Dealers allege that Fiat Chrysler falsifying sales

The lawsuit centres on the auto maker’s practice of so-called stair step incentives, which it has employed at its USA and Canadian sales divisions.

An explosive racketeering lawsuit by a car-dealer chain accuses Fiat Chrysler of paying dealers to fake new-vehicle sales-accusations which roiled stock markets overseas and brought a rapid rebuttal from the automaker.

FCA is riding a wave of 69 consecutive months of year-over-year sales gains.

The federal lawsuit alleges the automaker’s North American-based operations “knowingly endorses and encourages the false reporting of motor vehicle sales by directly rewarding its local managers … with monetary and quarterly bonuses which are directly related to reported vehicle sales numbers”, among other claims.

FCA CEO Sergio Marchionne, having already merged Italian company Fiat with Chrysler, has favored additional consolidation to strengthen the company’s financial position.

The suit alleges that dealership principal Edward Napleton was asked but refused to falsely report sales of 40 vehicles in exchange for $20,000 that would have been distributed by Fiat Chrysler to the dealership’s advertising budget. While it lists a variety of grievances and bad acts by Fiat Chrysler, the main claim is that on two occasions Fiat Chrysler employees offered Napleton or his workers payments to falsify end-of-month sales results.

According to him, a competing FCA dealer in his area reported 85 false new vehicle delivery reports, for which it received “tens of thousands of dollars as an illicit reward”.

FCA declined to comment as it has not been served the lawsuit yet.

The suit also alleges that FCA rewarded dealers who had falsely reported sales of hot-selling vehicles by allocating more of them to sell in subsequent months – despite the fact that the vehicles reported as sold were not actually sold.

An attorney for Napleton Automotive has not yet returned a call from CNNMoney.

The suit also claims that Fiat Chrysler uses unrealistically high sales targets as a tool to intimidate dealers into participating in the scheme and names a number of regional sales executives who allegedly participated.