Troubled Auto Dealership : A Star of Compton’s Redevelopment Dims
Except for some office furniture stacked in the middle of the floor, the showroom is empty. So are the outdoor car lots. The service department is deserted, the shelves stripped of auto parts. There is only one employee now--a watchman--where as many as 65 people used to work.
And instead of having a steady flow of city sales tax revenue and rent money, Compton has a vacant building in its auto mall, a bounced rent check for $9,000, and an IOU for $115,887 on an unpaid loan.
Brett Mitchell Chevrolet, a firm heavily subsidized with city redevelopment money, closed late last month after the state Department of Motor Vehicles suspended the firm’s operating license for 30 days for a series of law violations.
Shortly afterward, General Motors removed the cars and auto parts as collateral for what Mitchell owes its finance company subsidiary, a GM spokesman said. Last week, the DMV canceled Mitchell’s business license, and state tax officials slapped a lien against his firm.
For the 30-year-old Mitchell, the legal and financial problems may have permanently derailed a fast-track business career that seemed to be soaring last May when the U.S. Small Business Administration honored him as “Young Entrepreneur of the Year.”
For city officials, Mitchell’s problems amount to what could be a major redevelopment failure. Despite heavy financial investment in the Compton Auto Plaza and in individual dealerships there, the city has not been able to attract more than four dealers to an auto mall originally designed for 14.
Mitchell insists that the DMV action is the result of a bureaucratic mix-up by the state and that he will soon reopen for business. “We stand ready to fight and defend ourselves against all charges,” he said in a brief telephone interview this week.
However, Al Mateer, head of the DMV’s legal division, said: “I will be a very surprised person if he gets his license back.”
When Mitchell’s license was suspended Dec. 22, the DMV said he had not paid about $4,400 in registration fees and fines for cars sold by his dealership last year. It also charged that he resold car loan contracts. For example, the DMV said, Mitchell sold a loan contract on a car to the Bank of America, pocketed $20,766 and then resold the contract to General Motors Acceptance Corp.
Two weeks earlier, Mitchell and his wife, Elaine, also 30, were arrested in connection with the alleged writing of two bad checks to Beverly Hills Auto Imports for the purchase of a 1988 Volvo station wagon that cost $27,247. When Mitchell subsequently paid the dealer, the charges were dropped by the county district attorney.
Last week, in conjunction with a hearing held Monday before an administrative law judge, the DMV canceled Mitchell’s operating license, saying that for two years he failed to file corporate charter information required by the secretary of state.
Papers Filed Again
Mitchell said in an interview that he had previously filed the appropriate papers but that to please state officials he filed again this week. He also said that since his suspension last month he has paid all the fees and fines he owes. A spokeswoman for the DMV confirmed that the money he owes the department has been paid.
Two more hearings are set for March 16 and 17, however, and the DMV’s Mateer said that the state will fight any move by Mitchell to regain his license. Even if the court finds that Mitchell’s charter refiling is justification to reverse the DMV, there is still the allegation about resold car loans, which if proven would constitute fraud, Mateer said.
In addition, the State Board of Equalization, which collects sales tax revenue, has issued a lien for $110,721 against the dealership.
GM spokesman Tom Hoxie said that the auto maker is “not going to rush into terminating (Mitchell’s) agreement with us.” If his license is reinstated and he demonstrates that he is able to pay GM and continue operating the business, Hoxie said, the corporation will return the cars and auto parts.
Even if Mitchell pays his tax lien and solves his legal problems, he still has other debts. The city helped him establish the business in 1985 when it was searching for a new Chevrolet dealer for the auto mall, then the centerpiece of a 66-acre redevelopment zone along the Artesia Freeway. Two previous Chevrolet dealerships had already closed their doors there--Barnett Chevrolet and Plaza Chevrolet owned by Fred Robbin of San Diego. After that the city Redevelopment Agency bought back the dealership showroom, car lots and service garage.
Mitchell owned two parcels of land in Compton’s downtown. He sold the parcels to the city and with the money from the sale moved into the auto plaza. The city paid $725,000 for the two parcels, although Mitchell had purchased them less than a year earlier for about $335,000.
The City Council also gave him a five-year subsidized lease on the dealership property. For the first year he had to pay only $200 a month rent, then $3,000 a month for the subsequent four years.
At the same time, Mitchell took an active role in local civic and political affairs. He helped raise money for several charities and in his first two years of business gave several thousand dollars in campaign contributions to Mayor Walter R. Tucker and two councilmen, Robert L. Adams and Floyd A. James.
In May, 1987, however, he told the council he needed a loan of $175,000 to expand the business. In voting for the loan, Adams compared Mitchell’s business struggles to those of Lee Iacocca, the man credited with saving Chrysler from bankruptcy. One day, said Adams, Mitchell “may be a great big businessman like Mr. Iacocca and all the big boys.”
Mitchell got the loan and was given three years to repay it at 7% interest, which was 1.25% below what banks were charging their best commercial customers that year. Now Mitchell can’t sell cars and he still owes the city $115,887 on the loan. He is behind $21,813 on his monthly loan payments, according to a report prepared this week by the city staff.
Mitchell also owes the city $12,000 in back rent for the dealership property, according to the report. In December he sent the city a $9,000 check for three months back rent and it bounced, city officials said.
Several city officials expressed surprise last week when they learned that the state had canceled Mitchell’s license. The auto dealer, they said, had assured city officials when the dealership was closed in December that he would settle his legal problems and reopen soon.
City Manager James Goins said he does not know what the city will do to recover the money it is owed. But Goins was firm on one issue: He said he would oppose any move by Mitchell to get more financial assistance from the city.
“Presently,” Goins said, “he’s not in the condition we’d want to do business with.”
But Adams counseled patience: “He hasn’t said he wasn’t going to pay us.”
The city, said Adams, is trying to generate sales tax revenue, and to do that it has to help firms by loaning them money or selling them property at affordable prices. “To us it’s an investment,” Adams said. “A lot of people make bad investments.”
Several city officials said they believe that another dealer can be found to open a Chevrolet business if Mitchell does not reopen. “I don’t think that we are going to have a problem,” Councilman James said. “There are other dealers who want to move there.”
Goins acknowledged that within two years after the city opened the auto mall, officials realized that they would never reach their goal of having 14 dealerships there. The city has brought in other kinds of development to the area, he said, pointing to a hotel and convention center being built on part of the original 66-acre site. Work on the hotel, however, has been stalled for two months because of labor and financial problems on the part of the developer.
