Fraud in the Dealership

Dealers work with a lot of numbers. What acceptable number, in dollars, should a dealer set as the threshold before terminating or prosecution an employee for theft?

Let me pose the question differently. What are you as a dealer willing to tolerate from one of your employees who is intentionally circumventing company policy for personal enrichment?

And is the unethical behavior more tolerable if it only adversely impacts customers, not the dealership itself?

This may seem like an easy question to answer, since theoretically no dealer would tolerate any employee taking advantage of the dealership or its customers.

The reality is that this precarious situation presents one of the toughest questions a dealer can actually face.

We have all have heard and read stories about controllers, office managers, accounting personnel and cashiers who have been caught stealing thousands of dollars, even hundreds of thousands of dollars, sometimes millions of dollars from the very dealerships that support and trust them.

We ask ourselves what could have done to prevent this outcome from being realized.

By reading the headlines alone, we would believe that the majority of the theft that occurs in dealerships is perpetrated by accounting or clerical personnel.

Is it possible dealership accounting and clerical personnel have a certain predisposition for this behavior?

That's unlikely, because the fact is that there can be bad actors in other departments of a dealership. They just don't make the headlines as often.

The reason that there is not as much media coverage of theft schemes in other dealership departments is not because they go undetected.

It is also not because the money involved is insignificant. Instead, the lack of public discussion about thefts that originate in revenue-producing departments is because these events tend to be more complex and less clear-cut.

Thefts committed by accounting and clerical personnel generally involve a paper trail. An examination can reveal exactly how much was stolen and for how long.

In revenue-generating departments such as parts, service and sales, situations where cash improperly changes hands or disappears are much harder to detect, and even harder to track and substantiate once they are discovered.

Typically, frauds occurring in revenue-generating departments often go unreported and unprosecuted for three main reasons.

In particular are cases where sales or F&I personnel have taken advantage of customers or where customer funds were taken. Those situations leave dealers hesitant to pursue legal action.

In unwinding these schemes, the dealer would have to go back and contact customers regarding suspect transactions, which could open a Pandora's box.

And, based on my first-hand experience, it can be challenging to get local law enforcement and district attorneys to prosecute some front-end frauds due to their complex nature..

In the last year, I've witnessed:

In all but the first case, these employees are still on the job. In the first case, the employee was fired but not charged.

A situation in which an employee intentionally circumvents dealership policies and controls for personal benefit is no different and no less harmful to a dealership than an employee taking money out of the cash register.

Phil Villegas is a Principal at Dealer Transactional Services, LLC, an affiliate of Morrison, Brown, Argiz & Farra, LLP, in Miami, FL. He can be reached at [email protected] or 305-318-8515.

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