Michelin sues Sudduth Tire for alleged fraud

By Miles Moore, Senior Washington Reporter

GREENVILLE, S.C. (Jan. 16, 2015) — Michelin North America Inc. is suing a Southern California commercial tire dealer for allegedly defrauding the tire maker of more than $3.2 million.

Long Beach, Calif.-based Sudduth Tire Co. Inc. submitted fraudulent claims to Michelin for sales to government agencies of more than 71,000 tires, in order to gain credits from Michelin for free or discounted tires, according to the 10-count complaint filed Jan. 6 with the U.S. District Court for the District of South Carolina, Greenville Division.

The suit names as defendants Sudduth Tire, company President Jeanne Sudduth and her son, company Vice President David Obenauer.

According to the lawsuit, Sudduth Tire has been a Michelin dealer since 1993. The dealership is a participant in Michelin's Government Sales Program (GSP), in which Michelin gives dealers credits as an incentive to sell tires to government entities. Participating dealers submit Government Sales Support (GS/GU) Claims to Michelin to verify government sales, and in return the tire maker gives them credits to be used to purchase tires at a discount, or even get them free.

In April 2014, the lawsuit said, Greenville-based Michelin began to notice discrepancies between the number of tires Sudduth Tire purchased and its GS/GU claims.

After conducting an audit, the tire maker found that Sudduth Tire had made unverified GS/GU claims for more than 71,000 tires, according to the complaint. Michelin said it had given Sudduth Tire $3.25 million in credits for those claims.

Michelin demanded repayment of the credits in July 2014. Mr. Obenauer replied in August 2014, saying the company could not comply with Michelin's request for repayment, according to the complaint.

Mr. Obenauer wrote Michelin again in September 2014, according to the lawsuit, saying his attorneys were investigating a case of embezzlement at Sudduth Tire which may have involved the GS/GU credit applications.

The Michelin complaint accuses Mr. Obenauer and Ms. Sudduth of more than 400 acts of wire fraud between January 2012 and May 2014. It also accuses them of breach of contract with Michelin, as well as civil violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act.

The tire maker seeks repayment of the credits, treble damages, punitive damages, pre- or post-judgment interest, attorneys' fees, court costs and other damages the court deems proper.

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