Two brothers who used to own a Hermiston car dealership and their former business manager are facing federal charges for allegedly defrauding KeyBank of more than $6 million.
The conspiracy at D&R Auto Sales involved selling new inventory bought with the loan but failing to report the sales, instead covering it up by asking customers to return their recently purchased vehicles for a free service on the same day of an audit, according to the FBI.
The now defunct business also operated as D&R Motors and D&R Ford/Mercury. A second dealership was in Enterprise, Ore.
Owners Roger Spangenberg, 49, and David Spangenberg, 52, and manager Steven Johnson, 63, appeared in U.S. District Court in Oregon last week on charges of conspiracy to commit bank fraud, the Federal Bureau of Investigation reported in a news release.
Roger Spangenberg was arrested in his hometown of Post Falls, Idaho, by agents with the Internal Revenue Services' Criminal Investigations Division and the FBI, along with Post Falls police. Spangenberg used to live in Kennewick, according to Herald records.
The arrests came after a federal grand jury returned an indictment against the three men.
David Spangenberg lives in Spokane and Johnson is from Aberdeen.
"These defendants left a multimillion-dollar trail of destruction in eastern Oregon," said S. Amanda Marshall, U.S. Attorney for the District of Oregon in the FBI news release. "Financial fraud results in significant harm both to our financial institutions and our communities, and we will continue to work with our law enforcement and financial institution partners to pursue and prosecute financial fraud aggressively in this district."
The indictment alleges that from January 2007 through August 2008, the Spangenbergs and Johnson conspired to defraud KeyBank through a Floorplan Line of Credit and Security Agreement, which reportedly is known in the automobile industry as a "flooring loan."
KeyBank extended a line of credit to the D&R dealerships to buy new inventory, but the business failed to repay the bank after the vehicles were sold, the news release said.
The Spangenbergs and Johnson deceived the bank into believing the inventory hadn't yet been sold by asking customers to drop off their new vehicles at the dealerships for servicing at no charge, the news release cited in the indictment. Those returns were requested on the specific date of an audit, and the men allegedly misrepresented to KeyBank that any new vehicles not present on the lot were being used as rental cars.
The indictment states that the business owners and manager also submitted false Vehicle Identification Numbers, or VINs, to KeyBank to get funding for inventory the dealerships never bought, and "double floored" vehicles with more than one financial institution.
The defendants all entered innocent pleas in federal court and are scheduled for trial March 27 before U.S. District Judge Michael H. Simon.
Conspiracy to commit bank fraud carries a maximum sentence of 30 years in prison and a $1 million fine.
-- Kristin M. Kraemer: 582-1531; firstname.lastname@example.org