Klause sentenced to house arrest, $5,000 fine in fraud scheme

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Longtime Ocean City car dealer goes out of business

Klause sentenced to house arrest, $5,000 fine in fraud scheme Klause sentenced to house arrest, $5,000 fine in fraud scheme

OCEAN CITY — Local car dealer Harry Klause was sentenced to three years’ probation, a $5,000 fine and four months of house arrest with electronic monitoring Dec. 13 in Camden federal court, according to his attorney William J. Hughes Jr. of Atlantic City.

Part of the sentencing included a restriction on selling cars during his probation, according to the US Attorney’s Office.

Klause, the president, operator and manager of Harry Klause Cars and Trucks Inc. on Asbury Avenue, pleaded guilty before U.S. District Judge Robert B. Kugler in Camden in August to perpetrating a scheme to defraud automotive loan lenders and customers who traded in and bought vehicles at his dealership. The sentencing was originally scheduled for Nov. 15, but moved to Dec. 13.

“Harry was very remorseful for the harm that he has caused to customers whose credit ratings were impacted,” Hughes said. “He has sold cars in Ocean City all of his life and he has had been his business for over 30 years.”

Hughes said that the Klause and the Palmer families have been selling cars in Ocean City on the same Asbury Avenue lot since 1920.

“His sentencing is a sad day not only for the conduct for which Harry is very sorry, but also somewhat marks the end of an era,” Hughes said.

According to Hughes, Klause will no longer sell cars in Ocean City.

“He has some vehicles which have to be sold, but once those are transferred, Harry will be effectively out of business,” he said.

Earlier this month, The Gazette reported that although the sign had changed at Klause’s dealership from “Harry Klause” to “Ocean City” Cars and Trucks, that Klause retained ownership of the property at 1122-24 Asbury Ave. According to county property records, the neighboring property at 1116 Asbury Ave., also owned by Klause, was sold in September to George and Darlene Blood for $250,000. Since that time, all the cars have been removed from the lot.

Hughes said he does not know if Klause has any plans to sell the lot.

According to documents filed in this case and statements in court, Klause purchased trade-in vehicles from customers of his auto dealership and applied the purchase price against the price of vehicles those customers bought from the dealership. Though Klause agreed to pay off any existing loan the customers had on the trade-in vehicles, he didn’t do so in a timely way, causing damage to the customers’ credit scores, the documents state.

The documents go on to state that Klause then sold the trade-in vehicles to other customers even though he had neither paid off the loans nor gotten the vehicle titles from the lenders. Klause steered the buyers of the trade-in vehicles to various lenders to finance the purchases, but didn’t immediately – or ever – send the titles to those lenders. The wire fraud charge carries a maximum potential penalty of 20 years in prison and a $250,000 fine. The government was represented by R. Stephen Stigall of the U.S. Attorney’s Office Camden branch. 

Hughes said that the house arrest can begin after all the paperwork has been filed and the home has been inspected. Under house arrest, Klause will be permitted to go to work and to attend medical appointments or religious services, he said.

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