Amidst mounting legal challenges, a popular online car dealer that had its Illinois license briefly suspended earlier this year has been given the green light to sell vehicles on a restricted basis.
This, while a top executive for the company, Carvana, has been charged with more than 80 offenses, including both misdemeanor and petty crimes, tied to its business dealings across Illinois.
The latest update for Carvana comes after two formal hearings held this week: One with the Illinois Secretary of State’s office, and another in the Circuit Court for DuPage County, where Carvana’s Illinois base is located.
For the online car dealer, convenience is a major selling point, catering to customers directly from their mobile devices, and allowing them to buy or sell used vehicles at the tap of a finger.
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The company’s goal is to disrupt the old business model, and streamline the process for auto sales moving forward.
But months ago, the company was accused of a different set of disruptions by hundreds of Illinois customers who complained to the state that it took them months, even up to a year, to receive titling and registration documents necessary to drive the vehicles they purchased.
Those customers contacted the Secretary of State’s office, and the agency launched a formal investigation, focused on Carvana’s business practices and whether it adhered to state law.
One focal point is Carvana’s alleged misuse of temporary out-of-state tags and delayed title transfers, investigators for the Secretary of State’s office told NBC 5 Responds.
The state has alleged Carvana is selling vehicles that the company does not have titles for on-hand, and that has led to a mess of complications for certain customers down the line.
After the state briefly suspended Carvana’s license in July, banning it from new sales, Carvana defended itself in court, asking a DuPage Circuit Court judge to issue a temporary restraining order against the Secretary of State’s office.
Carvana’s attorneys argued that the state did not have the kind of evidence necessary to suspend its license, and that the courts should intervene.
DuPage Circuit Court Judge Bonnie Wheaton granted Carvana’s request on July 29, and slated a hearing on the matter for this week.
On Wednesday morning, attorneys for both sides told Judge Wheaton that they’ve made progress on working out their differences, but no final agreement has been reached.
Still, the state agreed that Carvana can be permitted to operate under strict conditions.
“We can ultimately work with Carvana on a proposed path forward,” said Tanya Bouley, an Assistant Attorney General for Illinois representing the Secretary of State’s office.
The Secretary of State’s office told NBC 5 Carvana can sell vehicles for the time being, but it is banned from issuing temporary registration permits or tags.
Carvana is also required to work with a licensed remitter for all auto sales.
A spokesperson for Carvana told NBC 5 it's continuing to work with state officials on the issues at play over its business license.
“This week's proceedings reflect Carvana's consistent willingness to negotiate a resolution,” the spokesperson wrote by email, adding that it’s confident it will “successfully defend the right of Illinois residents to continue to buy and sell cars online”
In a separate proceeding playing out in a DuPage Circuit courtroom, the Secretary of State’s office has filed more than 80 criminal offenses against Carvana’s Vice President and General Counsel, Paul Breaux.
DuPage court records show Breaux faces 54 misdemeanor traffic offenses including “improper use of out-of-state registration or title” and 28 petty offenses including “failure to transfer a vehicle title” among others.
The Secretary of State’s office said the misdemeanor charges can carry a maximum punishment of 30 days to six months in jail, court ordered supervision, as well as fines ranging from $1,000 to $1,500 per offense.
Breaux is due in court on November 1 for a status hearing on the case, according to court records.
Through a company spokesperson, Breaux called the charges “confusing” and “extremely anti-consumer.”
“The State of Illinois has charged me because Carvana delivered a car to a customer's home,” Breaux said. “This is surprising and confusing both because it feels extremely anti-consumer and because I proactively met with several Illinois officials in 2017 to describe this exact practice and they did not then, nor have they since raised any concerns.”
Breaux added that during that time of operating in the state, Carvana “delivered tens of thousands of cars to Illinois homes and provided exceptional customer experiences.”
The company says since this episode of controversy started in Illinois, it has received a “surge of support” from Illinois customers while it works with the state on a long-term resolution.
There are new signs, though, that the problems here in Illinois are bubbling up in other states.
A class-action lawsuit was filed last month by a New York law firm on behalf of Carvana investors alleging “securities fraud” in the midst of a recent decrease in the company’s stock price.
The lawsuit claims Carvana failed to disclose to investors “serious, ongoing issues with documentation, registration, and title with many of its vehicles”; an issue at the heart of problems here in Illinois.
Investors also allege they were not informed that “Carvana was facing imminent and ongoing regulatory actions including license suspensions, business cessation, and probation in several states and counties including in Arizona, Illinois, Pennsylvania, Michigan, and North Carolina.”
A spokesperson for Carvana told NBC 5, “The lawsuit has no substantive merit and we will defend against it vigorously.”
This is the second class-action lawsuit to be filed against Carvana this year.
Another class-action lawsuit, filed in January, is on behalf of customers, accusing Carvana of misusing out-of-state temporary tags.
Robert Cocco, an attorney representing the customer class, said that it is made up of drivers from across the country.
Carvana has asked the judge in that case to dismiss the class-action lawsuit, and move the complaints out of court and into arbitration.
Cocco told NBC 5 the judge’s decision in that case is expected in the coming month.