Arbitrator awards more than $14 million to customers of Lawrence Kia who allege dealership conducted loan scheme
photo by: Chad Lawhorn/Journal-World photo
For more than three years, a group of customers of the Lawrence Kia dealership have been arguing that they were victims of a loan scheme that involved false information being submitted to lenders.
In the legal proceedings that followed, evidence even emerged that one of the dealership’s owners had the nickname of “Picasso” because fellow employees believed he forged the signatures of so many customers.
Now those customers are on the cusp of receiving millions of dollars from the dealership and a trio of its owners.
A group of 31 customers of the Lawrence Kia dealership have been awarded more than $14 million by a legal arbitrator in relation to the loan scheme allegations. Douglas County Judge James McCabria recently upheld the arbitrator’s decision, which involves a case that has been unfolding largely behind closed doors for more than three years.
The Journal-World in June 2020 was the first to report on allegations that officials with the Lawrence Kia dealership, 1225 E. 23rd St., were altering loan applications of some of their customers. The allegations at the time centered on the idea that local Kia officials were inflating the monthly income totals of customers who were seeking financing to buy a vehicle from the dealership.
A source at the time provided the Journal-World with documents for more than a dozen customers that showed income amounts on loan applications did not match the income amounts customers had provided to the dealership.
The contention was that 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.
Arbitrator Leland Shurin indeed found that the Kia dealership’s “scheme of misconduct” increased the dealership’s gross profit by roughly $1.2 million, according to the judgment in the case.
Shurin said evidence indicated there was a belief throughout the dealership that some of the respondents — the technical term for a defendant in an arbitration case — were forging signatures of Kia customers.
“Evidence adduced at hearings in this case showed Respondent Kevin Morrissy was known as ‘Picasso’ around the dealership because he forged customers’ signatures,” Shurin wrote in his judgement.
Exactly what Shurin determined Kia officials had done in their “scheme of misconduct” was difficult to ascertain from the court filings. Since most of the case took place in the arbitration process, the court file in Douglas County District Court does not provide detailed information about the testimony and evidence presented in the arbitration process.
But Shurin’s final judgments, which are a part of the court file, make it clear that he found the dealership and a trio of officers — majority owner James Patrick “Pat” Morrissy, his son and partial dealership owner Kevin Morrissy, and partial owner and general manager Chintaka Rajapaksha — had acted in ways that had to be punished. Specifically, he said all of the parties knew that what they were doing was wrong and could end up hurting people.
“[E]ach respondent was aware at the time of their actions of the likelihood that serious harm could arise from their misconduct,” Shurin wrote in the judgment.
Shurin also found that each of the parties acted toward the customers in question with “fraud and/or malice.”
But the big finding by the arbitrator was that while the Kia dealership was alleged to have profited by $1.2 million from the scheme, the dealership and its officers should be required to pay many times more than that to resolve the issue.
A court file in Douglas County District Court shows 15 customers who were part of the case were awarded a total of $13.88 million by the arbitrator. Ken McClain, an attorney for the customers, told the Journal-World another 16 customers received smaller awards from the arbitrator totaling about $1 million.
The group of 15 customers who received larger awards were deemed to be a special category of consumers under Kansas’ consumer protection laws, due to their age, disability or other such factors. As a result, those 15 were awarded punitive damages from the dealership. Additionally, the arbitrator is requiring the three officers of the dealership to pay punitive damages in their individual capacities.
In the filed judgment, Shurin wrote that he ordered those punitive damages because there has been no indication during the case that the individuals are remorseful over the scheme.
“Respondents — each of them — have not accepted responsibility for their acts, and they continue to deny all wrongdoing and liability,” Shurin wrote in the judgment. “They will not be subject to criminal penalties. Therefore, I find that the imposition of punitive damages is necessary and appropriate to accomplish the deterrent effect needed.”
Most of the 15 customers in the case who were granted punitive damages received an award of $800,000 to $900,000, although about 40% of the amount is earmarked to pay the fees and expenses of attorneys who worked the case.
When and whether the customers will get that money isn’t clear. Brian Boos, an attorney for the Kia dealership and its officers, said he was “not at liberty to comment on the pending litigation.”
That could mean an appeal of the arbitrator’s award is in the works, or it could mean that a settlement is being discussed. There are signs that a settlement is in the works. One of the parties in the lawsuit told the Journal-World this week that a multimillion-dollar settlement with the dealership is all but finalized.
“The case tentatively has been resolved to the satisfaction of both parties, and I can’t comment further than that,” McClain, the attorney for the customers, said.
McClain would not confirm the settlement dollar amount that the individual had told the Journal-World, but he did make comments that further indicated a settlement was being crafted.
“I’m very surprised that somebody is commenting on it because there is a confidentiality provision that we are going to abide by,” McClain said.
As for what’s next for the Lawrence Kia dealership, Boos, the dealership’s attorney, declined to comment on most questions posed to him by the Journal-World. That included a question about what the dealership wanted community members to know about the arbitrator’s finding that the dealership acted with “fraud and/or malice” and that it was aware that its misconduct likely would create serious harm for people.
Herbert Vance, a 78-year old Oklahoma resident, is one of the customers who has received an award from the arbitrator. He said his interactions with Lawrence Kia have created problems in his life. Documents in the case show that when Vance was applying for financing at Lawrence Kia he told the dealership his monthly income was $2,000. But a financing application prepared by the dealership lists his monthly income at $9,961.
Vance ended up buying a vehicle that was substantially more expensive than he had planned. He ended up keeping the truck — even after the income discrepancy was discovered and after Lawrence Kia offered to take the truck back and return his trade-in — but that decision has been taxing. Vance said he did end up falling behind on the payments for the truck.
“Financially, it ate my lunch,” Vance said of the deal.
Now, Vance is hopeful of getting some monetary compensation. The arbitrator has awarded him just over $870,000, but he said he knows it is unlikely he’ll end up with that amount. But what does come should still be significant, and it is only part of what he hopes comes out of this ordeal.
“It will help,” Vance said of any money. “I think the only way I would feel comfortable — and I’m not trying to get anyone thrown into prison — but I think they should not be in a position where they can do the same thing to anybody else.
“I would hate to see somebody else go through this same deal.”