General Motors sues to recoup misused worker discounts

[Oracle of Delphi]

Robert Snell / The Detroit News

DETROIT -- Turns out General Motors Corp.'s employee discount isn't for everyone.

The automaker, which last week temporarily extended the perk nationally to anyone in a bid to boost sales and clear out inventory, simultaneously filed three lawsuits alleging fraud as the company cracks down on employees, retirees and widows giving discounts to nonrelatives, according to court documents. Along with other recent lawsuits, the automaker is suing for more than $450,000 plus costs and attorney fees.

"What an irony, huh?" lawyer John Pieri said. He represents a retired autoworker in Buffalo, N.Y., who is being sued for $45,501 and accused of giving discounts to 13 people from 2004 until April 2007.

Several retirees and lawyers said the lawsuits are an attempt to raise cash by a financially troubled company that lost $15.5 billion during the second quarter and provide insight into an unconventional way GM is trying to recoup revenue amid the slowest sales climate in more than a decade.

It was unclear Friday how many cases have been filed nationwide and a GM spokesman did not know how often the automaker files such cases. GM's lawyer, Michael Clawson, could not be reached. There have been at least nine cases filed in circuit courts across Metro Detroit in recent months.

The timing of the lawsuits, three of which were filed on or after Aug. 20, the day GM extended the employee discount to everyone, is coincidental, company spokesman Tom Wilkinson said.

"In decades past, GM was so wealthy, I think probably a lot of these types of abuses might have been tolerated," he said. "We're obviously in a competitive situation and you get more focused on watching your costs."

The employee-pricing program, which ends Tuesday, is a perk offered to employees as part of their benefits package. Any eligible employee, retiree or surviving spouse can use the discount to buy or lease six new or used vehicles each year, or extend the discount to relatives. Almost anyone on the family tree is eligible, from children to same-sex partners, in some cases, but GM is accusing the employees of profiting by giving the discount to people who they knew weren't qualified and for their own "financial gain."

In the lawsuits filed by GM, the discounts saved buyers $1,000 to almost $9,000, depending on the vehicle's sticker price.

GM periodically audits dealership records for violations. If one is found, an employee could lose his or her discount for five years for each violation, and permanent suspension for subsequent violations.GM uncovered the sales in question during a routine audit and asked the workers, retirees or their spouse to verify the buyer's name, address, date of birth and relationship. When they failed to respond, GM's lawyer made another attempt before filing the lawsuit, according to court records.

GM hadn't filed any similar lawsuits in Oakland County Circuit Court in the past two years, but this year has filed two cases there and at least seven others across Metro Detroit. The nearly identical lawsuits accuse people, including a former employee in Charlotte, N.C., and a widow in Gallatin, Tenn., of fraud and misrepresentation, conversion and breach of contract.

Retired Roseville electrician Omar El was sued in June for $87,095 and said he agreed to repay GM $7,500 to settle claims that he gave unauthorized discounts to 14 people. El, who retired in 2001 after 32 years, said he doesn't know the people who received the discounts and did nothing wrong, but settled to avoid possibly having to pay a larger amount.

With the court case behind him, El is not sure he'd ever buy another GM car.

Either way, he can't use his employee discount. He's been suspended from the program for 16 years, he said.

"It's not fair," El, 62, said, of GM extending the discount to everyone while suing some workers and retirees.

Pieri, the lawyer for retiree Russell Battaglia of Buffalo, N.Y., shares a view held by others that vehicle salespeople are using an employee's identity -- on file from an earlier sale -- to give away discounts to customers and close deals.

"Why wouldn't an unscrupulous salesman do that?" Pieri said.

Joe Serra, a dealer who sells a variety of brands including GM vehicles and is a former president of the Detroit Auto Dealers Association, said he has never heard of another dealer or salesperson using an employee's discount without permission.

"God, I hope that doesn't happen," he said. "It's just unethical."

He also has never heard of GM suing an employee for violating the incentive program.

GM is not suing any dealers, spokesman Wilkinson said.

The automaker's decision to extend the employee discount to everyone, timed to coincide with the automaker's 100th anniversary, has been successful, Serra said.

"But when it's stretched outside of (a limited promotion), that's not what GM signed up for," he said.

The timing of some lawsuits also coincides with aggressive moves by the automaker to raise cash and trim expenses. On Friday, GM confirmed that it offered early retirement incentives to salaried workers.

"I just think because the economy is so bad, and if they think they're being ripped off to the tune of $450,000, every little bit counts," Mount Clemens lawyer William Staugaard said.

He represents Warren retiree Kenneth Curfman, an octogenarian who Staugaard said is being sued for about $40,000.

Staugaard said two of his client's 15 purchases are legitimate. The rest are suspicious.

"I'm willing to bet dollars to doughnuts that I'm going to find no connection whatsoever to my client," he said. "I'm really narrowing in on that somebody was abusing (Curfman's) number."

Ford Motor Co. also monitors the use of employee discounts, but if anything, has encouraged employees to give away their discounts and boost sales.

A year ago, the Dearborn automaker allowed its active and retired workers to extend the discounts to as many as 13 friends and family members, five more than previously allowed.

Link: http://www.detnews.com/apps/pbcs.dll/artic...UTO01/808300368

[CARBIZ]

???? Is it the wild, wild west down there? Without an authorization number from GENERAL MOTORS, the discount does not get assigned. Simple. The employee must call their HR people and get that number, then we have to call our dealer line and match the autorization number with another number that we get from head office in Oshawa. I just did a retiree employee from Ohio and the paperwork is a nightmare. If their is fraud, it would have to come from the employee, not the dealer. We don't get any of our 'memo money' unless all the authorization numbers are matched - and each one has to be generated new, plus the 'employee' has to sign off on it.

Again, it's the games from the employees that cause the havoc. They know the dealer sells for cost and gets 5% 'kicked back' in compensation, so the employee shops the 5%. In a nasty letter from head office last year, GM threatened the dealers and the employees that if the guidelines are not followed TO THE PENNY, the deal will be charged back to the dealer and the employee could be fired for fraud. In a rare flash of brilliance, GM declared they will audit the salesman's commission slips, since that is the true proof of gross. Many dealers were playing games with stuff like 'throwing in' extended warranties, etc. to mask the deeper discounts they were giving, and I guess the union got fed up with all the games.

Saturn pulls the same crap with their 'no haggle pricing.'

But which came first: the chicken or the egg? I've had many GM employees want to negotiate 'cost.' WTF? I'm glad to see GM finally cracking down on this. Frankly, it is impossible for a dealer to follow the rules, because the employees themselves will just keep looking until they find a dealer desperate enough to sell them the vehicle the way they want to buy it.

[daves87rs]

Just sad...can't see why there has to be so much abuse....

[Oracle of Delphi]

Just sad...can't see why there has to be so much abuse....

Because people are greedy! Next month starts the Supplier discounts suits for people that received those discounts that shouldn't have, plus those suppliers will be banned from the program if they equal/reach a certain percentage of misuse, along with their employees losing the benefit for life.

Karma is a Bitch!

[saturnd00d]

I think GM did the right thing here. What it comes down to, is if you violate the terms of conditions, you pay the price. Same holds true for any other job.

[Newbiewar]

???? Is it the wild, wild west down there? Without an authorization number from GENERAL MOTORS, the discount does not get assigned. Simple. The employee must call their HR people and get that number, then we have to call our dealer line and match the autorization number with another number that we get from head office in Oshawa. I just did a retiree employee from Ohio and the paperwork is a nightmare. If their is fraud, it would have to come from the employee, not the dealer. We don't get any of our 'memo money' unless all the authorization numbers are matched - and each one has to be generated new, plus the 'employee' has to sign off on it.

Again, it's the games from the employees that cause the havoc. They know the dealer sells for cost and gets 5% 'kicked back' in compensation, so the employee shops the 5%. In a nasty letter from head office last year, GM threatened the dealers and the employees that if the guidelines are not followed TO THE PENNY, the deal will be charged back to the dealer and the employee could be fired for fraud. In a rare flash of brilliance, GM declared they will audit the salesman's commission slips, since that is the true proof of gross. Many dealers were playing games with stuff like 'throwing in' extended warranties, etc. to mask the deeper discounts they were giving, and I guess the union got fed up with all the games.

Saturn pulls the same crap with their 'no haggle pricing.'

But which came first: the chicken or the egg? I've had many GM employees want to negotiate 'cost.' WTF? I'm glad to see GM finally cracking down on this. Frankly, it is impossible for a dealer to follow the rules, because the employees themselves will just keep looking until they find a dealer desperate enough to sell them the vehicle the way they want to buy it.

its not that hard... maybe in canada, here its a simple click of the mouse... not hard at all...

[CARBIZ]

its not that hard... maybe in canada, here its a simple click of the mouse... not hard at all...

Click of the mouse? I just did a deal with a retired Ohio employee. It was more than just a click of the mouse for him and for us.

Something is rotten and GM has every right to be pissed about it.

[Newbiewar]

Click of the mouse? I just did a deal with a retired Ohio employee. It was more than just a click of the mouse for him and for us.

Something is rotten and GM has every right to be pissed about it.

I'm just saying every GME discount I ever did was extremely easy... but my dealership usually had a way of making everything easy... its probably why we were so big

[daves87rs]

Because people are greedy! Next month starts the Supplier discounts suits for people that received those discounts that shouldn't have, plus those suppliers will be banned from the program if they equal/reach a certain percentage of misuse, along with their employees losing the benefit for life.

Karma is a Bitch!

True...

[2QuickZ's]

In the U.S. you can call it in or you can go online and pull a number in about 2 minutes. The deal can be completed with nothing more than the number, though I believe the paper gets sent to the employee who must then verify the relationship, sign the paper and mail it back. If the paper is already on hand, they can sign it and turn it into the dealer. I'd have to verify all this with my Dad. He is a GM retiree and is the one that I have gotten my GMS number through. I have bought/leased 4 new GM products since 2005 and I have not had any official document in my hand for a single one of them. I had nothing more than a piece of paper with the number written on it in my hand writing. No problems what so ever. That seems like it would be a pretty easy system for an employee to cheat.

[CARBIZ]

In the U.S. you can call it in or you can go online and pull a number in about 2 minutes. The deal can be completed with nothing more than the number, though I believe the paper gets sent to the employee who must then verify the relationship, sign the paper and mail it back. If the paper is already on hand, they can sign it and turn it into the dealer. I'd have to verify all this with my Dad. He is a GM retiree and is the one that I have gotten my GMS number through. I have bought/leased 4 new GM products since 2005 and I have not had any official document in my hand for a single one of them. I had nothing more than a piece of paper with the number written on it in my hand writing. No problems what so ever. That seems like it would be a pretty easy system for an employee to cheat.

Yes, yes, yes, but the employee must get an authorization #, which then has to be matched to another # that the dealer must get. Sure, signatures and 'authorization' could be fudged, but I've seen the GM audit guys: they must have all been fired from the tax office for being too rough.

Any misuse would have to come from the 'employee,' who could (theoretically) 'sponsor' his neighbor's wife's butcher for a new car - if he/she wanted, but they are swearing to the relationship in writing.

Seems to me to be an awful lot of trouble for $500, since many of you on this board insist you would 'never' pay more than $500 over invoice.