State officials declined to say whether the sales complied with state motor vehicle laws. They said DHHR officials were reviewing the matter.
DHHR staff members privately noted that state government agencies don't need a dealer's license to sell more than five cars a year.
And since the nonprofit groups ran Wheels programs for the state, they perhaps didn't need a license to sell vehicles, the employees said.
Division of Motor Vehicles lawyers declined to say whether the foundation complied with state law.
The foundation also bought at least 47 cars from Kenneth Ray Parsons, a Cabell County used-car dealer who didn't have a dealer's license. Many of those cars were purchased at an auction in Ashland, Ky.
Unlike West Virginia, Kentucky doesn't have an "as is" law, which says cars can't be sold without a warranty.
"The reason you go to Kentucky is you're buying inferior vehicles," Lemmon said.
Parsons also later bought more than 90 cars for about $90 each from the foundation.
He said he followed the foundation's orders for buying and selling cars to the letter.
"They told me how to do it, and I did it," Parsons said. "They knew I didn't have a dealer's license. If I sold these cars illegally, so did they."
Last fall, Parsons was one of several businesses who helped the foundation secure the $1 million grant to run the donated car program. Parsons promised to donate a dozen cars to the foundation.
The foundation bought most of its cars — more than 300 — at Capitol City Auto Auction in Elkview. The group hired a broker who bought cars that Richards picked out.
Kincaid said agency officials fielded complaints and investigated "irregularities" in the auction purchases but found no wrongdoing.
State investigators also are examining records that detail Wheels program sales by Bluefield-based Community Action of South Eastern West Virginia, better known as CASE.
In 2000, CASE sold 52 cars to a used-car dealer for $5,000. Those same cars had been purchased the year before for $118,000. And 22 of the vehicles had been bought from the same dealer, many at retail price.
It's almost unheard of in car-sales business to purchase cars at retail prices, especially when buying in bulk.
"Paying retail, that's insane," said Bob Adams, who runs a Wheels program in New Hampshire. "That's like putting a sign on your back that says, 'Rip me off.'"
To contact staff writers Eric Eyre and Scott Finn, use e-mail or call 348-4869.