Fiat Chrysler ‘cooperating’ with federal investigators

Michael Wayland
The Detroit News

Federal investigators are probing the U.S. sales reporting practices of Fiat Chrysler Automobiles NV.

The automaker, in a statement Monday, confirmed it is “cooperating with an (U.S. Securities and Exchange Commission) investigation into the reporting of vehicle unit sales to end customers in the U.S.” It went on to say it “will cooperate fully” with “inquires into similar issues” recently made by the U.S. Department of Justice.

“FCA will cooperate fully with these investigations,” the company said.

The statement also described how the company records its shipments: “In its annual and quarterly financial statements, FCA records revenues based on shipments to dealers and customers and not on reported vehicle unit sales to end customers.”

The investigations apparently stem from two Fiat Chrysler dealerships owned by Illinois-based Napleton Automotive Group. They filed a civil racketeering suit against the automaker in January, alleging the company, among other claims, offered dealers money to report unsold vehicles as sold. That complaint was amended in March to include additional Napleton-owned dealerships and to amend and add other details, according to court records.

A spokesman with the Securities and Exchange Commission declined to comment. Officials with the Justice Department did not respond for comment.

The amended federal lawsuit alleges that the automaker’s North American-based operation “knowingly endorses and encourages the false reporting of motor vehicle sales by directly rewarding its district managers and business center directors with monetary and quarterly bonuses which are directly related to reported vehicle sales numbers.”

The civil racketeering suit alleges that dealership principal Edward Napleton was asked to falsely report sales of 40 vehicles in exchange for $20,000 in incentives by Fiat Chrysler to the dealer. It says that would have been distributed to him “as a credit under the disguise as cooperative (‘Co-Op’) advertising support.” Napleton, the suit says, “immediately rejected” the alleged proposal.

A lawyer for the dealer group did not immediately respond for comment on Monday.

Fiat Chrysler at the time of the lawsuit said the “claim is without merit.”

“This lawsuit is nothing more than the product of two disgruntled dealers who have failed to perform their obligations under the dealer agreements they signed with FCA US,” the company said in January. “They have consistently failed to perform since at least 2012, and have also used the threats of litigation over the last several months in a wrongful attempt to compel FCA US to reserve special treatment for them, including the allocation of additional open points in the US FCA network.”

In March, Fiat Chrysler attempted to have the Napleton dealerships’ suit dismissed. It said the “plaintiffs have not, and cannot, remedy the gaping holes in the amended Complaint, because each of their claims is based on nothing but raw conclusions.”

The judge has not ruled on Fiat Chrysler’s request to dismiss the case, according to court documents.

FCA US at the time of the lawsuit had recorded 69 consecutive months of year-over-year sales gains — a streak that continued through the first half of this year.

However, starting with March sales, Fiat Chrysler stopped mentioning the sales streak in monthly press releases and added sections about determining monthly sales and forward-looking statements.

Fiat Chrysler’s U.S. sales were up about 6 percent to 1.15 million vehicles through the first six months of the year.

Fiat Chrysler confirmed the investigations following separate media reports regarding the investigations. Bloomberg News midday Monday reported that the Justice Department is in the early stages of investigating whether the carmaker violated U.S. securities laws.

The news outlet did not clarify what the investigation involved, but mentioned a lawsuit against Fiat Chrysler from earlier this year over its U.S. sales reporting practices “may provide clues about what prosecutors are looking at.”

Automotive News later Monday afternoon reported investigators from the FBI and the Securities and Exchange Commission visited Fiat Chrysler field staff in their homes and offices this month as part of a coordinated investigation into the automaker’s U.S. sales reporting practices.

A Fiat Chrysler spokeswoman declined to comment on the reported activity of the FBI and other details outside the company’s statement.

Fiat Chrysler shares on the New York Stock Exchange closed down 0.3 percent Monday at $6.73.

(313) 222-2504

Twitter: @MikeWayland