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California attorney general accuses prominent Sacramento car dealer Paul Blanco of fraud

Sacramento auto dealer Paul Blanco, who has touted his involvement in minority communities statewide, was sued Monday by state Attorney General Xavier Becerra for allegedly preying on vulnerable customers with false advertising, phony credit statements and products such as service contracts that added thousands of dollars to purchase prices.

The lawsuit, filed in Alameda Superior Court, accuses Paul Blanco’s Good Car Co. of deceiving buyers and lenders in their purchases of cars and trucks, including instances where service contracts and other add-on products were hidden in purchase paperwork by Blanco workers “sometimes literally by covering them up with their hands,” Becerra said at a news conference in Sacramento.

“We have no idea at the end of the day how many people have been defrauded, how many people have been deceived,” Becerra said.

The Sacramento dealership referred calls for comment to Chief Financial Officer Putu Blanco, Paul Blanco’s wife, who issued a statement denying the allegations and vowing to fight the lawsuit.

“Our family-run business has helped hard-working Californians who cannot afford or don’t have the credit score necessary to buy a car at other dealerships do so,” she said. “Paul Blanco’s Good Car Company has rigorous controls and a culture of compliance in place to ensure California regulations are followed and consumers are protected.

“We will fight this misguided action vigorously to demonstrate to the Attorney General and his lawyers that our customers and California consumers come first.”

The company’s statement accused Becerra’s office of focusing on “technicalities,” such as “stating in radio ads that ‘everyone can get financing,’ when in fact, not every single consumer can be financed.”

“The action also relies on very old advertising that has not been in place for years,” the company said.

Becerra’s office said the company sells about 1,200 mostly used vehicles a month and that an untold number of buyers were deceived by false advertising or had their credit worthiness inflated on loan applications to fool lenders into providing money needed for a purchase.

“The practice of fraudulently inflating income was so common that defendants’ personnel even developed associated slang,” the lawsuit says. “For example, ‘packing income’ meant falsely increasing a customer’s reported income on a credit application, and packing income ‘by a nickel’ meant increasing a customer’s income by $500.”

The intent was to target “those who are vulnerable, in many cases sometimes in predominately low-income communities,” Becerra said.

The lawsuit says Blanco’s firm went as far as to create a “Senior Gold Program” for older buyers who were told they could receive preferential credit terms even though the program “in fact never existed.”

One manager referred to sessions during which employees were coached to lie to lenders as “lessons in larceny,” the lawsuit says, adding that workers who expressed concern about such tactics were threatened with dismissal.

“One senior manager threatened employees on at least two occasions, telling them not to be a ‘snitch;’ he explained that employees who raised concerns about malfeasance to Mr. Blanco would be fired, and referenced the example of an employee who had previously met that fate,” the lawsuit says.

Some of the allegations are reminiscent of Hollywood tales of used car sales: sales representatives are given scripts telling them to customers on the phone to hold for five seconds, then come back on the line with this message: “Congratulations! (Customer’s name)! Based on the information you have provided, you meet the credit criteria for several of our lenders...”

The alleged tactic of Blanco workers getting buyers to sign contracts without seeing the full price – which is covered by their hands – was known as a “hands-down close,” the lawsuit says.

The suit comes one year after Blanco’s company championed an effort to refurbish the Meadowview home where Stephon Clark was shot to death by Sacramento police officers in March 2018 after running from them into the backyard.

It also comes despite efforts by the company, which operates eight dealerships in California and two in Nevada, to portray itself as a leader active in fighting domestic violence, sex trafficking and problems in minority communities.

Becerra has been investigating the dealership’s practices for two years, officials said, and is seeking a permanent injunction against the alleged practices and restitution. He asked any car buyers who feel they were victims of the alleged practices to call the attorney general’s complaint line at 1-800-952-5225.

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Darrell Smith covers courts and California news for The Sacramento Bee. He joined The Bee in 2006 and previously worked at newspapers in Palm Springs, Colorado Springs, Colo., and Marysville. A Sacramento Valley native, Smith was born and raised at Beale Air Force Base, near Marysville.
Sam Stanton has worked for The Bee since 1991 and has covered a variety of issues, including politics, criminal justice and breaking news.
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