Fiat Chrysler Automobiles NV is under investigation by the U.S. Justice Department for fraud, according to people familiar with the matter.
Prosecutors are scrutinizing whether the carmaker violated U.S. securities laws, they said. The inquiry is in early stages, according to two people, who asked not to be identified because the investigation is confidential and declined to specify what conduct is being investigated.
A civil lawsuit against Fiat Chrysler may provide clues about what prosecutors are looking at. A Chicago-area dealer alleges the company inflated its U.S. car sales by paying dealers to report selling more vehicles than they actually did.
Shawn Morgan, a spokeswoman for Auburn Hills, Michigan-based Fiat Chrysler, didn’t immediately respond to a telephone and e-mail request for comment. A Justice Department spokesman declined to comment. A spokeswoman for the Securities and Exchange Commission, which typically investigates securities fraud cases along with the Justice Department, declined to comment.
Fiat Chrysler shares in the U.S. fell more than 5 percent on the news in intraday trading and as much as 3 percent since Friday’s close. It was down 1.4 percent to $6.66 at 12:23 p.m. in New York.
A criminal investigation could deliver a blow to the automaker, which has posted record vehicle sales since Fiat acquired full control of Chrysler in 2014 through a government-backed bailout that brought the maker of Jeep and Dodge brands out of bankruptcy in 2009. In December, Fiat Chrysler said it had the best month of U.S. sales in the company’s 90-year history with 217,527 vehicles sold — recording its 69th consecutive month of year-over-year sales gains.
That performance was challenged in a private lawsuit filed in January by dealerships in Illinois and Florida that alleged the sales were padded through a scheme by which dealers — sometimes unbeknownst to their owners — were paid to create false New Vehicle Delivery Reports. Similar claims were made in a 2015 lawsuit filed by a dealer of Fiat Chrysler-owned Maseratis.
Fiat Chrysler, in a Jan. 14 regulatory filing, said an internal investigation concluded the padding allegations were baseless and that the lawsuit was “nothing more than the product of two disgruntled dealers.”
In the sales-padding cases, a federal judge in Chicago is considering Fiat Chrysler’s request to dismiss one of the lawsuits while a judge in Brooklyn is deciding whether to merge two other cases.
Read more of the original article at Bloomberg.com.