CAMDEN, N.J. — Harry Klause, the operator and manager of Klause Cars and Trucks Inc., pleaded guilty Aug. 9 to wire fraud charges associated with a scheme to defraud finance sources and the dealership’s customers.
Klause purchased trade-in vehicles from customers of his Ocean City, N.J.-based dealership, and applied the purchase price against the price of vehicles they purchased. Though Klause agreed to pay off any existing loan the customers had on the trade-in vehicles, he didn’t do so in a timely way, causing damage to his customers’ credit scores. Klause then sold trade-in vehicles to other customers even though he had neither paid off the loans nor gotten the vehicle titles from the lenders.
Klause steered buyers of the trade-in vehicles to various lenders to finance the purchases, but he didn’t immediately — or ever — send the titles to those lenders. If a customer stopped paying his or her car loan, the lender would be without recourse to repossess the vehicle.
During his guilty plea proceeding, Klause admitted specific acts of fraud concerning individual transactions.
The wire fraud charge carries a maximum potential penalty of 20 years in prison and a $250,000 fine. Sentencing is currently scheduled for Nov. 15, 2013.