Volkswagen of America Inc. is seeking to rescind an agreement with a White Plains auto group that allegedly misled the automaker about who actually owns a VW dealership in Schenectady.
VW accused Volkswagen of Schenectady and holding companies owned by Walid Darwish of fraud, in a complaint filed Aug. 4 in Westchester Supreme Court.
“Individuals purporting to act on behalf of Darwish Holding Companies … have claimed an interest in VW of Schenectady,” the complaint states, “and have taken action to thwart Mr. Darwish and take over the management and control of VW of Schenectady without Volkswagen of America’s approval.”
The individuals VW refers to are executives of Potamkin Automotive Group in Miami Lakes, Florida. Neither the executives nor Potamkin are named as defendants in the action.
The dispute traces back to a deal that Darwish made last year to buy ten New York car dealerships from Fuccillo Automotive Group, whose founder, Billy Fuccillo, had died in 2021. Besides Volkswagen of Schenectady, the deal included dealerships that sell the Ford, Mitsubishi, Nissan and Stellantis brands.
In April 2022, VW approved Walid “Wally” Darwish as the dealer principal in Schenectady. Darwish Auto Group and Darwish General Corp. — both wholly owned by Darwish — each owned 50% of the dealership.
The dealer agreement is a personal service contract, according to the complaint, and requires VW’s approval for any changes in ownership or general management.
But unbeknownst to VW, the complaint states, Darwish and Potamkin had made a deal eleven days before VW approved the Schenectady agreement.
VW learned about the arrangement in September 2022 when Potamkin asked VW to approve a reorganization of the dealership.
Potamkin executives explained in a letter to VW that Darwish had approached Potamkin before closing on the Fuccillo deal because he was unable to obtain funding from other sources.
Potamkin loaned $62 million to a Darwish holding company, of which $2 million was for financing Volkswagen of Schenectady.
A new company, DP Dealership Holdings, owned the Schenectady business, with Potamkin holding 65% interest and Darwish holding 35%.
The letter said that a committee of three, including Darwish and Potamkin executives Barry Frieder and Mark Manzo, was managing the dealership.
Last October, VW issued a termination notice to VW of Schenectady for violating the dealer agreement. It granted extensions that are to expire on Aug. 17.
Meanwhile, on July 19, according to the complaint, Frieder and Manzo notified personnel in Schenectady that Darwish had been terminated from the management committee and they would make all decisions.
On July 21, Darwish emailed the dealership staff and said he was the 100% owner, operator and manager dealer and that they should report to him and his executive team.
VW is asking the court to declare that it is entitled to rescind the original dealer agreement with Walid Darwish or, alternatively, to bar anyone other than Darwish from exercising control over the dealership without VW’s approval.
Darwish did not reply to an email asking for his side of the story.
