or officer in the two finance companies. His son and daughter are listed as the principal owners.

In the complaint, the trustee charges 11 counts, including conspiracy, fraud and unjust enrichment. The complaint seeks the return of more than $6.4 million plus $350,000 in punitive damages.

Old Charlie should have learned Automotive F&I Compliance from the insider:

No comments: