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Investigation of Possible Illegal Activity in Dealer Terminations

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On: Tue, Oct 26, 2010 at 12:44PM | By: Sherry Christiansen

Investigation of Possible Illegal Activity in Dealer Terminations

The federal inspectors who criticized the Obama administration, General Motors, and Chrysler for their handling of about 2,300 U.S. dealership terminations have opened a follow-up investigation of possibly illegal activity in the effort.

The Office of the Special Inspector General for the Troubled Asset Relief Program, whose $700 billion bailout included GM and Chrysler, won't disclose the targets of the investigation or the actions being probed, said Kris Belisle, the office's spokeswoman.

According to Belisle, files used in preparing last year's report regarding dealer termination have recently been given to the office of investigators.

“There is an investigation,” Belisle told Automotive News today. “Generically, we can investigate any offense.”
The audit examined the role of the administration's auto task force in the dealer cuts and the processes used by GM and Chrysler to decide which dealers to terminate. It also looked at the extent to which dealer cuts would save money for the automakers.

The new investigation will explore whether illegal activity occurred which could possibly lead to fines, or even imprisonment. The investigation will be performed by the prosecutor’s office, which is headed by Neil Barofsky, which examines reports of false statements, obstruction of justice, fraud, and public corruption. If foul play is suspected, investigators could issue subpoenas, order arrests, or refer cases to the United States Justice Department for prosecution.

Greg Martin, spokesman for GM, refused to comment as did the U.S. Treasure Department spokesman Mark Paustenbach when asked if his office had been notified by investigators.

Michael Palese stated that investigators have not yet contacted Chrysler. “Chrysler Group's optimized dealer network is already contributing to improved vehicle sales and will be a vital part of the company's success as we continue to deliver outstanding products to our customers,” Palese stated.

Chrysler Corporation terminated about 760 dealerships after a series of federally-mandated arbitration cases took place this summer and GM closed 1,550 dealerships.

GM and Chrysler have been criticized, not only for the procedure used to close stores, but also for not keeping accurate records of the process regarding which dealerships were selected to be closed.


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