Embattled auto dealer Denny Hecker is planning to file suit against car finance company GMAC, the company that used to loan money to Hecker's customers.
Hecker's attorneys fired back today regarding allegations that the prominent dealer defrauded hundreds of customers.
They say the auto loan company is responsible for hundreds of complaints that have touched off a criminal investigation of Hecker's business.
Attorney Marsh Halberg said other finance companies, like Toyota and Hyundai Financial and US Bank, are cooperating with Hecker's dealers as they go through bankruptcy.
"It didn't have to be this way. I gave you three examples of three separate lenders that chose to work with the Denny Hecker organization in a positive way, so that the little guy in the middle wouldn't get squeezed by this problem. GMAC has chosen not to do that," said Halberg.
GMAC said Hecker's dealerships collected and owed the taxes and fees in the deals being investigated by the state.
Halberg demanded that GMAC account for its finances and pay damages to Hecker dealerships.
The anticipated court action follows a day of charges and counter-charges involving Hecker's once-sprawling auto empire. The Minnesota State Patrol says it has already launched a criminal investigation into dozens of consumer complains of fraud involving sales at some of the 26 dealerships Hecker once owned around the state.
Customers had been unable to obtain clear titles, or get license plates or tabs for their new cars, because state fees hadn't been paid.
The complaints are being made by customers in 15 counties across Minnesota who have either purchased or traded in a vehicle at one of Denny Hecker's dealerships during the past several months, according to Col. Mark Dunaski, chief of the Minnesota State Patrol.
"Based on the nature of the complaints we've received so far, we have reason to believe motor vehicle fraud may have occurred," Dunaski told reporters at a Wednesday news conference. "The number and severity of citizen complaints prompted us to take action, with the goal of resolving the problems both for consumers and the state of Minnesota."
The state investigation is looking at complaints from consumers who purchased a vehicle, paid the 6.5 percent sales tax, title and license registration fees to the dealer, but never received their title or license plates.
Officials are also investigating complaints from consumers who traded in their vehicles, and were later informed by their lender that the lien on that vehicle had not been paid off.
Dunaski explained that Minnesota requires auto dealers to remit the sales tax on vehicle sales and other fees to the state, and to remove liens on vehicles they take in trade. Failure to do either is a felony, he said.
Dunaski said it was far too early to estimate how much tax money was not paid to the state.
He added that Hecker has not been charged and does not face imminent arrest.
Authorities spent the day Wednesday conducting raids at six Hecker locations -- the corporate headquarters in St. Louis Park, three of his homes, and two dealerships, one in Inver Grove Heights and another in Oak Park Heights.
By early afternoon, nearly a dozen State Patrol vehicles were parked outside the headquarters offices, and officials ere seen loading material onto a cargo truck.
Hecker's attorney Bill Mohrman said Hecker was "absolutely stunned" by the events, but had been cooperating with authorities.
Mohrman blamed GMAC, the financial arm of General Motors, for apparently failing to pay sales and trade-in proceeds to the state.
According to Mohrman:
- GMAC took control of several of these dealerships in early 2009, including control over the vehicle sale transactions of those dealerships and the collection of any funds of those transaction. That included taxes, title, license and insurance.
- Since March 2009, Hecker has been in communication with GMAC, urging them to pay the funds to the state.
Mohrman said Hecker found out in April that GMAC had apparently not been making the payments.
Late Wednesday afternoon, GMAC issued a statement questioning Hecker's version of events. The company said the transactions in question are between the customer and the dealer, and GMAC was not involved in them.
"From March 23, following defaults by the dealerships, GMAC had staff on site to oversee the collateral to ensure that the terms and conditions of our financing agreements were met," the statement said. "During this time period, after detailed discussions with Hecker and his legal team, GMAC remitted funds directly to the dealership for the costs associated with the transactions during this time period."
Contrary to Hecker's assertion, GMAC also said it was not notified by either the dealerships or attorneys that there were outstanding sales tax, title or license fees that needed to be paid.
Halberg, who is representing Hecker on a previous DWI case, said Hecker and his civil attorneys were meeting at the headquarters in St. Louis Park when law enforcement officials came in this morning.
Halberg said the evidence will eventually show that Hecker did nothing wrong.
"We believe there are e-mails and correspondence between Denny Heckers' group and GMAC about this issue that are favorable for us that will come to light, I think, when the dust settles and all the documents are reviewed," Halberg said.
Col. Mark Dunaski said the state started receiving complaints six or seven months ago and that the pace had picked up recently, to the point where the State Patrol is receiving complaints daily.
Hecker filed for personal bankruptcy in early June, saying he owes up to $1 billion to as many as 1,000 creditors.
He has listed 95 creditors in court documents, including auto finance firms, banks, attorneys, and a business partner.
He has shuttered or sold 25 of his 26 dealerships. He's also been sued by business arms of several automakers.
Before his business started to fall apart late last year, Hecker's face was everywhere in the Twin Cities - in newspaper ads and on bus billboards and TV - urging customers to visit his dealerships for good service. He used to claim $6.8 billion worth of annual auto sales and service.
In April, prosecutors charged him with misdemeanor counts of driving while intoxicated and careless driving.
A blood test found powerful prescription drugs in his system after his Range Rover struck a utility pole in December. The drugs included narcotic painkillers, a stimulant, an anti-anxiety drug and insomnia medication.
Halberg said in April that the wreck was an accident, and not related to the medications.
The Minnesota State Patrol is asking anyone who had problems with a Hecker car purchase to call its toll-free hotline at 800-593-5000.
(The Associated Press contributed to this report.)