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N.C. Used-Car Dealer, Finance Company Swap Fraud Suits

July 10, 2008

BENSON, N.C. — The legal battle between Security Auto Sales and Security Credit Corporation Inc. has reached the North Carolina Supreme Court, according to the Dunn, N.C. Daily Record. The used-car dealership, formerly located in Benson but now closed, began doing business with Security Credit, which is based in nearby Smithfield, in April 2005. Each company is accusing the other of engaging in fraudulent business practices, and each is seeking compensatory damage awards.

Security Credit's lawyers claimed that Security Auto owners Michael S. Barefoot, his ex-wife, Franki Barefoot, and an associate, Eddie Snead, were partners in a scheme to defraud the lender and their customers. The suit alleges that the Barefoots and Snead rolled back odomoters, listed later-than-actual model years on applications and failed to disclose to both customers and Security Credit that several units were salvage vehicles. They are asking for $1.3 million in damages.

In turn, Barefoot's lawyers said that Security Credit and its owners, including N.C. state representative Leo Daughtry, the company's vice president, president David Lee and secretary/treasurer Kathy Conway, "fraudulently and intentionally intended" to close or cripple his business, make him lose his business license and ruin his business reputation, according to the Record. In addition to compensatory and punitive damages, Barefoot has asked for action under federal and state racketeering laws as well as North Carolina statutes concerning abuse of process, torturous interference with contractual business relations and breach of duty of good faith and fair dealing.

As of press time, the next court hearing has yet to be scheduled. The full text of the Daily Record article can be read here.

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