FERGUS FALLS, Minn. — A man who blew the whistle on a scheme to double-bill Minnesota police and sheriff departments on their squad cars has settled a lawsuit he brought that claimed Minnesota officials failed to fully hold a former state vendor accountable for overcharges.
The civil lawsuit by Steve Kleiber alleged that Nelson Auto Center of Fergus Falls still owed money to the state and more than 200 law enforcement agencies across Minnesota in the wake of a double billing scandal first exposed more than four years ago by KARE 11.
In a statement to KARE 11, Nelson Auto indicated it already repaid all it owed, but made the “business decision” to settle the case to avoid the cost of further litigation.
Steve Kleiber began sounding the alarm back in 2015 when he met with officials from the Minnesota Department of Administration and investigators from the State Patrol.
After reviewing invoices for patrol cars purchased by two local departments, Kleiber says he told state officials he had uncovered examples of overbilling. They included cases in which the police departments had been charged twice for equipment that was supposed to be included in the base price of the master contract.
“And they did nothing with it,” he said. “They allowed it to continue.”
Unhappy with what he saw as the state’s failure to follow-up on his information, Kleiber eventually contacted KARE 11.
“This ate at you?” investigative reporter A. J. Lagoe asked him.
“Yes, because it’s tax money,” said Kleiber who has a background in the auto industry. “I don’t think we should be wasting tax money to enrich a vendor,” he said.
Acting on Kleiber’s tip, KARE 11 filed public records requests for squad car purchasing records from 20 different police and sheriff's departments.
We discovered every one of them had been double billed.
In a series of reports beginning in May 2017, KARE 11 exposed a widespread scheme to overcharge on police vehicles statewide.
In the wake of KARE 11’s investigation, Gerry Worner – Nelson Auto’s former fleet sales manager – was convicted of Theft by Swindle, the state canceled Nelson Auto’s contract, and the Department of Administration launched an audit to determine the extent of the overbilling.
In December 2017, that audit found overcharges totaling $803,309 on the sales of 3,235 vehicles. Nelson Auto said it cooperated with the audit and sent refund checks to more than 200 government agencies.
But KARE 11’s investigation didn’t stop there.
Using more public records requests, KARE 11 obtained documents used in the state audit. They included invoices showing what Ford had charged Nelson Auto for vehicles and what the dealership had charged police.
KARE 11 found additional discrepancies the original audit had missed.
For example, the records showed Nelson Auto had failed to pass along an increase in the so-called Government Price Concession (GPC), a discount Ford gives dealers when they sell to government agencies. Nelson’s contract required that any increase in the GPC “must be immediately passed on to the state.”
KARE 11’s findings prompted another state review.
In March 2018 the Minnesota Department of Administration confirmed KARE 11’s finding that Nelson Auto had received – but had failed to pass on – more than $200,000 in GPC funds from Ford.
Nelson replied that the additional money had been an overpayment from Ford and, thus, the automaker should be reimbursed rather than taxpayers. The state demanded proof that the dealership returned the money to Ford.
In February 2019, the state completed another audit which found additional overcharges. It concluded the “grand total overcharge” was $975,079 on 3,434 vehicle sales.
In all, records show Nelson refunded more than $1.4 million to government agencies and to Ford.
However, Kleiber, through a whistleblower lawsuit, claimed the state still dropped the ball.
“Did the state and law enforcement audits miss overcharging?” asked KARE 11’s A. J. Lagoe.
“Yes,” replied Mark Becker, an attorney representing Kleiber in the whistleblower lawsuit. “By our calculations there is a substantial amount of additional money that needs to be paid back to the cities and the counties.”
Becker argued the state failed to enforce a provision in the master contract which he says legally capped the total profit Nelson could make at $224.94 per car.
In addition to claiming state audits missed overcharges, the lawsuit said that under the terms of Minnesota’s False Claims Act the dealership should be forced to pay fines – and triple damages – for each false invoice it submitted since 2011 to 238 state and local agencies that purchased off the contract.
In court, Nelson Auto and its owners successfully filed motions asking to have the case dismissed. They argued that Nelson’s owners didn’t know about the overbilling by their former employee, cooperated with the state investigation, and have already paid back the amount state officials determined needed to be refunded.
However, when Kleiber and his lawyers appealed, the case was reopened.
Court records show the two sides recently agreed to settle the case for $1.1 million and bring the police car double billing saga to a conclusion.
In a statement to KARE 11, Nelson Auto said:
"The trial court judge dismissed this lawsuit because all of the issues had already been decided in arbitration and Nelson Auto had already made appropriate reimbursements. We think that’s why none of the more than 200 cities and other government entities joined or participated in this lawsuit."
"Plaintiff Kleiber appealed the dismissal and that appeal is pending. But no matter who would win or lose, further appeal was virtually guaranteed. Nelson Auto therefore made a business decision to settle the case to avoid the significant expense and distraction of further appeals."
Per the settlement agreement:
- $478,131 is being repaid to law enforcement agencies across the state,
- $420,888 goes to Mark Becker and his law firm Fabyanske, Westa, Hart & Thomson,
- $200,980 goes to Steve Kleiber for blowing the whistle.
Check below to see how much local law enforcement agencies are receiving in the settlement:
In a statement to KARE 11, Becker wrote, “We are pleased to have reached a settlement that provides funds to Minnesota cities and towns in a case that was originally dismissed by the trial court.”
If you’d like to blow the whistle on illegal or unethical behavior, email firstname.lastname@example.org.
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