Lithia says refunded auto incentives, probe ongoing

By Soyoung Kim

DETROIT, March 19 (Reuters) - U.S. car dealership group Lithia Motors Inc (LAD.N: Quote, Profile, Research) has refunded $158,500 to automakers after finding three of its stores had improperly reported auto sales in order to take incentive money from the manufacturers, the company said in filing with securities regulators.

Lithia, the No. 7 U.S. dealership group by sales volume, also said its audit committee had hired a special counsel as part of an ongoing review of "potential irregularities" in its sales reporting.

The disclosure marks the most detail Lithia has provided since disclosing on Feb. 20 that it was reviewing a potential sales reporting problem.

Medford, Oregon-based Lithia said in a regulatory filing with the U.S. Securities and Exchange Commission on Tuesday that its investigation had turned up evidence some vehicle sales were being reported at the end of a financial period even though customers had not signed final sales documents.

The company said the impact of that "timing difference" on its reported earnings could not yet be estimated, but said that the number of transactions under scrutiny represented "a small percentage" of overall sales.

"The investigation to date has not detected evidence that senior management encouraged or knew about the irregularities," the company said in its filing. "However, the external investigation continues to review data which could change these conclusions."

Lithia said that audits undertaken before it began its own probe with the special counsel had prompted three of its stores to rebate a total of $158,500 in incentive payments.

The company did not specify the automaker involved in the payments or detail when the rebates had been improperly booked.