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Jul 8, 2009 6:47 pm US/Central
Lawsuit: Hecker Gained Through Fraud, Fake Letters
MINNEAPOLIS (WCCO) ―
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The lawsuit, which was filed today in the Minnesota district U.S. Bankruptcy Court, alleges a significant portion of Hecker's debts were obtained through embezzlement and fraud. (File)
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A new lawsuit alleges that some of bankrupt auto tycoon Denny Hecker's still-unpaid debts owed Chrysler Financial after a $477 million judgment should not be erased due to bankruptcy filings.
The lawsuit, which was filed today in the Minnesota district of the U.S. Bankruptcy Court, alleges a significant portion of Hecker's debts were obtained through embezzlement and fraud.
One of the suit's allegations details letters tendered to Chrysler Financial, ostensibly from Hyundai Motor America, saying they were offering to sell nearly 5,000 cars to Hecker dealerships and would guarantee to purchase any unsold within a year of delivery. Chrysler Financial agreed to the purchase.
The lawsuit alleges Hecker forged these notes, knowing that Chrysler Financial would not have purchased the vehicles without their being "guaranteed units."
Only 605 of those purchased vehicles were actually sold, leaving Chrysler Financial with a $65 million purchase obtained, so the suit alleges, through fraudulent misrepresentation.
"I think somebody's going to take a look at this very carefully. I'd think the FBI would be very interested in this. Again these are allegations, but if they're true, this is a serious allegation," Joe Daly is a law professor at Hamline University.
The lawsuit also alleges Hecker deliberately failed to pay -- and implicitly directed his dealerships to not pay -- proceeds generated by the sale of thousands of Chrysler Financial-financed vehicles.
The lawsuit concludes that, because of fraud and misrepresentation, $83 million of the nearly $365 million Hecker still owes Chrysler Financial should be declared nondischargeable, meaning they would have to be paid even following a declaration of bankruptcy.
Last month, a suit filed on behalf of a U.S. bankruptcy trustee accused Hecker of using Advantage Rent-A-Car businesses as a diversion to move nearly $150 million from his Southwest Tex auto leasing businesses, allegedly overbilling "the Debtors, (who) did not receive sufficient or reasonable consideration, or reasonable equivalent value."
"Both sides seem to be indicating that he's stolen money. They can't do anything other than go to bankruptcy court as a civil matter and say please don't discharge him from these debts," said Daly.
Hecker has denied the charges in the Advantage suit saying he put millions into Advantage that he never got back.
Bill Mohrmon an attorney for Hecker issued this statement: "Mr. Hecker unequivocally denies Chrysler Financial's allegations. Simply put, no funds were embezzled out of the Hecker businesses and no contracts were forged or doctored… Mr. Hecker intends to vigorously defend against Chrysler Financial's claims."
Earlier in June, Hecker filed for personal bankruptcy, claiming he owes up to 1,000 creditors as much as $1 billion.
Federal investigators also recently raided Hecker's homes and businesses, searching for evidence that Hecker didn't pay sales taxes on his vehicles sold, and that he wasn't getting license plates and titles for customers. The Internal Revenue Service said Hecker owed at least $2.6 million in income taxes.
(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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