General Motors sues to recoup misused worker discounts

Several retirees and lawyers said the lawsuits are an attempt to raise cash by a financially troubled company that lost $15.5 billion during the second quarter and provide insight into an unconventional way GM is trying to recoup revenue amid the slowest sales climate in more than a decade. It was unclear Friday how many cases have been filed nationwide and a GM spokesman did not know how often the automaker files such cases. GM's lawyer, Michael Clawson, could not be reached. There have been at least nine cases filed in circuit courts across Metro Detroit in recent months. The timing of the lawsuits, three of which were filed on or after Aug. 20, the day GM extended the employee discount to everyone, is coincidental, company spokesman Tom Wilkinson said. 'In decades past, GM was so wealthy, I think probably a lot of these types of abuses might have been tolerated,' he said. 'We're obviously in a competitive situation and you get more focused on watching your costs.' The employee-pricing program, which ends Tuesday, is a perk offered to employees as part of their benefits package. Any eligible employee, retiree or surviving spouse can use the discount to buy or lease six new or used vehicles each year, or extend the discount to relatives. Almost anyone on the family tree is eligible, from children to same-sex partners, in some cases, but GM is accusing the employees of profiting by giving the discount to people who they knew weren't qualified and for their own 'financial gain.' In the lawsuits filed by GM, the discounts saved buyers $1,000 to almost $9,000, depending on the vehicle's sticker price. GM periodically audits dealership records for violations. If one is found, an employee could lose his or her discount for five years for each violation, and permanent suspension for subsequent violations.GM uncovered the sales in question during a routine audit and asked the workers, retirees or their spouse to verify the buyer's name, address, date of birth and relationship. When they failed to respond, GM's lawyer made another attempt before filing the lawsuit, according to court records. GM hadn't filed any similar lawsuits in Oakland County Circuit Court in the past two years, but this year has filed two cases there and at least seven others across Metro Detroit. The nearly identical lawsuits accuse people, including a former employee in Charlotte, N.C., and a widow in Gallatin, Tenn., of fraud and misrepresentation, conversion and breach of contract. Retired Roseville electrician Omar El was sued in June for $87,095 and said he agreed to repay GM $7,500 to settle claims that he gave unauthorized discounts to 14 people. El, who retired in 2001 after 32 years, said he doesn't know the people who received the discounts and did nothing wrong, but settled to avoid possibly having to pay a larger amount. With the court case behind him, El is not sure he'd ever buy another GM car. Either way, he can't use his employee discount. He's been suspended from the program for 16 years, he said. 'It's not fair,' El, 62, said, of GM extending the discount to everyone while suing some workers and retirees. Pieri, the lawyer for retiree Russell Battaglia of Buffalo, N.Y., shares a view held by others that vehicle salespeople are using an employee's identity -- on file from an earlier sale -- to give away discounts to customers and close deals. 'Why wouldn't an unscrupulous salesman do that?' Pieri said. Joe Serra, a dealer who sells a variety of brands including GM vehicles and is a former president of the Detroit Auto Dealers Association, said he has never heard of another dealer or salesperson using an employee's discount without permission. 'God, I hope that doesn't happen,' he said. 'It's just unethical.' He also has never heard of GM suing an employee for violating the incentive program. GM is not suing any dealers, spokesman Wilkinson said. The automaker's decision to extend the employee discount to everyone, timed to coincide with the automaker's 100th anniversary, has been successful, Serra said. 'But when it's stretched outside of (a limited promotion), that's not what GM signed up for,' he said. The timing of some lawsuits also coincides with aggressive moves by the automaker to raise cash and trim expenses. On Friday, GM confirmed that it offered early retirement incentives to salaried workers. 'I just think because the economy is so bad, and if they think they're being ripped off to the tune of $450,000, every little bit counts,' Mount Clemens lawyer William Staugaard said. He represents Warren retiree Kenneth Curfman, an octogenarian who Staugaard said is being sued for about $40,000. Staugaard said two of his client's 15 purchases are legitimate. The rest are suspicious. 'I'm willing to bet dollars to doughnuts that I'm going to find no connection whatsoever to my client,' he said. 'I'm really narrowing in on that somebody was abusing (Curfman's) number.' Ford Motor Co. also monitors the use of employee discounts, but if anything, has encouraged employees to give away their discounts and boost sales. A year ago, the Dearborn automaker allowed its active and retired workers to extend the discounts to as many as 13 friends and family members, five more than previously allowed. You can reach Robert Snell at (313) 222-2028 or [email protected].