The State Commission of Investigation accused Motor Vehicle Commission officials of being in cahoots with used-car auto malls to thwart regulations and enforcement, resulting in fraud, unpaid taxes and suspicious financial transactions."
TRENTON -- In a scathing report released Wednesday, the State Commission of Investigation accused New Jersey Motor Vehicle Commission officials of enabling used-car auto malls to thwart regulations and enforcement, resulting in fraud, unpaid taxes and "suspicious" financial transactions.
The SCI report alleges the auto malls, or "multi-dealer locations," were engaged in "questionable, unscrupulous and possibly illegal activities," while cloaked in the protection of heavily lobbied Motor Vehicle Commission officials.
"MVC's role as a regulator of business in this corner of the used-car world devolved into that of an enabler of some very troubling business as usual," the report said.
"Much of this occurred at the behest of MVC managers who took it upon themselves to effectuate what amounted to substantive policy and regulatory changes that benefited a narrow private interest -- all with the knowledge or authorization of the agency's chief administrator and governing board."
The 11 multi-dealer complexes in New Jersey owe at least $10 million in unpaid taxes, the investigation found.
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Those complexes serve as shelters for absentee dealers to secure used-car dealer licenses from New Jersey but conduct their business out of state, where "stricter licensing rules make it difficult, if not impossible, for them to qualify for certified dealer credentials," the report said.
The largest, the New Jersey Dealers Auto Mall in Bridgeton, better resembles an abandoned warehouse than a used car dealership, the report said, describing rows of empty cubicles and a deserted lot.
In fact, that complex is a bogus front for dealers, SCI said. It has been listed as the base of operations for about 1,214 used-car dealers, the report said.
MVC officials worked with that auto mall to circumvent state regulations, it said. Random inspections and audits of complexes were skipped altogether. Investigators' enforcement recommendations were "ignored, reversed or summarily dismissed." Penalties were waived "without explanation."
In sworn testimony to the SCI, MVC workers offered up examples of managers intervening on auto malls' behalf, with one employee saying "We find it hard to do our job because of roadblocks that we get from upstairs... just let us enforce the regulations, and everything would be fine," according to the report.
"During this investigation, the SCI found that hundreds of dealers based at Bridgeton and at other MDLs exist and function largely beyond the reach of basic rules governing licensure and oversight of car dealers in New Jersey," the report said. "The MVC essentially was a government entity run by mid-level bureaucrats accountable to no one," SCI said.
According to the State Commission of Investigation, the findings have been turned over to state and federal law enforcements agencies.
In its report, SCI said given New Jersey's lenient rules and enforcement compared with other states, it's "not surprising that used-car dealers looking to set up shop in this region often choose New Jersey as home base, if only on paper."
The SCI recommended reforms, including putting licensing and oversight operations under the Division of Consumer Affairs rather than the Motor Vehicle Commission.
The Motor Vehicle Commission says it has drafted regulatory changes to tighten dealer practices. It says it has issued more than $2.5 million in proposed fines to multi-dealer complexes across the state.
In one response attached to the report, former Division of Motor Vehicles director-turned lobbyist Dick Kamin, whose clients include New Jersey Dealers Auto Mall, said the state rules are an bad fit for the complex's tenants, which are wholesale dealers, not used-car dealers.
"But because New Jersey law does not provide for a wholesale dealer's license, NJDAM's tenants are forced to apply for used car dealer licenses and comply with associated regulations," said Kamin, who is mentioned in the report.
"These regulations make good sense for used car dealers selling cars to the public. They make less sense for the wholesale dealers occupying New Jersey Dealer's Auto Mall, who generally sell cars to used car dealerships for later sale to the public."
Read the State Commission of Investigation report here.
The Associated Press contributed to this report.
Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.
