By Scott Buttram
BIRMINGHAM –U.S. District Judge Virginia Emerson Hopkins sentenced a former sales manager at Serra Nissan in Birmingham to two and a half years in prison on Thursday for fraud and conspiracy charges to which he had pleaded guilty.
In addition to the 30 months in prison, Abdul Islam Mughal, 49, of Trussville, will face a forfeiture hearing in July. His role in a scheme at the car dealership was to falsify auto loan documents, prosecutors said.
A total of eight former Serra Nissan employees have pleaded guilty in the fraud scheme.
Gerald R. Shepard, 56, of Pinson, Michael J. Wilkinson, 56, of Moody, D. Scott Burton, 36, of Odenville, Terry W. Henderson, 39, of Pleasant Grove, Roland W. Riley, 28, of Birmingham, Dwight A. Perry, 44, of Birmingham, and Jeffrey R. Green, 33, of Porterdale, Ga. still face sentencing for their roles in the conspiracy.
Owners of the dealership have denied any knowledge of the scheme and were not charged in the incident.
“This defendant championed the use of predatory lending practices while he worked as a car dealership sales manager,” U.S. Attorney Joyce White Vance said.
“He defrauded customers and the lenders that trusted the dealership to present truthful information during the financing process,” she said. “Growing fraud and other deceptive practices in auto sales and financing are important issues affecting consumers, and my office is committed to working with law enforcement agencies and the Federal Trade Commission to prevent fraud during the auto lending process and to prosecute those who commit the crime.”
According to a statement from the U.S. attorney’s office, Mughal pleaded guilty in July 2014 to one count of conspiring with others, including Serra Nissan salesmen, general managers, sales managers and finance managers, to falsify loan documents in order to defraud customers and financial institutions in order to sell more cars.
He also pleaded guilty to one count of bank fraud for submitting falsified loan documents to financial institutions, including Capital One Auto Finance, between January 2012 and October 2013.
The judge granted the government’s motion for forfeiture in the case and set a July 2 hearing to determine the amount that must be forfeited, along with the amount of restitution Mughal must pay to victims. He must report to prison July 28, according to the statement.
“Financial fraud like Mr. Mughal engaged in undermines the trust we must have when making major financial decisions, like purchasing a vehicle, that carry serious consequences — consequences that cost all of us, such as increased business costs, to say nothing of the harm to the victims themselves,” FBI Special Agent in Charge Roger C. Stanton said. “The sentence handed down today is appropriate given the many victims left in the wake of Mr. Mughal’s fraud.”
“Abdul Mughal and his co-conspirators orchestrated a scheme driven by deception and deceit. They defrauded financial institutions and deceived customers of Serra Nissan with the intent to increase profits and enrich themselves. Their criminal actions are unacceptable,” Special Agent in Charge Veronica Hyman-Pillot said. “The sentencing of Mughal will serve as an example that Internal Revenue Service-Criminal Investigation and our law enforcement partners will work together to uncover similar schemes and recommend prosecution to the fullest extent of the law.”
According to Mughal’s guilty plea, while he was the dealership’s general sales manager, “there was a pervasive scheme throughout Serra Nissan … that if a customer did not qualify for a car loan for some reason, the salesman, finance managers, sales managers, or GSM were to falsify information or documents that would ensure the customer was funded.”
His plea agreement with the government listed ways that Mughal and others falsified loan documents including, but not limited to:
- Inflating the income information of prospective car buyers, a process participants sometimes referred to as “fluffing.”
- Creating or altering documents to submit to financial institutions that required proof of the prospective buyer’s income or residency.
- Listing accessories not actually included on a vehicle so a financial institution would increase its loan amount, a process participants sometimes called “power booking.” Mughal and others had a financial incentive to power book a deal, because if the profit on a transaction were high enough, the dealership would pay the employees on the deal something above their normal commission.
- Presenting straw buyers, who could qualify for a loan, to financial institutions when the actual buyer could not qualify because of poor credit or insufficient income.
In his plea, Mughal acknowledged one incident in which he told a salesman that a specific sale “could not be funded until they created a ‘legal lie’ for the bank” that showed the buyer, identified as J.T., made $5,000 per month.
J.T. bought a vehicle from Serra Nissan on Oct. 16, 2012. J.T. submitted a bank statement to Serra Nissan showing an ending account balance of $11.03, but the loan application the dealership submitted to Capital One Auto Finance included a fraudulent bank statement showing J.T. had monthly deposits of $6,179, according to court records.
In a second vehicle purchase on Oct. 16, 2012, a customer identified as W.K. submitted only a Social Security letter as proof of income. Serra Nissan, however, submitted a loan application to Capital One on W.K.’s behalf that also included a fraudulent bank statement, a claim of $2,973 in monthly Veterans Administration benefits — although W.K. is not a veteran — and false information that W.K. was retired from the State of Alabama and made $4,500 a month, according to court records.
The FBI and IRS-CI investigated the case, which Assistant U.S. Attorney Amanda Schlager Wick and Robin Beardsley Mark prosecuted.