By Dennis Oda, Star-Bulletin
Luana Alapa-Hee, holding daughter Kyla, and Michael Maeshiro
are partners in a Honolulu bridal shop and associates of the
Nationwide Auto Club Inc., an Atlanta-based company that
lets people buy cars at a discount. Maeshiro bought this car
through Nationwide. The state is investigating, saying the
club does more recruiting than selling.
It says it's taking heatBy Rob Perez
because it cuts into dealers' profit
Nationwide Auto Club Inc. says it can save Hawaii consumers thousands of dollars on most new car purchases.
There's one problem.
The state alleges the company is operating an illegal pyramid scheme. Nationwide disputes the charge.
"That's just utter nonsense," said Glenville Haldi, Nationwide's attorney.
The fight, which has generated allegations of high-level government corruption, now is in federal court.
In a lawsuit filed in May, the Atlanta-based multilevel-marketing company accuses the state of violating its constitutional rights.
Nationwide has turned to federal court partly because "we don't trust the state court," said President William Case. "We strongly feel the state of Hawaii doesn't want us there."
The state denies the company's allegations.
"They're totally wrong and off the wall," said Patty Moy, senior securities enforcing attorney for the Department of Commerce and Consumer Affairs, which is investigating the company for allegedly violating Hawaii's securities law. Nationwide officials "just don't like that we disagree with them," she said.
For $695, the company sells a two-year benefits package that enables buyers to purchase goods, including new cars, from suppliers at discounted prices. Nationwide associates, for instance, can purchase most domestic vehicles at factory-to-dealer prices, according to the company.
The benefits packages are sold by Nationwide representatives in a multilevel-marketing fashion -- similar to how Amway representatives sell their products and recruit others into the business.
But several states, including Hawaii, have raised questions about Nationwide's operation, saying the emphasis appears to be on recruiting rather than selling -- a key element of a pyramid scheme.
In Washington, the state has ordered the company to stop doing business there allegedly in violation of Washington law. The company is contesting the order.
Haldi said Nationwide isn't operating a pyramid scheme and is being unfairly tainted because many other multilevel-marketing companies have proven to be scams.
He also claims Hawaii officials haven't told the company precisely what is illegal about its operation. But Moy said her agency has told the company what it needs to do to comply with Hawaii's law, such as offer money-back guarantees.
Haldi said he suspects Nationwide's troubles stem from the potential economic blow Hawaii auto dealers would suffer if the company's purchasing system takes hold here.
"We would knock their entire price structure down," he said.
Haldi said Hawaii sources "in a position to know" have told Nationwide that powerful interests are influencing the state's actions. "We're concerned it goes pretty high up in the state and is well entrenched," he said.
Haldi wouldn't identify who the sources are.
He noted, however, that Attorney General Margery Bronster has financial ties through marriage to the local auto industry. Bronster's husband, Mark Fukunaga, is chairman of Servco Pacific Inc., which owns the Toyota dealerships on Oahu.
Moy laughed at Haldi's suggestion of high-level government meddling in the investigation.
"That's totally a fabrication," she said. ". . . He wants to think it's some evil, backward, seamy situation here. It is far from that."
While the two sides duke it out in court, Nationwide representatives are trying to kickstart sales here.
Michael Maeshiro, a Nationwide associate on Oahu, said he saved thousands of dollars by buying two cars recently through the company's program.
Maeshiro says local consumers are paying excessive amounts buying cars from dealers who jack up suggested retail prices by several thousand dollars. "It's a game at the expense of consumers," he said.