Wire Fraud and Bad Pawn: A Dark Tale

Do you store your Tupperware lids actually sealed “on” the base container or are you one of “those people” who throw the lid in a pile somewhere near the container? Then, when you need to use the container, do you have to search through the gigantic pile and try to source a lid that may or may not fit? Is that you? What’s wrong with you? Seriously? Sometimes, those lids don’t fit. For example, the lids shrink in the dishwasher. If that’s the case, get rid of the container. Recycle it or toss it. But, please, oh please, do not waste my time trying to find a lid that may or may not fit.

What’s wrong with you, seriously?

If it doesn’t fit, whether it’s Tupperware or compliance, don’t do it.

A Dark Dealership Tale

Speaking of which…did you hear about the dealer who is now jailed for 130 months (10+ years), defrauded twenty-three (23) lenders, and then forfeited $2,335,566.10? Let’s discuss.

Bobby Mayes, 51, of Norman, Oklahoma was convicted of scamming lenders, wire fraud, multiple counts of forgery, and aggravated identity theft at the Big Red Dealerships Group, which includes Kia and Mitsubishi stores. Also convicted, Charles Gooch, the Vice President and Compliance Officer of the Big Red Dealerships, and Courtney Wells, the Comptroller of the Big Red Dealerships who were complicit in the activities.

Here's a list of lenders who were included in the evidence against Mayes, Gooch, and Wells: Ally Financial, American Credit Acceptance, Americredit Financial Services, BBVA Compass, Consumer Portfolio Services, Credit Acceptance, Crescent Bank & Trust, Encore Automotive Acceptance Corp., Exeter Finance Corporation, FinancePoint, First Investors Financial Services, Flagship Credit Acceptance, Foresight Capital, Global Lending Services, Globe Acceptance, Kia Motors Finance, OU Federal Credit Union, Peak Acceptance, Prestige Financial Services, Santander Consumer USA, Sierra Auto Finance, Skopos Financial, and Tinker Federal Credit Union.

The Indictment

In Count 1 of the Indictment, filed on September 16, 2020, Mayes, Gooch, and Wells “knowingly, intentionally, and with interdependence, combined conspired, and agreed with each other and with others known and unknown to the federal grand jury to commit the offense of wire fraud.”

The wire fraud stemmed from “lenders offering loans, issuing counter-offers, negotiating, and approving financing arrangements on a digital interface with the Big Red Dealership employees.” When the loan was finalized, the lender would fund the loan and the monies would be dispersed by wire transfer, check, or cash disbursement.

The indictment states, “The object of the conspiracy was to obtain millions of dollars of loan proceeds from various banks, credit unions, and automobile financing lenders based on: (1) material representations and omissions to the lenders about the type, source, and amount of borrowers down payments or vehicle trade-ins; and (2) unlawful payments and bribes paid to at least one financial institution employee designed to bypass the scrutiny the loan officer was obligated to provide before approving such loans.”

The Schemes

The schemes included: “(1) paying the down payment for the customer but falsely representing to the lender it was a legitimate cash down payment; (2) creating false pawn shop transactions that made it appear that the customer had pawned personal property of significant value which generated a false down payment, the nature of which was concealed from the lender; (3) orchestrating false trade-in transactions where a customer was induced to trade-in a vehicle (whether it was operational or not or even whether the customer actually owned the vehicle) and then buy it back for $1.00; and (4) at least in one instance bribing a loan officer ($30,000) with one lender to avoid bank scrutiny of bad loan deals.”

At first, down payments were created where there were none and it was noted in the file that this was “King Cash.” Subsequently, Mayes and Gooch filed articles of organization with the Oklahoma Secretary of State for Norman Pawn & Gun, LLC. They no longer used fake down payments, aka “King Cash,” but created another method of faking down payments to secure loans for customers by using their own pawn shop. According to the indictment, this happened approximately 476 times where a customer provided items to be pawned and the dealership represented a cash down payment which was substantially larger than the pawned item. A check would then be cut from the pawn shop to the dealership. Then, someone would sign the customer's name on the back of the check, and deposit it in the dealership's account showing the down payment. (This is called Uttering Forged Security.)

Here are a few examples:

• The dealership accepted a broken Xbox and showed $1000 as a down payment.
• The dealership accepted an iPhone 5C and a used Amazon tablet and showed $3700 as a down payment.
• A salesperson generated a pawn slip for an Apple iPad 2 which translated into a $500 down payment and the customer never provided the iPad.
• The dealership accepted a PlayStation 4 and showed $2300 as a down payment.

In another scheme, customers were informed they could trade-in any vehicle regardless of whether it was operational and irrespective of whether or not it was even owned by the customer. The dealership created and documented vehicle trade-ins even when the customer was not actually providing the trade-in. Internal documents showed these trades as “In and Outs” or “Dollar Buybacks.” This happened approximately 636 times.

During litigation, there was even more drama where Mayes tampered with the case:

• He admitted to encouraging and providing funds for Wells to flee to Mexico
• He sent the court an anonymous email with false claims in order to obtain a new trial

Oklahoma City FBI Special Agent in Charge Edward Gray said in a statement, “The sentence handed down today should serve as a stark reminder that this level of greed comes with an even bigger price to pay.”

Do you like a moral? Do you like everything wrapped up nicely and in a tidy way? I do, too.

So, here it is:

When you have containers that are not up to the task you have, things inevitably become messy.

Spills will happen.

How do you catch the spills before the government gets involved? You install a governance, risk, and compliance (GRC) program.

The Pillars of Prevention

There are seven (7) pillars of an effective program:

• Implementing written policies and procedures
• Designating a compliance officer
• Conducting effective training and education
• Developing effective lines of communication
• Conducting internal monitoring and auditing
• Enforcing standards through well-publicized disciplinary guidelines
• Responding promptly to detected problems and undertaking corrective actions

A right-size program is like a right-size container lid. When events occur and you really need one, it’s too late to go searching for it. It should already be safely in place within easy reach, ready to do its job, reliably and without additional effort, like a well-fitting Tupperware lid.

Ensure you and your employees have the tools necessary to avoid messes like this one.

Otherwise, I’m going to ask you, again, what’s wrong with you?

Sources:

• Former Norman Car Dealership Owner Chris Mayes to Serve Nearly 11 Years in Federal Prison for Wire Fraud Conspiracy, Forgery, Identity Theft, and Obstruction of Justice
• Former Okla. Kia, Mitsubishi dealer gets nearly 11 years for fraud, tampering