Car Dealer Pleads Guilty to Wire Fraud

Harry Klause, the president, operator, and manager of a New Jersey car dealership, pleaded guilty in federal court to operating a wire fraud scheme that defrauded customers and lenders. His guilty plea was entered before United States District Judge Robert B. Kugler this past Friday.

Officials say Klause purchased trade-in vehicles from customers of his dealership and applied the purchase price against the cost of vehicles those customers bought. He agreed to pay off any existing loans that customers had on their trade-in vehicles but did not do so in a timely manner. This caused damage to the credit scores of these customers. Klause then sold the vehicles to other customers despite not paying off the loans or ever receiving the titles from the lenders.

Prosecutors also believe Klause steered the buyers of the trade-in vehicles to various lenders to finance their purchases without sending the titles to those lenders.

The scheme ran from November 2008 until September 2009 when FBI agents raided Harry Klause Cars and Trucks Inc. and confiscated more than a dozen boxes of documents. The dealership currently remains open.

The wire fraud charge carries a maximum sentence of 20 years in prison and a fine up to $250,000. Harry Klause is free on a $100,000 bail while he awaits his sentencing hearing that has been scheduled for November 15, 2013.