A Hooksett used car dealer was given a suspended sentence and ordered to pay $20,933 in restitution for keeping the money customers paid for extended warranties on their cars instead of sending the payments and contracts to the service provider.
Edward J. Walter, who operates the dealership NHCars.net, was sentenced in Merrimack County Superior Court on Thursday after pleading guilty to a Class A felony of theft by misapplication. He was given a 1½ - to 3-year suspended state prison sentence.
He will be allowed to continue operating NHCars.net under a revised business plan that requires auditing of his business practice and NHCars.net.
Walter and the corporation pleaded guilty on Jan. 29, but sentencing was postponed to enable NHCars.net to pay $20,933 in restitution, according to New Hampshire Attorney General Joseph A. Foster and state Insurance Commissioner Roger A. Sevigny.
Additionally, the LLC was fined $100,000, with $50,000 suspended for five years.
Indictments against Walter and the company charged both with recklessly taking money from consumers and failing to transfer those funds to the extended service provider that was offering the contract or warranty on the car sold by the dealership.
Walter, the manager and sole member of the LLC, was directly responsible for making the payments to the extended service provider.
The investigation began when consumers complained to both the Attorney General's Office and the Fraud Unit of the state Insurance Department. Consumers reported buying cars and extended warranties from NHCars.net only to discover, when they tried to use it for repairs, that NHCars.net had not forwarded the contract or the payment to the service provider.
The money instead was deposited into NHCars.net operating account, investigators said.
Additionally, Walter also offered an “in-house” warranty by charging a fee in exchange for his promise to repair the consumer's vehicle.
New Hampshire's extended warranty law requires the auto dealer to register with the Insurance Department and demonstrate financial responsibility before offering any extended warranty program. Authorities said Walter did neither.
Under the plea agreement negotiated by the Attorney General and the Insurance Commissioner, Walter will no longer offer in-house warranties.
“If a consumer has any concerns about a dealership's authority to offer extended warranties, they should contact the Insurance Department,” said Sevigny. “Businesses and dealerships need to understand the law, and they will be prosecuted if they collect charges for warrant services in violation of the law.”
To report a suspected case of fraud, go to the state Insurance Department website, 222.nh.gov/insurance, and click on the “Report Insurance Fraud” link. Consumers can also file a complaint with the Attorney General's Office at http://doj.nh.gov/consumer/ or by calling the Attorney General's Consumer Hotline at 1-9888-468-4454.