Ocean City Car Dealer Pleads Guilty to Fraud

An Ocean City car dealer admitted Friday (Aug. 9) to a scheme to defraud automotive lenders and customers who traded in and bought vehicles at his dealership, U.S. Attorney Paul J. Fishman announced. 

Harry Klause, 64, of Ocean City, "pleaded guilty to an information" charging him with wire fraud. A "plea to information" allows defendants pleading guilty to bypass the grand jury process and move more quickly to court. Klause entered his plea before U.S. District Court Judge Robert B. Kugler in Camden. 

Klause is president, operator and manager of Harry Klause Cars and Trucks, at 1120 Asbury Avenue in Ocean City.

According to a news release from Fishman and documents filed in this case and statements in court: 

Klause purchased trade-in vehicles from customers of his auto dealership and applied the purchase price against the price of vehicles those customers bought from the dealership.

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 the 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 the buyers of the trade-in vehicles to various lenders to finance the purchases, but didn’t immediately — or ever — send the titles to those lenders. If a customer stopped paying a car loan, the lender would be without recourse to repossess the vehicle. 

Klause operated the scheme from November 2008 to September 2009, when FBI agents raided his dealership and removed documents.

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 before Judge Kugler is currently scheduled for Nov. 15, 2013. 

U.S. Attorney Fishman credited special agents from the FBI’s Atlantic City Resident Agency, under the direction of Special Agent in Charge Aaron T. Ford in Newark, with the investigation leading to the guilty plea. He also thanked the Northfield Police Department, under the direction of Chief Robert James; and the New Jersey Motor Vehicle Commission, Business Licensing Investigative Unit, under the direction of Investigator Thomas Bramley, for their assistance. 

The dealership has remained open for business in Ocean City.