Fiat Chrysler Automobiles is accused in a federal lawsuit of paying dealers to inflate sales figures.
According to the suit, filed by two car dealers that are both part of the same larger dealer group, Fiat Chrysler offered to pay dealers to falsely report vehicle sales to boost the automaker's numbers in specific months.
Fiat Chrysler (FCAM) allegedly asked to dealers to falsely report sales of dozens of vehicles on the last day of the month, and then to "back-out," or undo the sales on the first day of the next month, according to the suit.
"FCA directly benefits from this practice as it results in the inflation of the number of year-over-year sales which, in turn, create the appearance that [Fiat Chrysler's] performance is better than, in reality, it actually is," according to the lawsuit.
Fiat Chrysler reported in early January that it had achieved 69 consecutive months of year-to-year sales increases.
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The automaker has denied the allegations, and accused the dealer group of filing suit because it was failing to meet its sales obligations. The company said it has not yet been served with the suit, but that it "believes that the claim is without merit." and was filed by internal counsel to the dealer group as [Fiat] has concurrently been discussing with the dealer group the need to meet its obligations under some of its dealer agreements."
Leonard Bellavia, an attorney representing the auto dealers, refuted Fiat Chrysler's claims in an interview with CNNMoney.
The two dealers are part of the Napleton Automotive Group which owns over 50 dealerships in the U.S. and is the 32nd largest dealer group in the nation, according to the industry newspaper Automotive News.
"How could someone who's number 32 in the country be underperforming?" Bellavia said.
Bellavia said other dealerships have also reached out to him to confirm their own experiences with these sorts of practices, he said.
One of Napleton's dealerships had agreed to falsely report the sale of 16 vehicles, according to the lawsuit. Then the group's owner Edward Napleton was offered $20,000 to falsely report selling 40 more new vehicles. Napleton refused, according to the suit, but that led him to discover the fraudulent 16-vehicle transaction.
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The payment from Fiat Chrysler for faking sales was to be counted as an "advertising credit," according to the suit, so it would not trigger an audit.
Fiat Chrysler also rewarded dealers by giving them more hot-selling cars in later months in return for falsely reporting sales of those vehicles in earlier months, according to the suit. The suit alleges that dealerships competing with Napleton's have benefited from the scheme.
It says that Fiat Chrysler's "pattern of conduct towards its dealers has been one of coercion and threats of termination having nothing to do with the actual performance of its dealers."
The suit also claims that Fiat Chrysler uses unrealistically high sales targets as a tool to intimidate dealers into participating in the scheme and names a number of regional sales executives who allegedly participated.
