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Owners Unpaid After Firm Closes, Official Vanishes : Car Dealer Takes Sellers for Ride

January 21, 1988|JIM CARLTON | Times Staff Writer

When Devan Shockley's wife gave birth to twins three months ago, he decided it was time to sell his Mercedes 280 SL and get the family out of debt.

Shockley, 24, a financial planner from Los Angeles, said he entrusted the sale of the shiny green coupe to a Newport Beach dealership called Auto Gallery, which sold new and used luxury automobiles on consignment. The car was sold a few weeks ago for $30,000, but the Shockleys say they never saw any money.

Auto Gallery closed last week after the president of the company disappeared and police began looking for an estimated $750,000 owed to sellers of Porsches, BMWs, Mercedes-Benzes and at least one Rolls-Royce. Value of the cars ranged from $6,000 to $54,000, police said.

Newport Beach police say they have received about 50 complaints from car owners who claim that Auto Gallery sold their cars and didn't pay them. A police investigation found that Auto Gallery, 2300 W. Coast Highway, had not reimbursed any of the 50 car owners since Sept. 1, Sgt. Todd Wilkinson said.

When detectives went to the home of company President James Anderson on Harbor Island Drive in Newport Beach to question him on Jan. 13, they found the house empty of furniture. Anderson had left with no forwarding address, they said.

Police said they have tried all possible avenues to contact Anderson and are still looking for him. No warrant has been issued. Anderson is separated from his wife, and she did not accompany him, detectives said.

The owner of the dealership, meanwhile, closed the firm and is trying to place it in receivership, Wilkinson said.

Until a trustee is appointed by U.S. bankruptcy court, owners of some 30 cars still on the lot cannot reclaim them, Wilkinson said. Wilkinson said a trustee was to be appointed this week but had not been as of Wednesday afternoon.

Judy Warren, attorney for Laguna Beach Motors Corp., a licensed dealership in Laguna Beach that owns Auto Gallery, declined comment on the case.

Auto Gallery had been doing business in Newport Beach since Oct. 16, 1986, Wilkinson said. Before last September, Wilkinson said, his department had received complaints from car owners who were not immediately paid by Auto Gallery after their cars had been sold. However, Wilkinson said, the owners were paid after police contacted the dealership.

Wilkinson said the dealership operators blamed financing delays for their inability to quickly reimburse some car owners.

By Sept. 1, complaints had escalated to the point that the Police Department asked the advice of the Orange County district attorney's office. That office advised that under state law, failure to pay a car owner within five days of a sale constituted embezzlement of funds.

General Manager Arrested

On Jan. 6, Newport Beach police arrested Reginald Kennedy, general manager of Auto Gallery, on suspicion of grand theft by false pretenses for allegedly sending bad checks as payment for 10 BMWs owned by a North Hollywood dealership. Kennedy, 39, of Laguna Niguel was released from the Newport Beach City Jail on $10,000 bond. He has not been charged, pending further police investigation into the case.

On Jan. 11, both Kennedy and Anderson, who is also 39, were fired by Laguna Beach Motors, Newport Beach police spokesman Robert Oakley said. Oakley said the corporate directors of Laguna Beach Motors were cooperating fully with the police investigation and had turned over all the company's financial records.

Laguna Beach Motors hired a private security company to guard Auto Gallery.

A guard on duty Monday night said a steady stream of people had visited the closed business since last Thursday, many of them car owners who said they had not been paid.

'Nightmare of Our Life'

"I've had a few people almost crying, literally," said the guard, who asked that his name not be used. "They don't know what to do."

Among those who left their cars at Auto Gallery were Joe and Susan Dwiggins, who recently moved to Laguna Niguel from Little Rock, Ark., and decided to sell their red Porsche.

Dwiggins, 27, a yogurt company regional sales manager, said he gave the car to Auto Gallery in October to sell on a 30-day consignment.

On Nov. 17, a salesman told him the car had been sold for $35,000. Two months later, the couple said, they still have not received their money and are paying more than $500 a month in car payments and insurance premiums.

"It's the nightmare of our life right now," said Susan Dwiggins, 25.

Temporary Registrations

Some people who bought cars at Auto Gallery also are in a quandary. Although they have the cars, they don't have the pink slips. Those remain in the hands of the original owners, who are refusing to release the paper work until they get their money, Detective Doug Parmentier said.

The buyers, meanwhile, are driving with 90-day temporary registrations, which can be renewed for another 90 days.

One buyer, a Laguna Beach engineer who did not want to give his name, said he has waited two months for title to his Porsche.

"We assumed the financing company was taking care of the paper work, and then the former owner called me last Thursday to say he had not been paid for the car," the 48-year-old engineer said Tuesday. "The person who is really hurt right now is the other owner."

As for the owners who are owed money, Parmentier said they may have a difficult time getting reimbursement. He said the dealership was only bonded for losses of $5,000 per car.

"The bottom line is it's a big can of worms and there are a lot of people who are going to be very unhappy until the attorneys sort it out," Parmentier said.

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