Partner sues megadealer for fraud

Terry Taylor, who built a dealership empire in part by granting equity stakes to his general managers, is being sued by one of his former managers, who accuses him of fraud. The suit alleges Taylor inflated expenses and withheld revenue that should have been shared with the minority partner.Other minority partners say that if the revenue-hiding charge is true, they will want recompense, too.The charges threaten to drag the publicity-averse Taylor into the spotlight and undermine a key strategy that he has used to accumulate more U.S. dealerships than any individual.The exact number of stores that Taylor owns remains unclear. But former and current partners and business associates estimate he owns anywhere from 120 to more than 150 U.S. rooftops, which would trail only four publicly traded dealership groups.His company, Automotive Management Services Inc. in West Palm Beach, Fla., provides support for his dealerships. Taylor, through his lawyer, did not respond to questions as to whether AMSI provides those services to other dealerships as well. The lawsuit contends AMSI inflated the cost of the services it provides, thereby fattening Taylor's wallet at the expense of his store manager equity partners.The charges are in a counterpunch lawsuit filed Nov. 16 in Putnam County, Tenn., by Michael Petrello, a former general manager at a Taylor-owned dealership. A related suit has been filed in West Palm Beach as well. Petrello is represented by the Orlando office of the law firm of BakerHostetler. It was one of a dozen law firms that helped to unravel Bernie Madoff's Ponzi scheme and win financial restitution for his victims.Petrello, 36, ran Taylor's Ford-Lincoln of Cookeville, in Tennessee, about 80 miles east of Nashville, until being terminated in July. Petrello, who still owns a 20 percent minority interest in the store, says he was fired without cause.Taylor vs. rivalsIf estimates of the size of Terry Taylor's auto-retail empire are correct, here's how it ranks against other large dealership groups. Number of dealershipsNew and used vehicles retailed, 2016Penske Automotive Group294457,251AutoNation260563,335Group 1 Automotive159301,184Lithia Motors154259,270Terry Taylor120-150*300,000-350,000*Sonic Automotive112253,462Hendrick Automotive Group103206,404* Estimates by sources familiar with Taylor's operationsSource: Automotive News Top 150 Dealership Groups list published March 2017Suit, countersuitThe lawsuit: Terry Taylor sued Michael Petrello, one of his former managers, in September, alleging he violated the noncompete, nonsolicitation and no-hire provisions of his contract.The countersuit: Petrello countersued in November, accusing Taylor of fraud and creating "fictitious" and inflated costs to profit at the expense of his dealership partners.The fallout: Several of Taylor's partners say they will want recompense if the suit's outcome shows that Taylor withheld reinsurance profits that they were due.In an email to Automotive News, Taylor's lawyer wrote, "It was only after Mr. Taylor learned that Mr. Petrello was actually spending very little time at the dealership attending to its business, and after Mr. Taylor confirmed with several co-workers that Mr. Petrello was only coming in a few days per week and then only for a few hours, that he lost trust in Mr. Petrello and decided to terminate his services."In an email, Petrello wrote: "For three years, it's all-day, every day." In his last two years, he said, "I didn't have to work 100 hours a week ... only 40."A month after being fired, Petrello took a general manager job at a Chrysler-Dodge-Jeep-Ram dealership in Kingsport, Tenn., about 200 miles east of his former store. This prompted Taylor to sue Petrello in September, alleging he violated a noncompete clause. Petrello says his noncompete was valid only within 25 miles of his former store, but he quit the job in Kingsport to protect that store's owner from any legal problems.Petrello's multimillion-dollar countersuit seeks to have Taylor buy out his 20 percent stake in the Ford-Lincoln dealership, pay him $90,050 for his last 45 days of work and to pay out other monetary damages. Taylor has not yet filed a response to the counterclaim.Speaking "on behalf of Mr. Taylor," Nashville lawyer James Cameron III wrote Automotive News in an email, "The allegations in the counterclaim are demonstrably false. Mr. Petrello's claim is nothing more than a retaliatory action made by a terminated employee to draw attention away from the original complaint filed by the Company alleging violations of the non-solicitation/no hire provisions of his contract."Cameron said that in addition to competing directly with Taylor's store, Petrello hired away employees. Petrello says they followed him of their own volition. Other partners watching

Partner sues megadealer for fraud

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