Car buyers allege that loan scheme ensnared hundreds at local dealership; dealer says ‘errors’ were not widespread
photo by: Chad Lawhorn/Journal-World File Photo
Sasha Jefferson last fall drove all the way from her southeast Kansas home in Pittsburg to get what she thought was a good deal on a used BMW at Lawrence Kia. That luxury car instead has taken her to a place she never expected to be: the center of an alleged loan scheme.
The auto division of the banking giant Wells Fargo has determined that the income listed on Jefferson’s loan application was overstated, but not by Jefferson. The bank doesn’t specifically identify who overstated the income information submitted to the bank, but it casts suspicion on entities tied to the Lawrence Kia dealership, 1225 E. 23rd St.
The bigger suspicion, though, is whether hundreds of other customers of the dealership — one of the largest Kia dealerships in the region — also have had their loan applications inflated, putting them at risk of everything from loans they can’t afford to credit score disasters.
Jefferson, who said she already has received one settlement agreement from Lawrence Kia and has received an offer of another from a former employee of the dealership, believes loan abuses have been prevalent, likely numbering several hundred cases.
“There is just a lot of smoke being blown all over the place,” Jefferson said.
A representative of Lawrence Kia confirmed that the dealership had identified some “errors” on the part of at least one dealership employee. General Manager Chin Rajapaksha, though, said the dealership’s investigation has not found evidence that the income discrepancies number in the hundreds. However, he also acknowledged that parts of the investigation are unfinished, such as whether a separate, former employee also was involved with inflating loan values.
“It is an ongoing investigation, and we obviously have notified the appropriate authorities to rectify it and resolve it and make our customers happy,” Rajapaksha said. “End of the day, we stand behind our customers. If there is any kind of issue with our customers, we are going to take care of them.”
Mark Kavanaugh, a former employee of the dealership who has been the subject of allegations made by Jefferson and other parties, denies any involvement inflating income values. But he disagrees with Lawrence Kia’s assertion that the problems aren’t widespread. As a manager who handled customer service issues, he said he had personally talked to 40 to 50 Lawrence Kia customers who believe they had their income levels improperly inflated on their vehicle loan applications.
“A couple of them wanted to punch me in the face,” he said of customers who were irate at the thought that their financial data had been manipulated by an outside party.
A rogue tipster?
How did Jefferson and those 40 to 50 customers learn that their incomes had been inflated? Most often through a phone call, a text or an email from someone they had never known before.
The source showed them two sets of financial documents. One was a printout from a customer management system that all Lawrence Kia salespeople have access to. It is the database where they enter basic information about the potential customers they are dealing with, including information such as names, addresses and self-reported monthly income amounts.
The second financial document was the actual Lawrence Kia credit application, which is the document the dealership uses to provide financial information to potential lenders.
The documents showed that the monthly income amount on the actual credit application was much higher than the monthly income listed on the form filled out by the salesperson. In other words, the income totals being reported to lenders were higher than what the customers had told the dealership. Such higher income levels might make it more likely that a customer would be approved for a loan or give customers confidence in buying a more expensive vehicle than they originally envisioned.
The source also provided multiple document sets to the Journal-World. In all, documents were provided for 13 customers. Each document set showed incomes that were inflated by approximately 25% to 80%. Some examples:
• A City of Lawrence maintenance technician had his income inflated by $1,000 per month, or 24%;
• A supermarket clerk had his income inflated by $2,150 per month, or 78%;
• A call center employee had his income inflated by $3,000 per month, or 57%
• A hair stylist had her income inflated by $2,949 per month, or 48%.
And, then, there was Herbert Vance, an Oklahoma resident who also thought he had found a good deal worth making the trip to Lawrence. He recalls getting up at 3 in the morning to drive from his home near Grand Lake. He got to Lawrence only to find that the truck he had been interested in online had sold the night before, he was told.
But another used truck was shown to him. Negotiations were tough. Vance remembers a Kia employee — Kavanaugh, in fact — kept returning to him with another deal and another counteroffer. Vance, 76 years old, explained that he was on a limited income as a partial retiree who also was out of work because of an injury. Eventually, a deal was struck. He remembers leaving Lawrence about 9 p.m.
The credit application that got him his loan on his 2016 Ford Lariat pickup truck listed a monthly income of $9,961 per month, according to the documents provided to the Journal-World. The amount he had told the salesman he made was $2,000 per month, according to the documents.
Vance got copies of the documents through a text message from a person that didn’t leave his name but simply said he was a former employee of the dealership.
“When you look at the paper that they wrote my income down for a month and it had my name on it, I was concerned,” said Vance, adding that he was completely worn out by the time he would have been asked to sign any final documents. It is unclear, though, whether Vance ever signed the document. The copy of the credit application provided to the Journal-World was unsigned, as were most of the credit applications provided to the Journal-World. It wasn’t immediately clear how a lender processed a loan with an unsigned credit application.
Ultimately, Lawrence Kia offered to take back the truck, return Vance’s down payment and return his trade-in. Vance didn’t take the dealership up on the offer because he does like the truck. But now he is beginning to regret it. The monthly payment can be a bit much.
“I don’t have a lot of money, and I work all the time,” Vance said. “When I miss a day, I know it.”
Jefferson, a former teacher who now works for an education company, said the problems that a loan scheme could cause for unwitting car buyers were one of the reasons she was speaking out. She said she would like to know how many people have had their vehicles repossessed due to taking out a loan that they shouldn’t have technically qualified for. Even if it doesn’t reach that level, it still can do lots of damage.
“How many people have been able to keep their cars but have given up other things?” she asked. “What are you going to do? You have to have a car. Are you going to find another job? Are you going to decide that you can’t afford that certain day care and put your kids in a less than adequate place so you can afford your car? How have people’s lives changed so drastically to keep their cars?”
The Journal-World never was able to determine the identity of the person who provided the documents, which included large amounts of personal data, including Social Security numbers, addresses, dates of birth and other sensitive information.
In an undated, unsigned letter to Jefferson, the dealership acknowledges that it had investigated her transaction and others and had determined that the errors were “isolated to one individual.” The letter does not identify the individual, but the letter said the person had been “severely disciplined up to termination.” In an interview with the Journal-World, though, Rajapaksha said he couldn’t comment on whether the employee had been fired.
Rajapaksha declined to provide any information about the employee who the dealership determined was involved in the matter. He also acknowledged that more than one employee may have been involved. That’s different from what the dealership communicated in its letter to Jefferson, but he said new information had come to light that has the dealership taking another look.
“Given all the circumstances now, the attorneys are looking at everybody that is a part of this to really determine who is really involved,” Rajapaksha said.
As for the anonymous tipster, the dealership’s letter makes reference to a “former disgruntled employee” who is now “threatening my employee for his own personal gain.” The letter states that the former employee is engaged in a personal vendetta. Rajapaksha said the dealership has asked local police to investigate whether the former employee illegally took sensitive customer information from the dealership. Regardless, Rajapaksha said the dealership has changed its data storage systems to make it more difficult for dealership employees to access sensitive information such as Social Security numbers, dates of birth and other such data.
In the letter, the Kia dealership offered to let Jefferson cancel her loan, return the vehicle and get a full refund on all down payments and equity she had in the vehicle. That hasn’t resolved the matter, though.
“We just want to make sure our customers are taken care of, and, again, if you refer to that letter, that’s what it clearly shows,” Rajapaksha said. “But sometimes people are unreasonable and they like to look at a situation and possibly take more advantage of it, and that’s why I’ve had to get our attorneys involved. They are dealing with whoever they need to deal with.”
A Dec. 5 letter from Wells Fargo, which the Journal-World obtained, indicates that Jefferson had her income inflated by about 30% on the loan application. The letter says the dealership confirmed the income was altered, but the letter does not go into more detail about how or who altered the income. The letter goes on to say that Wells Fargo regrets “the service you received from Lawrence Kia did not meet your expectations. The letter also said Jefferson’s experience “will be shared with the appropriate parties, and this will be addressed appropriately.” Other details aren’t provided.
Jefferson declined to comment on how she ultimately settled the matter with Lawrence Kia. She did acknowledge that she had signed a settlement agreement with the dealership, which involved her dropping a complaint she had filed with the Kansas attorney general’s office.
But she said she didn’t view the settlement as stopping her from speaking out against what happened to her and others.
“I’m afraid this is happening to a lot of people who can’t afford their vehicle,” she said.
The anonymous source said he has documents for approximately 200 customers who had their incomes inflated, although it was unclear to the Journal-World what period those documents covered. The majority of the 13 cases the Journal-World has documents for occurred in a two-month period in September and October of 2019, with one case dating back to February 2017.
With the documents and information it received, the Journal-World was unable to make any determinations about who was involved in altering the income amounts, such as whether it involved a lone employee, others connected with the dealership or third parties.
Jefferson, though, believes Kavanaugh was involved in the inflation of the income. Kavanaugh denies any such involvement. He said Jefferson and other customers are mistaken about his former role at the dealership. He said was not involved in the financing of vehicles, and he believes a forensic investigation will show that he did not have the proper password credentials to electronically submit credit applications to lenders.
Kavanaugh believes he knows the identity of the former employee who has been contacting the customers. The former employee mistakenly believes Kavanaugh was involved in the employee losing his job at Kia, Kavanaugh said. That dispute has led the anonymous source to convince others that Kavanaugh was behind the scheme, Kavanaugh said.
“The reality of it is, I’m not the guy,” Kavanaugh said. “They are fishing in the wrong pond with me.”
Kavanaugh, though, did acknowledge that he had presented a settlement offer to Jefferson, after it became clear that she was considering taking legal action against him personally. Jefferson said Kavanaugh had presented her with a $10,000 settlement. Kavanaugh said that was accurate. He said he believed the dealership would pay for $5,000 of the settlement, and he thought providing $5,000 of his own money would be cheaper than the legal costs to defend himself in court. Rajapaksha said the dealership never did anything to urge Kavanaugh to settle with Jefferson.
Jefferson confirmed to the Journal-World that she had been in contact “with a couple of different attorneys.” Vance, the Oklahoma truck buyer, also confirmed that Jefferson had approached him about teaming up on a possible lawsuit. She didn’t provide details on what will come next.
“There are hundreds of other victims,” Jefferson said. “I am determined to see that the misconduct is put to rest. I want to make sure that the people responsible for allowing it to go on pay for it.”
For his part, Kavanaugh said he also has hired an attorney and expects to file a suit against Lawrence Kia soon. He said he ended up confronting executives at the dealership near the beginning of the year after it became clear to him that the incomes of multiple customers had been inflated on loan documents. His employment with Lawrence Kia ended in April, he said.
While the parties — Jefferson, the anonymous source and Kavanaugh — disagree about who was involved in inflating the incomes, they all seemingly agree on one point.
“There is no doubt that there is a loan scheme going on,” Kavanaugh said. “The documents speak for themselves.”
He also doesn’t think the documents are done speaking. He thinks federal law enforcement officials will become more involved in the matter as more details become public.
“I think the U.S. attorney, who lives in Lawrence, is going to have to look at the story, and I think people are going to get indicted,” Kavanaugh said.
After publication of this article, Lawrence Kia issued a statement that said, in part, any customers with questions or concerns about their loan can contact the dealership directly at 785-856-8700 during normal business hours.