DA PROBING USED CAR DECAL SCAM
Mar 21, 1996
Mobile County’s district attorney is investigating a Mobile used-car
dealership that reportedly sold hundreds of lower-quality models altered
to look like they were top-of-the-line.
The criminal investigation follows a civil lawsuit in which salesman Grady Walker testified that now-defunct Auto-Mart of the Southeast sold base-model used cars that were restriped and plastered with deceptive decals.
An attorney for the defendants, however, said Walker is “a liar.”
District Attorney John Tyson Jr. said Wednesday that his office’s investigation into Auto-Mart’s sales practices will determine if criminal charges are filed.
Walker testified in the suit filed by Iris Lewis of Mobile, who won a $1 million verdict March 6 in Mobile County Circuit Court against Auto-Mart and its owner-operators, Mel Summerlin and his daughter, Stacey.
Also named in the suit were Fidelity Financial Services of Mobile, which handled a large part of the financing for Auto-Mart, and James Hughes of Preferred Stripes Custom Graphics in Saraland, who affixed the decals for about $45 per car.
Fidelity settled with Mrs. Lewis for an additional $1 million on the second day of trial before Circuit Judge Chris N. Galanos. Jurors found against Hughes and Walker, including them in the $1 million verdict.
Hughes, who acted as his own attorney in the suit, could not be reached for comment. Telephone messages left on an answering machine at the number listed for Preferred Stipes were not returned.
Mrs. Lewis charged in her lawsuit that Auto-Mart sold her a Volkswagen Jetta GL on March 28, 1992, and falsely represented the car as the more expensive Jetta GLI.
She reportedly discovered her car was not a GLI when she took it in for repairs. Fake decals had been added to make the car look like the GLI, Mrs. Lewis charged in her lawsuit.
In a sworn statement, Walker said Mrs. Lewis’ allegations were true.
“It was a pretty car, but it wasn’t no GLI,” Walker testified in a pre-trial deposition. “The same stickers that had been put on the others were put on that car.”
Toby D. Brown, Mrs. Lewis’ attorney, said testimony indicated that Auto-Mart, formerly at 2677 Government Blvd., altered and sold hundreds of redecorated cars to unsuspecting customers.
“It was, in a way, a perfect crime because the customers didn’t realize they were being defrauded,” Brown said.
The Summerlins now live in Mississippi, where they operate Emerald Coast Auto Sales in Gulfport.
Their attorney, Michael Gillion of Mobile, said the Summerlins believe that Walker altered the cars and they deny all knowledge of any fraudulent activity.
“The Summerlins’ position is that Grady Walker is the biggest liar in Mobile County and that they were not even present when Grady Walker did all those things,” the attorney said Wednesday.
Gillion said Walker began making accusations against Auto-Mart after Summerlin fired him in 1992.
Mobile County court files, however, show that unhappy customers had sued the Summerlins as far back as 1991.
Paul and Rebecca Reeves of Mobile filed suit May 8, 1991, charging that Summerlin sold them a 1988 Cadillac DeVille, representing that the car was in good condition when in fact it had been wrecked. That case is set for trial June 26 before Circuit Judge Ferrill D. McRae.
Walker, who worked for Auto-Mart in 1991 and 1992, testified that he bought the cars at used-car auctions in Alabama, Georgia, Florida and Louisiana - but Summerlin ordered him to buy only certain types.
Walker said he bought cars whose vehicle identification numbers are largely the same for all models, from the stripped-down base model to the high-priced special packages. The first part of the VIN identifies the make and model.
“You buy a base Camaro V-8, it’s got the same serial number as an Iroc or a Z-28, and it’s about $3,000 difference in the value,” Walker testified. “When it got to the lot, they would change it to a Z-28 emblem.”
Customers who got the car thought they were buying the more expensive Iroc or Z-28, Walker said. Trucks and vans, such as a Ford Aerostar, were altered to make it appear they were the special “Eddie Bauer” sports package model.
A year later, Walker gave a sworn statement to Auto-Mart’s attorney, saying he didn’t remember giving the earlier deposition. In the second statement, Walker said he must have added the decals himself.
He retracted that second statement in his trial testimony, Brown said, saying it was “a total lie.” Walker complained of being harassed and assaulted after making his deposition, Brown said.
Other witnesses, including Hughes and Auto-Mart salesman Bobby Powell, corroborated Walker’s deposition testimony, which Walker repeated at trial, Brown said.
An invoice from Preferred Stripes, introduced as evidence in the trial, shows a $45 charge to put GLI decals on Mrs. Lewis’ car. Another lists a $100 charge to remove the “XL” decals from an Aerostar and replace them with “Eddie Bauer” decals.
In other deposition testimony, Walker said he bought wrecked cars because car titles in Alabama give no indication that a vehicle was “totaled” and salvaged.
Cars with salvage titles from other states could then be resold in Mobile with a “clean” title, Walker said.
The Legislature passed a law in 1995 that will require Alabama car titles to state whether a car has been salvaged. The law takes effect in October, said a spokeswoman for Sen. Steve Windom, D-Theodore, who sponsored the bill.
The Summerlins also ordered Walker to buy cars with broken and repaired odometers, known as “TMU” or “true mileage unknown,” Walker said. “So you couldn’t - you didn’t know how many miles was on it.”
If a car was too new to be listed in used-car guides, Auto-Mart would alter the original factory invoice as well as the car’s decals and striping, Walker said.
Walker testified that up to 99 percent of Auto-Mart’s deals financed through Fidelity were “bogeyed” in some way to make the cars appear more valuable.
Auto-Mart advertised for customers with poor credit or no credit, Walker said. They couldn’t afford the 15 percent down payment most finance companies would require; $500 down was about average for Auto-Mart customers.
To finance a sale with such a small down payment on a $7,000 used car, “you either bogey the car or bogey the contract,” Walker said.
“Bogeying the contract,” he said, meant Auto-Mart listed an inflated value for the car on the loan papers, which made it possible to get a higher loan and make the sale.
The manager at Fidelity Finance would finance the cars without checking to see if the customer was getting what he ordered, Walker testified. “We were paying him real good money to do so.”
Walker said he personally delivered envelopes containing $200 or more in cash to Fidelity’s manager.
Fidelity would finance the car at 95 percent of its listed value, keeping 10 percent and paying for the car with the remainder. The customers would pay up to 28 percent annual interest.
That rate of interest is legal in Alabama, although it would be considered usury in some states.
Plaintiff’s attorney Brown said the evidence against the Summerlins was “overwhelming.”
Auto-Mart customers who believe they have been defrauded can still file lawsuits, Brown said, because the two-year time limit for fraud suits does not normally begin to run until customers discover they have been defrauded.
To report information on the case to the district attorney’s office, call 690-8400.