$5-Million Fraud Claimed in Deal on Luxury Cars
A Carlsbad woman who offered to sell luxury cars at incredibly low prices was indicted Friday by a federal grand jury on 62 counts of fraud and income tax evasion for not delivering 185 of the expensive automobiles and allegedly defrauding her clients out of more than $5 million.
Diana Devereaux, 43, brought in about $28 million from nearly 1,000 clients between 1981 and mid-1984 by convincing them she could buy the cars--typically Mercedes-Benzes, but also some Porsches and BMWs--for below-market prices.
But, according to the indictment, Devereaux actually bought the automobiles from authorized car dealers and, in the waning months of her three-year scheme, failed to deliver 185 of the vehicles.
Devereaux, a Greek citizen who was born in Egypt, pleaded not guilty Friday afternoon to all charges in the indictment, which include wire and mail fraud, interstate transportation of property taken by fraud, income tax evasion and filing false tax returns. She was released on $100,000 bail.
The indictment says that Devereaux used at least $326,000 of her clients’ money to buy more than $100,000 worth of jewelry, two Mercedes-Benzes and one Oldsmobile worth about $72,000, a $40,000 swimming pool for her Carlsbad home, more than $37,000 worth of fur coats, and other items.
Devereaux--through D&G; International Marketing Research and D&G; Fleet Leasing, formed with her husband, George--received the money for the cars up front, but delivered the vehicles as much as six months later. She allegedly used the money from new orders to purchase cars to fill previous orders.
The car buyers were offered several different explanations about how Devereaux could secure the discounted autos. Clients were told that Devereaux had a “special relationship” with a German car executive, that she bought the cars from a dealer in the Middle East, or that she bought the vehicles through a foreign diplomat.
Devereaux also told customers that she could sell the cars at a discount because she first placed their down payments in short-term investments and earned a profit that more than compensated for the cut-rate purchase price.
According to her price lists, a new 1984 Mercedes-Benz 380SL sold for $34,320, about $10,000 less than the retail list price. A 1984 BMW 533i could be bought from Devereaux for $25,244, also about $10,000 below list.
The alleged pyramid, or Ponzi-type scheme, ended in mid-1984 when the final group of buyers were unable to obtain their cars. A flurry of lawsuits followed, and Devereaux filed for Chapter 7 liquidation bankruptcy.
The case was presented to the federal grand jury more than a year ago, according to U.S. Atty. Peter K. Nunez.
Many of the customers were employed by IBM, where George Devereaux worked. Devereaux used her husband’s IBM job “to enhance the credibility of her” alleged scheme, according to the indictment.
Devereaux did not advertise her car-buying service, relying instead on word-of-mouth endorsements. “The fact that she delivered the first 800 cars was, for a lot of people, evidence that she was legitimate,” according to Assistant U.S. Atty. Charles Gorder Jr.
Her clients were primarily from Southern California, although other buyers came from Arizona, Georgia, Colorado, Florida, Texas and Minnesota, Gorder said.
Times staff writer Jim Schachter contributed to this story.
