New Details Emerge In Mahindra Fraud Case says Diaz Reus
MIAMI, March 31, 2016 /PRNewswire/ -- An amended complaint filed by six auto dealers provides new details as to how Indian vehicle manufacturer Mahindra & Mahindra, Ltd. allegedly defrauded hundreds of U.S. dealerships out of millions of dollars for light trucks and SUVs that were never delivered.
The Third Amended Complaint filed in the State Court of Fulton County, Georgia, claims that dealers paid fees of up to $210,000 for rights to sell the Mahindra vehicles in the U.S. between 2006 and 2010. Dealers relied on representations made by Mahindra executives that the company's "Scorpio" vehicle models would be certified and available for sale in the U.S. By January 2010, 347 dealers had paid more than $65 million in franchise fees and invested some $160 million to upgrade facilities for delivery of the Scorpio 2-door pickup, 4-door pickup, and SUV.
"This amended pleading tracks the story that has emerged from evidence gathered in the course of discovery, including depositions of senior Mahindra executives that were taken during the first half of March near Mahindra's headquarters in Mumbai, India," said Brant Hadaway, lead plaintiffs' attorney and Partner in Miami-based Diaz, Reus & Targ.
The new complaint alleges that Mahindra selected its U.S. distributor, Global Vehicles U.S.A., Inc., despite knowing that the distributor was in poor financial condition and would need to raise operating capital from dealer franchise fees in order to fund the more than $8.5 million in vehicle development costs that Mahindra required it to pay under the agreement. The filing further contends that senior Mahindra executives, including Chairman and Managing Director Anand Mahindra, Executive Director and Group President of the Automotive Sector Dr. Pawan Goenka, and President and Chief Executive of the Automotive Sector Pravin Shah, coordinated a "master plan" to conduct a hostile takeover of Global Vehicles, which included an intentional delay of obtaining compliance with U.S. safety and emissions regulations in order to maintain a negotiating advantage over Global Vehicles. At one point, Mahindra even secretly enlisted an executive of Goldman Sachs to pressure Global Vehicles into selling to Mahindra. When the takeover bid failed, the complaint alleges, Mahindra invoked a controversial provision in the distributor agreement that purportedly allowed it to terminate if vehicle certification was not achieved by a certain date, thus leaving the dealers with their losses.
Additional new details include allegations that Mahindra ignored warnings from its own chief engineer that the Scorpio was the not the right platform for launch in the U.S., and that Mahindra secretly cancelled development of the Scorpio SUV as early as 2007.
"From beginning to end, Mahindra acted in bad faith towards the dealers whose franchise fees were supposedly being used to fund development of the Scorpio vehicles," said Hadaway. "They knew that their conduct would result in litigation with the dealers."
About Mahindra & Mahindra Ltd.
Mahindra & Mahindra Limited is an Indian multinational automobile manufacturing corporation headquartered in Mumbai, Maharashtra, India. It is one of the largest vehicle manufacturers by production in India and the largest manufacturer of tractors across the world. It is a part of Mahindra Group, an Indian conglomerate.
About Diaz Reus
Diaz Reus is a global legal practice focused on national and transnational parallel proceedings in the following broad areas: sovereign, trade, commerce, finance, and fraud; civil litigation and arbitration; asset identification, location, tracing, and recovery; white collar crime, regulatory, and criminal investigations and defense in matters of corruption, bribery, money laundering, FCPA, OFAC, SDNs, and the Bank Secrecy Act; and politically sensitive investigations including the recovery of U.S. immigration status and visas. Headquartered in Miami, Florida, the firm has 15 additional offices located throughout U.S., Europe, Asia-Pacific, Middle East, and Latin America.
Media contact: Jayne Navarre, 305-375-9220, [email protected]
SOURCE Diaz Reus
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