Broome County Auto Dealer Settles Fraud Case

Attorney General Spitzer today announced that his office, through a voluntary effort of financial institutions and a warranty company, has resolved a case in which a Broome County used car dealer defrauded dozens of consumers by failing to pay off loans for trade-in vehicles and illegally keeping consumers' payments for extended warranties.

Thomas Gerow Gales, the owner of Gerow's Auto Sales in Deposit, has agreed to pay a judgment of over $101,000, including consumer restitution, civil penalties and court costs. The settlement - pending court approval in Broome County State Supreme Court - also bars Gerow Gales from owning an auto sales business in New York State unless he posts a $200,000 performance bond.

"Year in and out, auto problems remains high on my office's list of consumer complaints, both in this region and across the state," Spitzer said. "Failure to remit funds related totrade-in vehicle loans and extended warranties is a particularly egregious auto dealer practice because consumers are left being dunned for payment on loans for cars they no longer possess or with no repair warranty coverage for their used car."

According to the legal papers, Gerow Gales must pay at least 27 consumers approximately $96,000 in refunds. An investigation by Spitzer's office revealed that the auto dealership would accept a trade-in vehicle as partial payment toward the purchase of a vehicle, but would fail to repay the trade-in's outstanding loan, as promised. Gerow Auto Sales then resold many of the traded-in vehicles to other consumers. Without clear title, however, the vehicle's new owner would be unable to register it with the Department of Motor Vehicles and thus, could not legally drive the car on New York roads.

Other consumers complained that they had paid fees to Gerow Auto Sales - sometimes more than $1,600 - for extended warranties that the dealership never remitted to the warranty company. As a result, many consumers were left without warranty coverage for which they had paid.

As a result of Spitzer’s efforts, three financial institutions, NBT Bank, Partners Trust and Sidney Federal Credit Union, have issued lien releases valued at a total of almost $74,000 on six vehicles. While the foregoing three institutions are the only lienholders identified to date, Spitzer’s office will seek similar cooperation from any other lien-holders that come to light, to provide relief to defrauded consumers.

In addition, Spitzer’s office has obtained a commitment by the warranty company, The Guardian Warranty Company of Avoca, Pennsylvania, to honor the warranty contracts valued at a total of $22,600 paid for by consumers, even though Gerow Auto Sales failed to remit payment for the contracts.

The settlement agreement also requires Gerow Gales to provide a full accounting to the Attorney General's office of all monies received by consumers since January 2003, and to pay $5,000 in civil penalties and costs.

Consistently each year, auto problems rank at or near the top of consumer complaints to the Attorney General's office. In 2004 alone, Spitzer's office received 6,255 auto-related complaints, second only to complaints associated with credit. Included in those numbers were 188 auto complaints handled by Spitzer's Binghamton regional office. Since 1999, Spitzer’s office has commenced over 200 enforcement actions against auto dealers across the state.

Individuals wishing to file a complaint against Gerow's Auto Sales, or any other auto dealership, are directed to call the Attorney General's consumer help line at (800) 771-7755.

For tips on buying a used car, consumers are encouraged to visit the Attorney General's web page at www.ag.ny.gov.

Spitzer thanked Senior Automotive Facilities Inspector Timothy Furlong and Automotive Facilities Inspector John Hawkins of the Department of Motor Vehicles for their assistance in this matter.

This case is being handled by Assistant Attorney General Michael Danaher of the Binghamton Regional Office.