VENTURA, Calif.-The long arm of California's Department of Consumer Affairs (DCA) has collared Parnelli Jones Inc. for alleged violations of the state's Automotive Repair Act, resulting in one of the agency's largest service fraud settlements. After a two-year undercover investigation by the state Bureau of Automotive Repair (BAR)-leading toallegations that Parnelli Jones employees sold unnecessary parts and services and charged for services not rendered-the Ventura-based tire dealership agreed to pay $800,000 in an out-of-court settlement.
In late 1993, Parnelli Jones and Dob's Tire and Auto Centers merged, creating a company that now has 94 retail outlets in six states, including 50 in California.
As part of the settlement, announced Dec. 15 by the DCA, the state Attorney General's Office and the Alameda County District Attorney, Parnelli Jones' mechanical service departments in all its California stores closed for one day-Jan. 3. The company also paid restitution to more than 35 customers who allegedly were overcharged.
The firm also has agreed to:
Pay $229,000 to establish a state fund that will help pay for high-tech equipment for auto repair training programs;
Pay civil penalties totalling $250,000;
Pay $25,000 to a consumer fraud prosecution trust fund that is administered by California district attorneys; and
Reimburse the state for the costs of the BAR probe.
Initially, according to several sources, the BAR sought a settlement for an amount that exceeded the company's net worth.
In an interview with TIRE BUSINESS prior to the agreement, David Witten, Parnelli Jones' chief operating officer, said the company had been negotiating with the BAR for several months.
While agreeing to the settlement because of its inability to sustain the cost of a prolonged legal battle, the dealership does not admit to any wrongdoing, and takes exception to the BAR's investigative techniques, said President and CEO Dan Beach.
For the past two years, he said, the firm has met quarterly with the BAR to review its service operations and has ``always received a glowing report.''
What he didn't know-and wasn't told-was that after the agency had received a consumer complaint in 1992, it had begun an undercover investigation.
Eventually, Mr. Beach said, the company fired a store manager accused of overcharging customers.
``We try very hard to comply with BAR regulations and get our people to follow them,'' he said, calling a BAR probe ``a process from which there is no escape.''
In 1992, the BAR leaped into the headlines when its undercover probe of Sears, Roebuck and Co.'s California auto service centers produced charges of service fraud, spawning investigations of the retailer in a number of states. That led to settlements totalling some $15 million, including $3.5 million Sears paid in California alone.
And in November 1993, following a BAR investigation, Winston Tire Co., California's largest independent retail tire chain, agreed to pay $1.4 million to settle allegations it had defrauded auto service patrons.
Earlier that year CSB Partnership, an independently owned and operated Big O Tires Inc. franchisee with 17 California stores, paid a total of $169,000 in penalties after being nabbed by the BAR.
Mr. Witten said Parnelli Jones ``spent a lot of time and effort-after the Sears, Winston and Big O incidents-to protect ourselves. This (BAR investigation) is our worst nightmare.
``I can remember having meeting after meeting with our people. I have an inch-thick file of letters about our company policies (that state): `Be careful. This is what happened to (those companies); don't let it happen to us.'
``But the reality is, if (the BAR) wants to get you, they'll get you.''
In the wake of the fraud charges-primarily involving brake and suspension service-Mr. Witten said the firm must better train its mechanics to not ``condemn parts'' outright after only a visual inspection-especially since BAR agents often doctor new vehicle parts to make them appear old.
He said Parnelli Jones has ``spent a lot of hours'' with its employees discussing use of the word recommend when talking about proposed auto service, while avoiding the terms need and safety.
The company requires that any broken part affecting vehicle safety must be documented and verified on a service order.
To ensure against a similar predicament occurring again, he said the dealership will continue to update its various training programs, which include regular staff meetings to review BAR policies.
Company mechanics receive no commissions, but rather an hourly rate plus an ``efficiency bonus.''
``Our mechanics do not sell,'' Mr. Witten emphasized. ``They do not have direct contact with customers. They get paid based on the amount of work they get done, and are penalized for comebacks.
``The motivation is to get the work done right the first time.''
Mr. Witten recalled his initial job interview 24 years ago with the dealership's founder, race driver Parnelli Jones. ``All he wanted to talk about was taking care of customers. He didn't ask me anything else about how I'd run the business.
``He said, `My name's on the side of the building-I never want to cheat a customer.' ''
That company philosophy continues, Mr. Witten stressed.