For those of you old enough to remember or techie enough to check out old TV shows on YouTube, there used to be this very funny guy who essentially molded the late-night TV show genre. I speak, of course, of Johnny Carson, the King of Late Night for 30 years.

Johnny had a periodic skit called “Carnac the Magnificent.” Carnac was an Eastern mystic. In the skit, Johnny’s sidekick, Ed McMahon, would hand Carnac a sealed envelope that contained a question. Carnac would hold the sealed envelope to his head and answer the question without seeing it. He would then open the envelope, read the question, and the audience would dutifully laugh.

Here’s an example: Ed hands Carnac the envelope. Carnac raises it to his head. After a few seconds and with an enlightened look he says, “Gatorade.” Another comedic pause, and Carnac opens the envelope, pulls out a card, and reads the answer.

“What does an allegator get on welfare.”

Sometimes I have a similar experience while auditing deals. I put a folder or a worksheet to my head and say to myself, “There is something kinky with this deal.”

My Carnac Moment

I recently had one of those Carnac moments. I was looking at a deal done under a business name and with a guarantor. The Carnac feeling started immediately when I noticed that the business and guarantor were in a state that’s five state lines removed from the dealer. It was obvious that this deal was executed without the consumer ever setting foot on the dealer’s granite floor. The growing Carnac recognition centered on a driver’s license that was texted to the dealership. It was a forgery, based on the DL number that did not follow that state’s numbering convention. The manager also neglected to use the dealer’s ID scanning tool to vet the DL, which would have picked up the bogus DL number.

Red flags continued waving like hurricane warnings as I continued the review. The thief selected the notary public for the paperwork signing instead of using the service required by the dealership’s policy. A search of that state’s Secretary of State website showed the business was an active LLC there but at an address across the state from the one provided by the thief. This address discrepancy was also picked up in the dealer’s Red Flags Rule search, which was manually overridden by the manager without appropriate documentation. The thief arranged for the vehicle transport to the different address across the state.

There is Good News

The general manager leapt into action. He filed the appropriate report with law enforcement and contracted with a local repo agent, who recovered the vehicle overnight.

Why This War Story Is Important

I’ve written extensively over the years about both identity theft and out-of-area deals as an easier approach for an identity thief to steal a dealer’s vehicle using a victim’s identity. Some law enforcement officers who deal with identity theft tell me that many thieves are scaredy-cats. They do not want face-to-face contact with their victims and prefer to use the internet and out-of-area purchases to avoid people.

The one risk area we don’t usually discuss in the industry is the ability for identity thieves to steal a business’ identity and make the business the victim. The thief in this war story was able to do that, and we need to take notice.

Most agents I chat with help their dealer-clients with red-flags training and processes. Some of them have copies of my out-of-area delivery policy. I have updated that policy and the accompanying out-of-area checklist to include additional steps for deals under a business name. 

New to the policy and checklist is a requirement to run a Secretary of State search on the business. Check the name and address of the managing member and any additional members listed against the information provided on the credit application. Confirm that the business is currently active. A copy of the search results must be printed and scanned to the file.

Let me know if you want a copy of the policy to share with your dealers.

Continued Good Luck and Good Selling.

Gil Van Over is executive director of Automotive Compliance Education (ACE). He also founded and serves as president of gvo3 & Associates and is author of “Automotive Compliance in a Digital World.”