Federal and state officials have initiated a probe into the business operations of Chattanooga-based Southern Honda Powersports, the biggest Honda ATV and motorcycle dealership in the U.S.
The investigation comes amid charges by Ernest "Pug" Vickers III, who was a marketing consultant for Southern Honda through May 2007, that were published Monday in USA Today.
Vickers claims that Honda Powersports, which is owned by businessman Tim Kelly, falsified thousands of documents, failed to properly assemble ATVs and motorcycles before selling them and sold defective vehicles that had been recalled by Honda.
"We know of at least 1,000 units sold from 2006 to 2007 where the sale date was months after the recall," Vickers said.
Kelly called the charges "old news," and said that both Honda and federal investigators already examined Southern Honda in 2007 and found no evidence of fraud.
Vickers provided a dozen affidavits to the Chattanooga Times Free Press that have been signed by former employees, who back up many of his charges as well as other moneymaking schemes.
In the affidavits, former managers, salespeople and technicians admit to various types of fraud against consumers, regulators and the IRS under the direction of Kelly and his lieutenants.
Vickers also produced a letter from the U.S. Consumer Product Safety Commission citing Kelly for selling ATVs "without the required recall repairs being made," and a notice in May from the U.S. National Highway Traffic Safety Administration initiating an investigation into Kelly's business practices.
"It's absolutely unconscionable," Vickers said. "He's basically acted with total disregard for public safety and out of personal greed, electing to sell these units even though they have not been repaired."
Kelly said the allegations are "a vendetta, the construction of a madman who has nothing but time on his hands. I fired him after he broke his fourth wife's nose, and he threatened my CFO. He said 'if you fire me, I'll destroy this place.'"
Through its national Internet advertising and low-price strategy, Southern Honda Powersports grew annual sales to nearly $50 million before the recession hit in 2008. On some Saturdays in 2007 and early 2008, the dealership would sell more than 150 units in a day, or one every five minutes.
"It was helter-skelter at that point," said John Gore, who was hired as general manager of the dealership in 2007 and stayed until 2010.
Gore acknowledged that some vehicles under recall may have been sold in the rush. But he says that, for its size, customer complaints were not any greater than at most dealerships.
Kelly allowed that some paperwork may have been improperly filled out and that some recalled units had been inadvertently sold to customers. But he denied that he has ordered employees to falsify documents.
In fact, Kelly fired then-manager Garry Griffith when he found out about the infractions in 2006, he said Monday.
"These guys are mechanics, they're not lawyers," Kelly said. "They do the work on the bike, whether they take another 30 minutes to check every box is immaterial."
The bottom line, he said, is that his ATVs and motorcycles are safe.
"I and all of my managers ride motorcycles that are prepared in the same way as those we sell," Kelly said. "If this happened five years ago and we did all these terrible things, where are the bodies, where are the injuries?"
Vickers said on Monday that he has no direct evidence of any deaths or injuries that have occurred as a direct result of any negligence at Southern Honda. But he said knows of at least six accidents that he feels "pretty confident" are a result of improperly torqued nuts.
Crews assembling the bikes and ATVs used air-powered wrenches, not the torque wrenches that Vickers says were required. Gore said he was unaware of any widespread safety problems with the vehicles when he was general manager.
But Vickers insists with 50,000 units sold in the past decade by Southern Honda Powersports, there could be hundreds of deaths.
"Mark my words, there will be a Congressional hearing on this," he said.
Contact staff writer Ellis Smith at email@example.com or 423-757-6315.