Lawsuit Looks to Gain Restitution Order Against Unlicensed N.Y. Car Dealer

September 16, 2004

New York Attorney General Eliot Spitzer announced that his office has obtained a restraining order against two operators of an unlicensed used car dealership that reportedly duped consumers into buying vehicles that were in some instances unsafe for the roads.

Kevin Smith and Jay Shaffer, who have operated the Auto Store in both Jamestown and Ellicott, were served with a lawsuit alleging that they operated an unlicensed auto dealership and auto repair shop, sold used vehicles that were unsafe, made illegal, high-interest rate loans, and engaged in persistent and pervasive fraudulent and deceptive business practices.

Numerous consumers reportedly complained that they were duped into signing rent-to-own contracts when they believed they were signing purchase agreements. Furthermore, nearly 30 consumers have been unable to obtain clean title for these “rental” cars because the Auto Store had pledged the vehicle as collateral on loans they stopped paying. These consumers now face possible repossession by the finance company and may be unable to register their vehicles.

In addition, Smith and Shaffer repeatedly sold used vehicles to consumers that reportedly required hundreds, if not thousands, of dollars in repairs within days of the sale. In fact, a senior automotive facilities inspector from the Department of Motor Vehicles indicated that the vehicles had at least one – and in many cases multiple – defects that would not permit a dealer to certify the vehicle to be in a condition safe for the roadways.

Spitzer’s lawsuit also alleges that Smith and Shaffer engaged in the other illegal activities including:

* Repossessing motor vehicles for fraudulent reasons;
* Accepting trade-in vehicles as payment toward a new vehicle, but failing to credit the consumer’s account for the amount;
* Charging consumers for repairs they did not make; and
* Violating Vehicle and Traffic Law that requires the operator of a auto dealership and the operator of a auto repair shop obtain a license from the Department of Motor Vehicles.

The temporary restraining order signed by Chautauqua County State Supreme Court Justice Frederick Marshall bars Smith and Shaffer from: selling, leasing or renting vehicles; repossessing vehicles without a court order; making loans; destroying or disposing of business records; and transferring or disposing of any funds derived from the Auto Store business activities.

In filing the lawsuit, Spitzer’s office seeks to bar Smith and Shaffer from owning or operating any business in New York State unless they post a $250,000 performance bond. Spitzer also seeks a court order voiding all usurious loans, requiring full restitution for injured consumers and civil penalties and costs for their violations of law.

In a case prosecuted by Chautauqua County District Attorney James Subjack, Smith and Shaffer in June pled guilty to five felonies related to their operations at the Auto Store. Specifically, they pled to Scheme to Defraud in the First Degree; two counts of Offering a False Instrument in the First Degree; and two counts of Forgery in the Second Degree.

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