Lujack Chevrolet to be sold to GM by year-end
General Motors and a Davenport, Iowa, Chevrolet dealership have settled a lawsuit that accused the dealership of engaging in “widespread fraudulent and unlawful conduct” to report “sham” new-vehicle sales to the automaker.
Under the “mutually beneficial resolution,” the dealership, Lujack Chevrolet, will be sold back to GM before year-end, according to a statement to Automotive News emailed from Don Reese, COO of Gurley Leep Automotive, the dealership’s parent company.
“All other Gurley Leep or Lujack GM and Chevrolet franchises remain in place as is,” the statement said. “The judge ruled that there was no fraud found as alleged in GM’s claims.”
“Manufacturers and dealers have disagreements from time to time,” the statement said. “We look forward to continuing our successful partnership with General Motors at our other GM dealerships.”
The lawsuit identifies Michael R. Leep Sr. as the store’s dealer operator.
A spokeswoman for GM said the suit was settled on or about Oct. 22. She declined to comment about the settlement, saying that its terms are confidential.
“Davenport is an important market for Chevrolet. We intend to continue to take care of our customers’ sales and service needs in the community, and we are putting plans in place to create a great customer experience,” GM wrote in a statement emailed to Automotive News by the spokeswoman. “However, we have nothing specific to announce at this time.”
According to gurleyleep.com, the Misha-waka, Ind., dealership group operates nine dealerships in northern Indiana selling GM’s Buick, Cadillac and GMC brands, as well as Audi, Ford, Honda, Hyundai, Kia, Lincoln, Mercedes-Benz, Nissan, Sprinter, Subaru and Volkswagen.
The group also operates 12 stores in Iowa under the Lujack name, including Lujack Chevrolet and other dealerships selling Audi, Honda, Hyundai, Kia, Lexus, Mazda, Mercedes-Benz, Nissan, Porsche, Toyota and Volkswagen.
The group also owns Capital Honda in Okemos, Mich.
GM filed the federal lawsuit in January 2013, saying that the Chevrolet dealership committed fraud by reporting sales of new vehicles to retail customers, then transferring those vehicles to other affiliated non-GM dealerships for resale as used vehicles.
The “scheme is known within the Leep enterprise as ‘Daisy Chain,'” GM claimed in court documents.
“Dozens, if not hundreds of Leep’s reports of bona fide retail sales to individual customers were false,” GM’s lawsuit said. “Leep has thereby breached the dealer agreement and violated applicable law.”
The lawsuit alleged that incentives were claimed for “some or all of the purported buyers” and numerous fraudulent, misleading and improper customer surveys were submitted.
The Chevrolet dealership wrongly received thousands of dollars in payments from GM under Standards for Excellence, a program that rewards dealers for increasing sales and hitting customer satisfaction goals, the lawsuit said.
GM said in the lawsuit that the Chevrolet store’s performance was “substandard” for an extended period and reported as few as 38 sales in February 2011. But its sales rose to 282 units in November 2012 and “were among the highest of any Chevrolet dealership in the country,” according to court documents.
GM said in its suit that the vehicles were purchased by employees of affiliated dealerships with money from the Chevrolet dealership and then “funneled to Leep-affiliated dealerships.”
For example, GM said that when the Chevrolet dealership provided the names of people who bought the vehicles, one Leep-affiliated dealership employee bought 27 vehicles between Oct. 8 and Dec. 5, 2012.
It also said that a Nov. 10, 2012, ad for Gurley Leep Honda touted a “2013 Chevy Malibu Blowout” featuring vehicles “like new — under 100 miles” for $19,999.
Some of the vehicles involved in the alleged scheme “still had affixed the window sticker that accompanies new vehicles, a Leep Chevrolet vanity plate, and original factory plastic seat wrapping when displayed at Leep-affiliated dealerships and offered for sale as used,” the lawsuit stated.
Gurley Leep began operating the Chevrolet dealership in May 2007. It was among the dealerships GM marked for closure under its bankruptcy reorganization in 2009, the lawsuit said. The company accepted a wind-down agreement and was to close by Oct. 31, 2010. But the store was reinstated by GM after filing for arbitration.
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