Chrysler accuses Hecker of misappropriating $83 million

Chrysler Financial accuses him of fraud and forgery and says $83 million in debt shouldn't be forgiven.

By DEE DePASS, Star Tribune

Last update: July 8, 2009 - 9:45 PM

Chrysler's financial arm turned up the heat against Denny Hecker on Wednesday, claiming in a lawsuit that the auto-sales mogul obtained $83 million from it through fraud, forged documents and embezzlement.

Hecker's attorney denied the accusations.

The lawsuit is Chrysler Financial's second against Hecker. It sued him in January for defaulting on $550 million in loans and won a judgment in that case for $477 million in April. After certain liquidations, Hecker still owes $364.9 million, Chrysler said in its court filing Wednesday.

Hecker filed for personal bankruptcy in June, making it unlikely Chrysler Financial would be fully repaid, since much of the debt would probably be forgiven in bankruptcy.

But in its lawsuit filed Wednesday, Chrysler Financial claimed $83 million of Hecker's debt should be considered "nondischargable" because of "false pretenses, false representations, fraud ... and embezzlement."

Hecker's attorney Bill Mohrman denied the allegations and said Hecker will battle Chrysler Financial in court.

"Mr. Hecker unequivocally denies Chrysler Financial's allegations," Mohrman said. "Simply put, no funds were embezzled out of the Hecker businesses and no contracts were forged or doctored. ... It is not at all uncommon in personal bankruptcies arising out of the failure of large commercial enterprises such as Mr. Hecker's for creditors to make these types of claims. Mr. Hecker intends to vigorously defend against Chrysler Financial's claims."

In the lawsuit, Chrysler said "Hecker personally presented to Chrysler Financial a forged, doctored document and made other misrepresentations to Chrysler Financial in order to obtain $65 million in loan advances."

Chrysler claims Hecker requested the money in November 2007 so his Hecker Rosedale Dodge operation could purchase 4,855 vehicles from Hyundai Motor America. It claims that Hecker submitted two offer letters supposedly from Hyundai but that they were "forged" and "countersigned" by Hecker.

Chrysler said that it later discovered that Hyundai had actually sent Hecker a letter proposing to sell him just 605 vehicles, not 4,855. Based on the forged letters, Chrysler said, it agreed to finance 4,247 of the vehicles, which it believed were "guaranteed."

The lawsuit also said that Hecker convinced Chrysler Financial that Hyundai was willing to repurchase the vehicles and as a result "was able to retain cash incentives of between $4,100 and $4,500 per vehicle," totaling $15 million.

Chrysler also asserted that Hecker had "misappropriated" $67.9 million in proceeds from the sale or lease of 4,043 vehicles that were financed by Chrysler Financial.

According to loan agreements, those proceeds were supposed to have been kept in trust and promptly paid to Chrysler Financial. Instead, "Hecker maliciously kept and diverted the proceeds," it claimed.

The lawsuit is at least the 19th involving Hecker in the past year. Two recent lawsuits, by State Farm Mutual Automobile Insurance Co. and a U.S. bankruptcy trustee, accused Hecker of fraud related to his Advantage Rent A Car and Southwest-Tex Leasing businesses. One accuses him of inflating collision damage claims on some rental vehicles, while the other accuses him of funneling cash to himself and six subsidiaries a year prior to filing for bankruptcy.

Hecker has denied the claims. He continues to blame Chrysler Financial's new ownership for his undoing, saying it yanked his credit in November after the market soured, even though the prior owners had encouraged and helped him to buy the troubled Advantage Rent A Car several years earlier. The credit freeze occurred right after a deal fell through that would have allowed Hecker to sell Advantage for "in excess of $100 million," Hecker told the Star Tribune in an interview this week. The timing was disastrous, he said.

He has since shut 25 dealerships, closed his leasing and fleet operations and put his Advantage operations in bankruptcy court. Advantage is being liquidated.

Dee DePass • 612-673-7725

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