So how does a seemingly innocuous firing of a car salesperson turn into a public-relations disaster for Ferrari? Easy — all sorts of unexpected consequences can arise when a Legal File is created.
(Note: No one contacted by “Legal Files” was willing to speak on the record. Consequently, we drew heavily on court filings — mostly Bud Root’s at this stage — for the story.)
Bud Root has spent 22 years happily and successfully selling Ferraris. He started at Shelton Ferrari and moved to Ferrari of Palm Beach when the Sheltons sold their dealership. At age 71, Root remains a workaholic with a large and loyal customer base.
But the happy days ended abruptly when he was fired without warning.
According to Root, the trouble started when Ferrari of Palm Beach brought in a new general manager, Jay Youmans, who took a dislike to Root and fired him to create a position for his young and inexperienced girlfriend. While that could be age discrimination, the more interesting part of the story involves claims of fraudulent odometer tampering on a LaFerrari and sales tax fraud.
Key customer
At the center of the controversy stands one of Root’s best customers, C. Steven McMillan, an avid Ferrari collector and retired CEO of Sara Lee Foods. McMillan purchased a LaFerrari from Root and actually put some miles on it.
That affected the resale value of the LaFerrari, and McMillan was looking forward to purchasing an Aperta (LaFerrari Spyder) when it became available. One of the Ferrari of Palm Beach technicians took the shop’s Ferrari DEIS Diagnostics System device (an electronic device for the diagnostics of electronic control units) to McMillan’s garage and used it to reset the odometer from 243 to zero. The technician was paid in cash for his service.
Finger pointing
Root claims that he complained to management about the DEIS tester as soon as he learned of its capability. He also claims he warned McMillan against its use.
Youmans learned about the reset of McMillan’s odometer from another technician, and sparks started flying. Youmans concluded that Root had directed the technician to do this — and then summarily fired Root.
Root claims that Youmans made no investigation of the real facts, but just saw an opportunity to replace Root with his girlfriend. McMillan claims that Root advised him to do it, told him it was legitimate, and that it was “warranted” by Ferrari.
Sales tax fraud
As if the odometer rollback wasn’t bad enough, Root made more waves about what he claimed was complicity in sales tax fraud.
As “Legal Files” has explained numerous times before, sales tax states often afford various exceptions that are of interest to car collectors.
Under Florida law, no sales tax is imposed if a car is purchased from a Florida dealer by an out-of-state resident, the car is removed from Florida within 45 days — and it then stays outside of Florida for 180 days. To qualify for this exemption, the buyer must give a sworn statement attesting to the satisfaction of these requirements. Floridians frequently accomplish this by forming a Montana LLC to serve as the buyer.
Root claims that he complained to management that McMillan and a number of other customers abused these procedures by giving the requisite affidavits and then never removing the cars from Florida — all with the knowledge and cooperation of the dealership.
Root further alleges that after this all came out, the dealership went back to a number of these customers, including McMillan, and demanded that they pay the sales tax.
Administrative actions
Root also brought a Florida state administrative agency claim for age discrimination, which resulted in a finding that there was no reasonable cause to bring an age discrimination claim.
Root appealed that finding — but later abandoned the appeal. In the course of all this, Ferrari of Palm Beach made Root a unilateral and unconditional offer of re-employment, which Root accepted. He remains employed by Ferrari of Palm Beach to this day, although it doesn’t seem like a happy situation.
Lawsuits still filed
Root’s re-employment did not eliminate Root’s legal claims. He has filed suit against Ferrari of Palm Beach, Youmans and McMillan alleging defamation, violation of the Florida whistleblower statute, and wrongful interference with his employment as his main claims.
Root alleges that he continues to be treated badly — and that his employer is trying its best to either force him to resign or to create grounds for termination. Ferrari has not been sued. We don’t know if it will be, but it appears there will have to be some pretty special circumstances for Root to have any claims against Ferrari.
Since the lawsuits were filed, there have been a number of procedural skirmishes over whether the claims should be tried together or separately — and whether they should be in federal or state court. At present, they are all combined as one and will likely proceed in Florida state court.
Do they or don’t they?
Does the DEIS tester exist, and can it reset an odometer? “Legal Files” contacted Ferrari North America and asked whether the DEIS tester had the capability to reset an odometer. We also asked when doing so would be legitimate, and how Ferrari assures that proper protocols are followed.
Ferrari responded:
“We do not comment on litigation between a dealer and its employees. This litigation involves third parties with respect to Ferrari North America and the litigation does not involve Ferrari. Ferrari reserves the right to take all appropriate action against any party that has adversely affected its rights.”
Everyone seems to agree that McMillan’s odometer was reset, but the conflict centers on whether Root arranged it. In a February 28, 2017, USA Today article, Chris Woodyard quotes Alan Grunspan, one of the dealer’s attorneys, as stating:
“The single odometer incident referred to by plaintiff was done after hours, off dealership premises, without dealership’s knowledge, without dealership’s permission and without the dealership’s authorization, by a technician who no longer works for the dealership.”
Why can this device do this?
The DEIS tester exists, and it has the capability to reset the odometer to zero — but not to reduce the mileage to another number. One has to ask, why would a manufacturer do this?
Tampering with an odometer is a federal and state crime. There would seem to be no upside for the dealer or the manufacturer.
“Legal Files” has been told that the odometer reset can be done only one time, and only if the car has under 500 km (about 300 miles) at the time. However, we have been unable to confirm if that is a limitation on the functionality of the device or simply a policy.
It has also been suggested that the odometer reset capability was created in response to some U.S. Ferrari customers complaining that their new Ferraris would arrive with mileage showing on the odometer.
As much as an exotic-car manufacturer coddling its customers can be understood, there is a difference between an odometer reading 25 miles from testing the car on the Fiorano track and reading 300 miles. Having a professional driver test the car on a track to make sure the damn thing actually performs the way it was intended to should be considered an asset — not a value liability. Not to mention, does the law carry an exception for this?
Is this an isolated case?
Let’s start counting on our fingers:
Every dealer has a DEIS device, and many technicians own their own device.
Many of their technicians are trained on this device.
Owners have a huge financial incentive to show ultra-low mileage on these cars.
To reset the odometer, the technician is required to connect with Ferrari, comply with the security protocols, and gain permission.
Still, McMillan’s odometer seemed to get easily reset, in his garage — and without management involvement.
Taking all this in, it seems more likely than not that this has happened at least one other time — perhaps many times.
Protecting yourself
While we have no evidence that such odometer tampering is a widespread occurrence, the savvy buyer has to think about this with every 2010-or-later low-mileage Ferrari.
If the reset can be done only one time, with a 300-mile maximum reduction, then the valuation effect is minor — except perhaps with a LaFerrari. But if this possibility concerns you, then you have to corroborate the mileage as accurately as possible.
Get written confirmation from the seller that the indicated mileage is accurate. Carefully check service records for inconsistencies with the indicated mileage.
Pulling CARFAX (or similar) reports is another way to check the same thing, but the duplication is worthwhile. Realize that the car’s condition may not disclose much. Heat discoloration may show a 300-mile discrepancy on a 25-mile car, but perhaps not on a 900-mile car.
Finally, a word to the wise reader who employs people: Be careful what they are exposed to. To paraphrase an old saying, there’s nothing nastier than an employee scorned. ♦
JOHN DRANEAS is an attorney in Oregon. His comments are general in nature and are not intended to substitute for consultation with an attorney. He can be reached through www.draneaslaw.com.