Banned, fined Calif. dealer says AG’s office wore him down into settling for $1.7 million

A California used-vehicle dealer has accepted a decade-long ban from the industry and paid the state $1.7 million as part of a settlement to resolve violations the state says include 650,000 misleading advertisements, 20,000 instances of “power-booking” and another 1,500 ads for which Paul Blanco also bears personal responsibility.

These finance-and-insurance-related actions admitted by the group and Blanco violate both the state’s Unfair Competition and False Advertising laws, according to a Nov. 7 judgment.

But Blanco, former CEO and co-owner of Paul Blanco’s Good Car Company Auto Group, said he and his wife Putu Blanco, co-owner and CFO, had simply been worn down by the California Justice Department into settling. He denied virtually all of the allegations the judgment said he and the company committed. He described language in the document as a creation of the state and out of his control.

Many Californians rely on their car to travel to work, school, and to see their loved ones — it is an essential tool and one of the largest and most important purchases many families make,” California Attorney General Rob Bonta said in a statement Nov. 7. “While Paul Blanco’s claimed to be a ‘good car company,’ in reality they were in the business of putting Californians at risk, using deceitful advertising and illegal sales and lending practices. Today’s settlement ensures that Paul Blanco’s will no longer be able to operate in California and no longer be able to prey on people already struggling to make ends meet.”

Blanco told Automotive News on Nov. 29 the couple had paid attorneys $8.7 million over the years of dealing with the California agency. Then-Attorney General Xavier Becerra announced legal action against the company in 2019, but the investigation stretched back even longer, according to Blanco.

There was no more money left,” Paul Blanco said. Putu Blanco said her husband had even attempted suicide over the ordeal.

Most of the group’s dealerships had closed in 2019, with the last store ceasing operations in 2020, according to Putu Blanco. Lenders had fled the company, Paul Blanco said of the 2019 closures.

Putu Blanco said the couple, who now live in Texas, offered to settle three times throughout the process.

“He never stopped,” Paul Blanco said of Deputy Attorney General Hunter Landerholm. “He never let us settle.”

Putu Blanco called the allegations false. “They can’t find any evidence,” she said.

Paul Blanco’s Good Car Company and 11 California and Nevada dealership subsidiaries are permanently barred from auto retail and were fined $20 million under the settlement announced by the California attorney general’s office. The agency doesn’t expect the defunct company will pay the civil penalty.

Bonta said the case shows California needs a restitution fund when consumers are harmed by businesses that later go bankrupt.

In a letter to Gov. Gavin Newsom, Putu Blanco accused Landerholm of seeking to leave the couple without money for attorneys to “win a giant empty judgment.”

The deal also requires the Blancos to pay a $3.75 million civil penalty and $3.75 million in restitution. They were permitted to satisfy both with a $1.7 million payment. Putu Blanco told Automotive News on Nov. 30 they had done so.

Paul Blanco accepted a 10-year ban on owning a dealership and working in the industry or on dealership ads.

Putu Blanco — whom the couple said managed the daily operations — admitted no liability to any of the allegations, according to the judgment. She received a 10-year ban on any auto sales or finance business affiliated with her husband, but she is free to participate in the industry otherwise.

“They don’t want to blame me,” Putu Blanco said, noting her status as a woman and a minority.

“The allegations in the complaint and the admissions in the judgment speak for themselves,” the attorney general’s office said in response to the Blancos’ account of the case.

According to the judgment, the auto group and Paul Blanco admitted they aired at least 1,500 “Senior Gold” ads promising older consumers special interest rates and prices and no credit checks, down payments or income proof requirements. They described a partnership with credit unions for special senior rates.

But seniors received no special treatment compared with other consumers, and the group had no such partnership with credit unions, the judgment states.

“I didn’t admit to anything,” Paul Blanco said. He told Automotive News he had a role in only a single misleading ad.

Paul Blanco’s Good Car Company alone admitted to the more than 670,000 other violations described in the settlement, according to the judgment.

The group acknowledged running ads with one or more other misleading auto finance promises 650,000 times from Aug. 30, 2013, through December 2020, according to the judgment.

“The company can’t speak for itself,” Paul Blanco said of the admission. “It’s made up.”

The advertising’s inaccurate claims, according to the judgment, include assertions the group did not mark up lender interest rates and offered the “lowest” and “best” rates regardless of credit. They also include the assertion that more than 100 lenders competed for a customer’s business.

The judgment states the group acknowledged fooling lenders with 20,000 instances of “power-booking.” The term refers to a practice in which dealership employees mislead lenders about the value of a vehicle by falsely claiming the presence of features such as accessories.

Collectively, group staff padded vehicle values by more than $7 million, according to the judgment.

“Defendant Paul Blanco was aware of the power booking activity, but rather than stopping it he instead facilitated and encouraged it,” the state wrote in a complaint.

Both Paul and Putu Blanco deny any concerted power-booking efforts. Paul Blanco said the examples cited by the state could be disproved by his records. Other instances of vehicle configurations failing to match the information given banks weren’t intentional and were resolved between the dealership and the bank, he said.

The group admitted it knew of other lies by employees, according to the judgment. It said staff incorrectly claimed F&I products were mandatory, included within a vehicle’s price and “bumper to bumper” or “lifetime, despite significant exclusions and a shorter time span.

Putu Blanco said she had compliance programs in place since 2012 to check such behavior and had refined them throughout the years.

The group reported knowing about but failing to stop a high-level manager, Jeff Holt, who told customers he was Paul Blanco or a Blanco relative, “Jeff Blanco.” Holt was accused of misleadingly promising customers refinancing could be done in a year or sooner, and trained and encouraged other employees to power-book.

Both Blancos denied the state’s allegation of such refinancing promises. The behavior in question simply involved telling customers they could trade in their vehicles, they said. Putu Blanco argued that using a different name wasn’t illegal, and Paul Blanco said Holt had the authority to make the deals he did. Holt also had lived with the Blanco family for a while, they said.