Q&A: Car Fraud Puts Dealers on the Hook

In February, Jerry Seinfeld sued European Collectibles of Costa Mesa, Calif. The comedian and avid Porsche collector accused the dealership of selling him an “inauthentic” 1958 356 A 1500 GS/GT Carrera Speedster in 2013. The purported fraud was discovered shortly after Seinfeld resold the vehicle three years later.

To learn more about car fraud and how dealers can avoid trading in counterfeit vehicles, Auto Dealer Today reached out to attorney Bruce Shaw. From his offices in Willow Grove, Pa., north of Philadelphia, Shaw, who is not involved in the Seinfeld lawsuit, has traveled the nation to represent dealers, collectors, and insurance companies victimized by increasingly sophisticated counterfeiters.

ADT: Bruce, how did car fraud become one of your specialties?

Shaw: Prior to becoming an attorney, I owned a chain of high-performance shops, parts stores, and a body shop, and I did a lot of work on hot rods in the ’60s and ’70s. When I became an attorney, I sold my stores and it just kind of followed me. As these older cars were becoming more and more valuable and people started counterfeiting them, like you have the possible problem with the Seinfeld case, people just started calling me and one thing led to another.

As of now, we probably do more collector-car fraud actions than anyone. We litigate across the United States, we have clients in England and Australia, and we’ve worked on cases in Canada, Italy, Dubai, and various other countries. So we’ve been doing it for quite a while. But luckily I know all these cars inside out — mostly American cars, but we also do Jaguars, Lamborghinis, Ferraris, what have you. But the most counterfeited are American cars.

ADT: How is it done?

Shaw: Using the Chevrolet Camaro as an example, there are some Camaros that are very unique because they didn’t make many of them. Some are worth $150,000 and some are worth a lot more than that. They’ll take a cheap Camaro and strip everything off. They look the same underneath. Then it’s just a matter of putting all the right accessories back on.

ADT: What about the documentation?

Shaw: Well, with these high-definition laser printers, a lot of the paperwork can be counterfeited too. What they call a build sheet, just an 8½-by-11-inch piece of paper, that when the car came down the assembly line, it gave the workers the instructions for putting this rare car together. Every car club website has all the information. A counterfeiter can make them pretty convincing, even age the paper to make it look more authentic.

ADT: Who are the perpetrators?

Shaw: There’s all different people, and each one tends to specialize in certain cars. One person may specialize in Camaros, and when he goes to flea markets, he picks up all the parts he needs to put the car together. Also, there’s a lot of manufacturers out there that reproduce parts for cars you can’t buy anymore. And there seems to be no shortage of people that want to pull these frauds over.

ADT: Are we talking about hobbyists building one or two fakes a year or career criminals running big shops?

Shaw: A decent amount of the people who counterfeit cars have been judges on that particular type of car or read up on them or collected them themselves for many years. They are experts and they know the telltale signs everyone’s going to look for. You never know what their motivation is. But I think it’s greed, money, the chance to take something worth $10,000 and possibly get $200,000.

And I should say a decent amount are counterfeited up in Canada and brought down. There you really have a problem. Even if you catch them, it’s hard to prosecute them. Whether it’s Canada, England, they don’t respect — nor does any country — respect the laws of the United States. You have to go by the rules and laws of that country.

ADT: Surely they have laws against fraud.

Shaw: They do, but you have to get a Canadian lawyer, and they know nothing about the cars. We’ve had cases in Italy, special cars built by special designers that turned out to be fake. You can pursue the whole case, which we always try to do. But a lot of times these cases are governed by different countries’ laws.

ADT: You mentioned selling a $10,000 car for $200,000. Is that the typical spread?

Shaw: Some frauds are small, amounting to $1,000 or $2,000, because they changed something little. The problem is the extremely valuable cars. You’re talking hundreds of thousands of dollars. We just resolved a case for a client who had bought a ’67 Corvette, a special limited edition. And he paid more than $300,000 for it. They made maybe 1,300 or 1,500 of these cars.

ADT: And each one is worth $300,000?

Shaw: Well, because of fires, accidents, thefts, there may be only 300 or 400 left in the world, if you’re lucky. So they get bid up pretty aggressively. And after the fella bought it, he took it to a show to have it judged, and somebody there said, “Gee, I think this might be bogus.” Somebody recommended us. We flew an expert down there. On a lot of these cars, they’ll put the VIN or some other kind of code on the motor. On the ’67s, they were stamped right into the block, and the counterfeiters had ground the original number off and stamped another number on. We caught it.

ADT: Did that buyer get his money back?

Shaw: We were in litigation for a while but, yes, we were able to get the client’s money back. But mind you, he paid $18,000 in sales tax on that car. You can’t get that back.

ADT: Are the perpetrators ever prosecuted?

Shaw: Most times, unless the case is $500,000 or $1 million, the powers that be at the state and federal level are not really interested in prosecuting. They figure that if the victim has enough money to afford a hobby like that, they’re not going to be a priority. And rightfully so. The consumer protection bureaus in each state are there to help small people who spent $15,000 to get their kitchen done and the guy absconded with their money.

But if it’s repetitive, yes. They would take a stand and try to prosecute. Take odometers. When they passed a federal law against turning back odometers, they were going after repeat criminals. And we do sometimes have the same people involved over the years with car fraud.

ADT: What is the dealer’s responsibility? Aren’t they just as much a victim as a private collector?

Shaw: Dealers have to be extra careful about buying a classic car for resale. The courts will hold you to a higher standard than a consumer. You are expected to have examined the classic ahead of time for your protection. And you have to be extra careful about selling a classic car to a consumer, because in most states, the consumer can rely on the state’s consumer fraud act, which could result in the consumer getting up to triple damages and attorney fees back in a successful lawsuit.

Be extra careful about advertising a classic car for sale. Do not advertise a classic car as “authentic” or “numbers matching” if you really have not examined the car yourself. You cannot rely on “That is what the owner told me” as a defense. You are a car dealer and therefore have a higher standard of reliability and accuracy as to what you are advertising.

Most dealers are more sophisticated than a regular person. And they have at their disposal a lot more tools and resources they can check. And they don’t get as emotional as consumers. But whether you’re a collector or dealer, you should always have an expert look at these cars to make sure the car is authentic, that it’s real and has not been counterfeited.

ADT: Do the cars your clients call about ever turn out to be genuine?

Shaw: Well, there are cars out there owned by collectors and dealers that are questionable. It’s never been proved that they are or aren’t real. That’s the worst kind. Have we ever had a case in 20 years where somebody has come to us with a concern and we’ve said the car is real? It’s never happened. It’s always been an issue.