Center Point Dealership Sued for Unpaid Loans & Alleged $12M Fraud

A $12.3 million fraud lawsuit filed by Stellantis Financial Services against Sky Auto Mall, a car dealership with locations in Center Point and Newhall, Iowa, has brought allegations of a complex scheme involving duplicate loans and obscured financial records to light. The lawsuit, filed this week, alleges that Sky Auto Mall and its owners – Igor, Yelena, and Alex Tovstanovsky – fraudulently obtained loans for the same vehicles from multiple lenders.

According to the lawsuit, Stellantis initially loaned Sky Auto Mall funds to purchase vehicle inventory. However, the dealership then allegedly secured additional financing from other lenders, including Ford Motor Company, on the very same vehicles. To conceal this practice, Sky Auto Mall purportedly transferred vehicles between its two locations, effectively hiding the duplicate loans. The lawsuit claims that this allowed each lender to believe they were financing unique assets.

The alleged scheme involved maintaining two sets of financial records: one accurate record detailing the fraudulent activity, and a distorted one designed to conceal the duplicate loans, as stated in the lawsuit. Stellantis alleges that Sky Auto Mall failed to repay the loans after selling the vehicles, retaining approximately $1.4 million in proceeds. The automaker is seeking $12.3 million in damages, excluding interest and fees, and a separate filing requests the seizure of all vehicles, parts, and equipment purchased with funds from Stellantis.

The potential seizure of assets could exceed $20 million, according to Stellantis. Attempts to reach Sky Auto Mall for comment on Thursday and Friday were unsuccessful, with representatives reportedly declining to comment. A sign at the Center Point location indicated limited operating hours, deviating from the dealership’s usual schedule.

The lawsuit has already begun to raise concerns among Sky Auto Mall customers. Jaylin Jones, who purchased a 2023 Ford Edge Sport from the Newhall location in early February, shared his experience. He was initially drawn in by advertisements promising zero-down payment options. They didn’t adhere to any of that at all, and it was disheartening because this is a lot of money to put down, Jones said. He described a series of changing down payment requirements, starting with $0, then $500, and ultimately reaching $5,000. I should have walked away then. However, I needed a new car…. he added.

The allegations against Sky Auto Mall center around a practice known as floorplanning, a common financing method used by auto dealerships. Floorplanning allows dealerships to borrow money to purchase inventory, using the vehicles themselves as collateral. The loans are typically repaid as the vehicles are sold. The lawsuit alleges that Sky Auto Mall abused this system by repeatedly using the same vehicles as collateral for multiple loans, effectively inflating its borrowing capacity.

Stellantis’s lawsuit claims that Sky’s principals acknowledged that they misled (Stellantis Financial Services) in conversations since Sky’s default and double flooring actions were discovered, including with regard to the financial reporting for Sky, suggesting an awareness of wrongdoing. This admission, if proven, could significantly strengthen Stellantis’s case.

The case highlights the risks inherent in auto financing and the potential for fraud within the industry. While floorplanning is a legitimate practice, it requires careful oversight and transparency to prevent abuse. The allegations against Sky Auto Mall suggest a systemic failure in these areas.

The lawsuit’s outcome could have significant implications for Stellantis and other lenders involved. A successful outcome for Stellantis could result in the recovery of the $12.3 million owed, as well as the seizure of valuable assets. However, the process of recovering these assets could be lengthy, and complex. The case also raises questions about the due diligence practices of the lenders involved and whether they could have detected the fraud earlier.

For customers of Sky Auto Mall, the lawsuit creates uncertainty about the validity of their vehicle purchases and the status of their financing agreements. The allegations of fraud could potentially lead to legal challenges and financial losses for those who purchased vehicles from the dealership. The situation underscores the importance of thorough research and due diligence when making significant purchases, particularly in the automotive sector.

The legal proceedings are ongoing, and Sky Auto Mall has yet to publicly respond to the allegations. The future of the dealership remains uncertain as the lawsuit progresses. The case serves as a cautionary tale for both lenders and consumers in the auto financing market, emphasizing the need for vigilance and transparency.