$2 Million Verdict in "A Bernie Madoff Scam”

A Lake County judge found three owners of North Shore Auto Group guilty of fraud last week and ordered them to pay $1.5 million in actual damages and an additional $800,000 in punitive damages to Highland Park investor Charles Brahos.

According to a lawsuit filed by Brahos, ’s managing partners—Carl Ritz of Northbrook, and Carey Chickerneo and Steven Goodman of Highland Park—created a phony contract without Brahos’ knowledge. The men then broke the conditions of what Brahos thought was the real contract and ultimately attempted to expel him as a shareholder in the company.

“Its truly on the level of a Bernie Madoff scam,” Brahos told Patch. “At closing, they switched the paperwork. Everything closed, everything appeared to be in place, including a closing document book … except a signature was missing.”

Calls to North Shore Auto Group Monday were not returned.

Managing Partners Hide Phony Agreement For Two Years

According to Brahos, the fraud was carried out over several years beginning with his first involvement in North Shore Auto in 2006.

Brahos and his former partner, Nicholas Gouletas, each invested $750,000 in the company that year, when Chickerneo, Goodman and Ritz wanted to buy what was then a Buick, Volkswagen, Subaru and Nissan dealership at 1350 W. Park Ave. in Highland Park. Along with Brahos and Gouletas’ investments, the business plan called for Chickerneo, Ritz and Goodman to contribute a total of $500,000, and for the company to borrow an additional $1.35 million.

Amcore Bank, which has since been closed by the FDIC and incorporated into Harris Bank, agreed to loan the money to the group, and to issue two lines of credit totaling $2 million, provided the members created an operating agreement. Chickerneo, a licensed attorney, drafted one and submitted it to Brahos and Gouletas. The agreement divided up shares of the company and named Chickerneo, Goodman and Ritz as managing members and Gouletas and Brahos as non-managing members.

Through his lawyer, Brahos requested that the group add clauses setting up a schedule for repayment of his and Gouletas’ investments and stipulating that the two would become managing members if their money was not repaid on schedule. Chickerneo, Goodman and Ritz met with Brahos and Gouletas and agreed to add the conditions to the contract during a meeting in November 2006, according to Brahos.

Nevertheless, the day after Chickerneo, Ritz and Goodman ostensibly agreed to Brahos’ changes, the five members went to the dealership—separately—to sign the operating agreement. Brahos signed five sets of the agreement, which included his provisions for management conditions, and a third, blank signature page, at Chickerneo’s insistence.

“We signed those agreements and only those agreements,” Brahos said.

Goodman was supposed to sign the agreement last. But according to Brahos’ suit, he refused to sign when he showed up.

And instead of submitting the agreement Brahos had signed to Amcore, Chickerneo gave the bank a different operating agreement—one that appeared to contain Brahos’ signature, according to his lawsuit. The phony agreement lacked the repayment schedule and management conditions Brahos wanted.

North Shore Auto Group Loses Money, Arouses Brahos’ Suspicion

North Shore Auto Group began losing money soon after it took over the dealerships. Within six months, it had lost $700,000, according to Brahos.

“At that point, I was concerned the line of credit was ballooning out,” Brahos said. “I demanded to see the financial paperwork.”

As a shareholder, it was Brahos’ right to see monthly financial documents. But, he said, he was accused of “interfering.” Despite his repeated requests, Chickerneo, Ritz and Goodman refused to let him see the paperwork.

By October 2008, Brahos’ money still hadn’t been repaid. The papers he signed said if he hadn’t recouped his money by that point, he would become managing partner, which is what he expected to happen. But instead, Chickerneo, Ritz and Goodman attempted to expel him, take his shares, and make him a guarantor, according to Brahos’ suit.

That made him potentially liable for millions—not just the $1.35 million loan and $2 million line of credit from Amcore, but a $6 million debt on the lease and up to $7 million debt on the cars the dealership was leasing from the franchises, Brahos said.

The three principals were also paying themselves well in excess of the amount Brahos agreed to. Meanwhile, Ritz, Chickerneo and Goodman were exceeding the borrowing limit on loans from their franchise creditors and, in total, lost more than $100,000 in the business while continuing to borrow money from other lenders.

Brahos Discovers The Phony Agreement—“A Rollercoaster Ride”

Brahos didn’t discover that there was a second, fraudulent operating agreement until November 2008. At that point he went to Amcore to tell the bank that he would begin exercising his rights as a manager, in accordance with the agreement he had signed.

“The bank thought I was perpetrating a fraud and was confused because they had not one but two operating agreements,” Brahos said. “I was on the backseat of a rollercoaster ride.”

Amcore eventually showed Brahos the phony agreement. When Brahos confronted Chickerneo, Ritz and Goodman, they refused to recognize the agreement he had signed, and continued to make decisions without his input.

“We gave them the opportunity to become owners of this car dealership, they found the deal, but at the end they stabbed me in the back,” Brahos said.

In June 2009, Brahos filed suit in Lake County Court. On Wednesday, a jury deliberated three hours before finding  Chickerneo, Ritz and Goodman guilty of fraud.

Judge Margaret Mullen ordered North Shore Auto Group to pay $1.5 million in damages to Brahos, as well as $500,000 in punitive damages from Chickerneo, $200,000 from Goodman and $100,000 from Ritz. .

“I was always a car guy, I always loved cars,” Brahos said. “I planned to give my part of the business or all of the business to my son or daughter.”

North Shore Auto Group is three blocks from his house, so Brahos and his wife saw it on a regular basis, he added—despite the fact that he was barred from the property beginning in 2008.

“Imagine your wife when she goes to the grocery store, across the street, sees this $750,000 growing to $1 million elephant growing around our necks,” he said. “It’s about greed.”

Other counts against Chickerneo, Ritz and Goodman are still up in the air; Judge Mullen will render a verdict March 11 on the rest of Brahos' lawsuit.