The Untold Story Of HyperSport, Carvana’s Mysterious And Scandal-Plagued Former Vendor

In 2019, Alexander Cabrera, a lot attendant working the night shift in Carvana’s Tolleson, Arizona reconditioning facility, was promoted to the position of coordinator. His new responsibilities included reviewing invoices submitted by HyperSport Industries, a reconditioning vendor that performed cosmetic work, such as paint jobs and dent removals, on the used cars that Carvana sells to customers.

It didn’t take long for Cabrera to become suspicious of HyperSport.

“When I was coordinating in QC [quality control], I would notice in the paint department invoices for vehicles that were sold months ago with the current date on it. And I was like, ‘This car’s not even here,’ or [invoices for] panels that weren’t even done,” says Cabrera, who adds that he raised the issue internally, but that the problem persisted.

Two former Carvana managers who worked in other Carvana-owned reconditioning facilities also told Forbes that HyperSport was submitting duplicate invoices that were being processed. “They would charge multiple times for the same repair. I know for a fact they were doing that,” one of them says.

Carvana has never mentioned HyperSport in any public filings or statements. But the two firms are linked, a Forbes investigation finds. From 2017 until at least last year, HyperSport technicians worked alongside Carvana technicians at over a dozen Carvana inspection and reconditioning centers (known as “IRCs”), according to eight former Carvana employees, who worked as managers, technicians and inventory coordinators across the company’s facilities. These employees – most of whom spoke with Forbes on the condition of anonymity – say that HyperSport employees were often underqualified to do the work that Carvana was paying them to do. They also allege that HyperSport was controlled by a Carvana manager or his associates–and that as a result, HyperSport was incentivized to push through duplicate invoices to Carvana and skimp on buying its own supplies.

“We had a feeling that someone was getting a kickback out of this,” says Cabrera, who left Carvana last year. “It didn’t make sense.”

All those who spoke with Forbes named Daniel Serna, Carvana’s former director of inspection center development and expansion, as someone they suspected was involved. Public filings show that an individual named Jose Alejandro Garcia Serna, who has an apparent brother named Daniel Garcia Serna, helped set up HyperSport. Government loan data also shows that HyperSport took out a loan in 2020 through a residential address in Colorado owned by two individuals named Daniel Garcia Serna and Victor Garcia Serna.

HyperSport did not respond to a detailed list of questions shared by Forbes earlier this week. In a statement provided to Forbes in February by HyperSport’s outside counsel after Forbes first contacted HyperSport about the allegations made by former Carvana employees, a company spokesperson wrote: “HyperSport has never defrauded, or sought to defraud, Carvana or any other company with which HyperSport transacts business,” and that HyperSport “has not provided any pecuniary benefit to… any Carvana employees to influence contract awards,” and that, “Carvana auditors routinely review and inspect HyperSport’s invoicing system to ensure the accuracy of HyperSport’s billings.” HyperSport also denied that Daniel Serna “ever possessed an equity interest in HyperSport.” Jose and Daniel Serna did not respond to repeated requests for comment. Forbes could not confirm the identities of HyperSport’s ultimate beneficial owners.

Forbes found no evidence that Carvana, its C-Suite or its controlling shareholder Ernest Garcia II knew about the allegations by former Carvana employees cited in this article. Carvana has not been accused of any wrongdoing in connection with HyperSport. The company did not respond to a detailed list of questions shared by Forbes.

Carvana, a pandemic darling, had a market capitalization of $60 billion in July 2021, thanks to investor exuberance and a strong used car market. But the company’s breakneck pace of growth left many customers with title-less or banged-up cars, prompting some states like Illinois and Michigan to place temporary restrictions on Carvana’s operations. Today Carvana’s stock is down more than 90% from its peak. It laid off 4,000 employees–over 20% of its workforce–last year.

One person who is riding high is Ernest Garcia II, Carvana’s largest individual shareholder. A convicted felon who pled guilty to one bank felony charge in 1990 in connection to the Lincoln Savings & Loan scandal, Garcia II is today worth an estimated $4 billion, thanks in part to the $3.6 billion in Carvana stock he sold (pre-tax) in late 2020 and 2021. He remains the company’s controlling shareholder through his super-voting shares, though he does not sit on the board or hold any executive position.

His son, Ernest Garcia III, founded Carvana in 2012 as a division within Phoenix-based used car dealership Drivetime Automotive, which is wholly owned by his father. Carvana was spun off into its own company in 2014. Garcia III, who has served as Carvana’s CEO since its inception, also has a large stake in Carvana once worth over $10 billion but, unlike his father, he held onto most of his shares and is now worth an estimated $600 million.

Carvana’s downturn has coincided with mounting legal headaches. The company and its top brass are facing at least six lawsuits in federal and Delaware court from multiple parties including pension funds, car dealerships and investors. The allegations range from illegally issuing temporary vehicle license tags and violating car dealership laws, to making misleading statements in financial filings, to selling stock to their controlling shareholders, Garcia II and III, at a “below fair value” price. Carvana is contesting all of these legal actions, which remain ongoing. The company “believes the claims in these matters are not material or are without merit,” as it stated in its annual 10-K filing.

The inspections and reconditioning side of Carvana’s business was historically supported by Garcia II’s firm, DriveTime Automotive, which leased to Carvana the reconditioning centers it relied on. That arrangement was one of several between Carvana and Garcia II “not negotiated at arm’s length” as the company disclosed ahead of its public offering.

Once armed with $225 million in IPO proceeds, Carvana began building its own facilities. Between 2017 and last year, it opened 15 reconditioning centers in 10 states. The first one, in Tolleson, a suburb of Phoenix, began operations in September 2017. That facility, according to former Carvana employees, was also the first to bring in HyperSport, which had been incorporated in Arizona two months earlier.

“HyperSport didn’t come along until Tolleson. Then, every inspection center after that, they were in every one of those facilities,” says a former manager.

In Carvana’s facilities, HyperSport employees worked exclusively on cosmetic repairs, such as paint jobs, paintless dent repair (a technique to remove dings from vehicle exteriors), reconditioning of wheels and glass replacement, according to former Carvana employees. “They are put in our locations and they do everything that we do,” says a former paint technician in Carvana’s Tolleson facility.

One former manager described how Carvana’s inspection centers “have three cosmetic lines, [and HyperSport] essentially ran one of those cosmetic lines, while Carvana simultaneously ran the other two lines. Essentially, what they do is they run that one line until Carvana can get enough staff to remove them from the facility. And once they remove them from the facility, they’ll have an off-site location.”

Of the 12 cities named on HyperSport’s website, 10 are locations where Carvana built new reconditioning centers. HyperSport purchased one of its facilities–a 418,000 square foot center in Birmingham, Alabama– from Verde Investments, the investment arm of Carvana’s Garcia II.

For hiring, HyperSport had its own pipeline of talent: individuals Carvana rejected, according to former Carvana employees. “They would take people that Carvana wouldn’t hire,” says a former Carvana manager. “A lot of people I talked to at HyperSport were like, ‘Yeah I applied to Carvana and didn’t get it, but HyperSport called me,’” says Cabrera.

HyperSport’s work product was reportedly subpar, but Carvana was reluctant to part with the vendor, for reasons that were not made clear, say former employees. “HyperSport couldn’t get their shit together. They couldn’t do what they promised they would do,” according to an individual who worked in Carvana’s Salt Lake City facility. He says his attempts to replace HyperSport were met with resistance internally. “I called other vendors and I got my hands slapped.”

One person who worked in Carvana’s San Antonio location said: “Everyone was complaining because they [HyperSport workers] really didn’t perform. I said, why don’t we fire them? They’d say, oh it’s a mandate. You cannot go outside HyperSport.” Another person involved in Carvana’s Indianapolis reconditioning facility recalled how HyperSport came “pre-packaged” when the center was launched. “Basically the messaging was that a new site can’t get up to operational speed without the use of a cosmetic repair vendor,” the person said. “I worked with the HyperSport leadership for months trying to get a higher quality and a better output from them. I could never get the result from them that I needed.”

Perhaps part of the problem was that HyperSport employees weren’t being fairly compensated. HyperSport is currently being sued in a class action filed in February 2022 under the Fair Labor Standards Act for allegedly shortchanging its employees on wages. Mark Jackson, who worked for HyperSport in its Columbus, Ohio facility from August 2020 to October 2021, alleges that HyperSport’s management would “manually reduce” hours he recorded in his time log in order to “reduce the wages, including overtime,” that it had to pay him. In other words, they underpaid him for hours that he’d put in. HyperSport “routinely deducted time from other similarly situated employees’ daily hours worked” at its various U.S. facilities, the lawsuit alleges. Several former HyperSport employees have joined the class action group. The case, filed in the Southern District Court of Ohio last year, remains in the pre-discovery phase. HyperSport denies the allegations. (Carvana is not part of the lawsuit.)

While allegedly underpaying its workers, HyperSport was also allegedly double dipping on invoices, say former Carvana employees.

Michael Ramsey, a second coordinator who worked in Carvana’s Tolleson facility alongside Cabrera on the nightshift, said that every quarter, he would review spreadsheets of about 1,000 invoices that had gone unprocessed, and that about a fourth of them would be duplicates. Ramsey says that he and his colleagues would identify and earmark the duplicates, but that the morning shift would then process those repeat invoices. Ramsey says the problem persisted for “at least a year” despite he and others raising the issue.

“I don’t know why they would process them, because we would already see that there was a charge,” says Ramsey, who left Carvana last summer. “So why are [they] going to charge twice on something that we already paid for?”

One former employee in Carvana’s Indianapolis department says he “discovered HyperSport had been invoicing the same units/stock numbers over and over again for the same repairs” and that his complaints to management went unaddressed. “I was basically told, ‘Thanks for pointing this out. Mistakes happen. We aren’t interested in pursuing those overpaid invoices.’”

A former cosmetic associate who painted cars in Carvana’s Tolleson facility said that HyperSport employees would take Carvana’s paint and other supplies, such as tape rolls and sandpaper, without paying Carvana back. “I was having to give them whatever materials they needed. Every day. And a lot of materials. They told me to always give HyperSport any materials they needed. They never paid Carvana back,” says the former associate. “I’ve had numerous crap stolen from me in the shop from someone on their team. They’re all sheisty.”

HyperSport often did not have the materials it needed to complete its jobs and relied on Carvana’s supply inventory, says a former Carvana employee in its San Antonio facility. “We bought all the equipment and they utilized it.”

All those who spoke with Forbes that they believed that Daniel Serna, Carvana’s former director of inspection center development, was involved in HyperSport’s operation. One former manager says Serna reprimanded him after he had suggested that Carvana replace HyperSport with another vendor. “I truthfully, 100% believe it was Daniel’s company—or Daniel knew whose company it was and was getting money from it,” says the former manager.

“I think it was Daniel calling the shots,” says Cabrera.

HyperSport companies were registered as limited liability companies in at least nine states, Forbes found. While none of those filings reveal HyperSport’s beneficial owners, three of the company’s subsidiaries – in Arizona, Arkansas and Indiana – name an individual, Jose Garcia, as its registered agent. This person’s full name is Jose Alejandro Garcia Serna (no relation to Carvana’s Ernest Garcia II or III), according to a public records search. This same Jose Alejandro Garcia Serna has a younger brother named Daniel Garcia Serna, according to public records. (The Sernas appear to be from Fresno County, California–born in 1984 and 1988, respectively.) Additionally, Daniel Garcia Serna is listed as the co-owner of a home in Colorado (along with an individual named Victor Garcia Serna), which was listed as the address for a $445,000 pandemic-era PPP loan that HyperSport took out in May 2022.

HyperSport is not the only auto firm controlled by the Sernas. Arizona Automotive Collision Group, LLC was incorporated in Arizona in 2019, and its registered agent was Jose Serna. This entity’s mailing address is a residential address in Arizona whose owner is Daniel G Serna, according to the Maricopa County Assessor’s Office.

Another firm, Ghost Reconditioning Centers LLC, was incorporated in 2021. Its state filings in Colorado and Arizona named Jose Serna as its officer. The former listed the same Colorado residential address co-owned by Daniel Garcia Serna; the latter named the same Arizona home that is owned by Daniel G Serna.

A third firm, Push Paintless Dent Repair, which was first incorporated as an LLC in California in 2015, and whose registered agent was Jose Alejandro Serna, became inactive in 2018. However, a second Push Paintless Dent Repair LLC was incorporated in Colorado in 2020 by Jose Serna. Land records show that in June 2022, Push Paintless Dent Repair LLC acquired HyperSport’s reconditioning facility in Alabama for $600,000, the same price HyperSport had paid Garcia II’s Verde Investments for the same facility 14 months earlier.

It was in late May 2022 that Daniel Serna was let go by Carvana, according to former employees. One former Carvana manager says that after Serna left the company, Carvana instructed his reconditioning facility to phase out contracts with HyperSport.

It’s not clear when, or if, HyperSport stopped working for Carvana entirely. In the statement provided to Forbes in February, HyperSport alluded to “the ongoing business relationship between HyperSport and Carvana.”

In recent reviews left on the jobs site Indeed, two former HyperSport employees – one in Tolleson, Arizona, and one in Oklahoma City – say that HyperSport laid off their teams around the end of last year. “They let most of us go right around the holidays and said they would contact us,” wrote one of the former employees. “I’ve reached out but no response every time.”

With additional reporting from Sue Radlauer