FCA settles suit over claims of phony auto sales
Fiat Chrysler Automobiles NV’s U.S. unit settled an antitrust lawsuit claiming the company pushed dealers to submit fraudulent sales numbers to prop up its share price.
The allegations spurred a federal investigation into whether the figures filed with the Securities and Exchange Commission misled shareholders about the carmaker’s financial situation. Those probes are ongoing, FCA said. The settlement terms are confidential.
The lawsuit, filed in federal court in Chicago in January 2016, alleged racketeering, violations of antitrust laws and breach of contract. FCA initially won dismissal of the racketeering claim in October 2016, then again in July after an amended complaint was filed. The remaining case was headed to trial this year.
“FCA US is pleased we could reach an amicable resolution to this matter,’’ the company said in an emailed statement.
Nicole Navas, a Justice Department spokeswoman, declined to comment on the status of the U.S. investigation.
Stacked the deck
The dealers claimed that FCA “stacked the deck’’ against them “by soliciting fraudulent sales reports from certain dealers, and by using the numbers generated from these false sales to further subsidize plaintiffs’ competing dealers and to allocate hotter selling vehicles to them.’’ The case was brought by Napleton’s Arlington Heights Motors in Illinois and six other dealers. Their attorney, Steve Berman, declined to comment other than to say the settlement is confidential.
While the racketeering claims were dismissed, the dealers continued to pursue allegations of price discrimination and that FCA broke franchise agreements and violated dealer protection statutes in four states, including Illinois and Florida.
Fiat Chrysler, which restated the five and a half years of sales results in July 2016, said at the time that its counting methodology had been in place for decades and included safeguards to ensure sales weren’t double-counted.
The recalculation shortened the automaker’s previously reported sales-growth streak by three years, putting a dent in its comeback story after its 2009 bankruptcy. Fiat took control of the former Chrysler LLC as part of a government-engineered deal in 2009.
The allegations of falsifying sales figures and subsequent restatement also spurred two lawsuits by investors claiming securities fraud. The lawsuits, filed as class actions in Detroit federal court, alleged FCA artificially inflated the value of the company’s shares by falsely claiming an unbroken year-to-year sales streak. FCA settled the suits for $14.75 million, according to court filings.
The dealer case is Napleton’s Arlington Heights Motor Inc. v. FCA US LLD, 16-cv-00403, U.S. District Court, Northern District of Illinois (Chicago).