Dealer Pleads to Bank Fraud

The owner of several used-car dealerships in the Kansas City, Mo., metropolitan area pleaded guilty in federal court for his role in a bank fraud conspiracy that resulted in losses of millions of dollars by several financial institutions.

John A. Hart III, 51, of Kansas City, pleaded guilty before U.S. District Judge Ortrie D. Smith to the charge contained in information that was filed in lieu of the Sept. 21, 2011, federal indictment.

Between May 2000 and February 2009, Hart operated several used car dealerships at various locations, including Better Than New Automobiles, LLC, On Time Auto and Hart Family Motors.

Hart and others obtained loans and lines of credit from various financial institutions in connection with vehicles involved in his auto sales business. Hart admitted that he provided false and fraudulent financial information to obtain loans and lines of credit. Hart also admitted that he obtained multiple loans in which the same vehicle was pledged as collateral, and failed to disclose to the financial institutions that vehicles pledged as collateral for loans were already encumbered at another financial institution or in another loan.

Hart also admitted that he and his wife borrowed more than $1 million from First Missouri National Bank between Nov. 15, 2006 and March 26, 2008. They provided copies of their 2004 and 2005 income tax returns to the bank. However, according to the plea agreement, they did not actually file their 2004 and 2005 returns until 2009.

The filed returns were materially different than the tax returns submitted to the bank in support of their loan application. According to the plea agreement, the filed returns claimed a much lower adjusted gross income.

The government believes the loss attributed to Hart is between $2.5 million and $7 million. Under the terms of the plea agreement, Hart reserves his right to argue what the appropriate loss calculation should be at the sentencing hearing.

Under federal statutes, Hart is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution.

A sentencing hearing will be scheduled after the completion of a pre-sentence investigation by the U. S. Probation Office.

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Dealer Takes Anything in Trade

the oddest trade was a horse Najjar accepted in September as down payment on a 2010 Chevrolet HHR.

"We have an ad running that says, When other people say no, we find a way to go'," he said.

It caught the attention of a woman going through a divorce and in need of a car, he said.

When she showed up at his Pinellas Park, Fla., showroom, Najjar assured her he would be flexible on the trade.

"She said she had nothing of real value except a horse," he said. She showed him a video of Dallas, her buckskin quarter horse, and Najjar called his wife.

"I asked her, What do you think about owning a horse?' And she said, I always wanted one.'"

The woman had been paying more than her new car payment to feed and care for the 13-year-old gelding. Those costs now fall to Najjar.

"Somebody told me a long time ago, don't take anything on trade that eats," Najjar said. "I broke the rule I guess."

No matter. Najjar's wife and three kids - ages 5, 7 and 9 - are delighted.

Having to find a buyer for a traded item occasionally takes longer than expected and that can temporarily tie up Najir's cash flow, but it doesn't happen often.

"We try to turn things around pretty quick," he said. "We have a relationship with some local vendors (and) always turn to them first."

Najjar said the occasional hassle unloading the oddball trades are worth it.
They bring in an extra 10 or 15 deals a month.

He avoids taking anything illegal in trade and is careful to do everything by the book.

That includes valuing even the items he keeps and telling the lender he is taking, say, a horse as the trade in. Najjar said his entire sales staff is skilled at assessing the value of a broad range of items.

But if the trade in turns out to be worth less than the required down payment, it is the dealership that comes up short, not the bank.

Creditors don't mind the unconventional deals because all the risk falls on Najjar.
There are some limits to what Najjar will take on trade. He once refused two burial plots.

"He was asking too much money for them," Najir said. "I didn't know how to value them - and I didn't want to use them."

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