State Agents Work to Protect Car Consumers : How DMV Blows Horn on Crime

Orange County residents spend more money on cars and auto-related products than on anything else except their homes.

So, it is easy to see why local automotive scams and crimes keep 13 local Department of Motor Vehicles special investigators on the run.

Tucked away in DMV offices in Fullerton and Santa Ana, the investigators probe a plethora of crimes ranging from rolled-back odometers to stolen parts and false advertising by county car dealers.

Investigators wear badges, carry guns and arrest people when necessary. Their territory includes five auto malls and 1,245 new- and used-car dealerships. Investigators also keep tabs on hundreds of auto repair shops, dismantling yards, recreational vehicle and boat dealers.

“For all the fraud that’s out there, we could use double the investigators in Orange County,” said Rande King, a special investigator in the Santa Ana office.

Uncover Other Crimes

In their quest, DMV investigators often uncover other nefarious activities, including drugs smuggled inside cars purchased wholesale in Mexico. And three Northern California inspectors recently stumbled into a major methamphetamine lab while they were inspecting an auto-dismantling business.

Many investigators join the DMV from the California Highway Patrol or other law enforcement agencies. All are required to have the stamina needed to solve complex paper fraud cases and work closely with other agencies, including the FBI and the Secret Service.

“We are a run silent, run deep operation,” said Al Caruso, southern area administrator, commenting on why so few people even know the DMV investigators exist.

Car dealers who run into trouble with the DMV usually live up to their reputation as being fast-talking and flashy.

“We tell the victims right up front that generally, when funds are embezzled, the dealer usually has a habit he’s spent it on--gambling, drugs or women,” said Caruso.

Most DMV cases against dealers are built on customer complaints. Recently, a woman who canceled an extended warranty on her new recreational vehicle was having trouble getting her money back. In the course of an inquiry, DMV investigator Claire Page found out that the dealer earned a $1,700 profit on the $2,158 warranty package he sold to the woman. Page’s investigation also revealed that the dealer paid $294 for a service contract but charged his customer $1,695.

Discounts Not Requested

In another pending case, Page said she reviewed a Ford dealer’s weekend ads promoting a $2,000 discount for a particular model. She later checked the dealer’s sales records to see if the advertised discounts were offered to buyers. The records revealed that about 35 buyers had not received the discount because they hadn’t asked for it.

“By law, the dealers have to offer the discount to everyone, not just to the people who ask for it,” Page said. She declined to name the dealership because it is still negotiating a substantial monetary settlement with the DMV, Page said.

Page also checks on special sales packages, including one dealer’s $599 “Coastal Protection” plan. For that price, customers’ cars received a special wax job, fabric guard and an undercoating. Another dealer featured floor mats, stripes, door edge guards and wheel-lip moldings for $999.

“These packages are deceptive because people are confused by them,” Page said, adding that the deceptive advertising cases take a lot of time to put together, but she “keeps plugging away.”

Even after a DMV investigator painstakingly makes a case against a dealer for deceptive sales practices, false advertising, or rolling back odometers, the next challenge is finding a district attorney willing to prosecute.

“Fraud cases are very hard to prove, and D.A.s don’t like them,” said James Barnes, a Santa Ana DMV investigator. “But, if you have enough time, there are few cases that are unsolvable.”

In Orange County, investigators are now focusing their efforts on a burgeoning crop of fly-by-night subleasing firms.

The subleasing companies profit by matching people who can no longer afford their cars with poor credit risks who are willing to take over the payments. The new buyer or lessor sends his monthly check to the subleasing company, which is supposed to pass it through to the original lender. The problem is the that sub-lessors may stop making the payments and the original owner or leaseholder is stuck.

Meanwhile, the bank or finance company has no idea that the original buyer is out of the picture because the car title remains in his or her name.

Customers Left Behind

Page said several Orange County subleasing companies have disappeared, leaving dozens of unhappy customers in their wake. Because the companies operate in a gray area of the law, it has been difficult to prosecute them.

“It’s too hard now to prove grand theft, so there is new legislation pending,” Page said.

The bill, AB 2275, authored by Assemblyman Robert C. Frazee (R-Carlsbad), would make it a crime to sublease a vehicle without the written consent of the seller or lessor.

Tom Carter, a spokesman for Western Auto Brokers in Fountain Valley, said his company would welcome more regulation because the subleasing business “attracts people who have no intention of being legitimate.”

“It’s so easy to get into and start up that it attracts every con artist from coast to coast,” Carter said.

Carter said his brokers charge fees ranging from $500 to $1,500 to find cars for people with poor credit or those who do not want car payments to appear on their credit records.

“Basically, what we do is fill a void in the industry,” Carter said. “We help divorcees, bankrupts, people who are treated as second-class citizens (by banks and finance companies).”

Right to Inspect Books

By law, DMV investigators have the right to inspect a dealer’s books and sales records at any time. Auto industry officials said most dealers have nothing to hide.

“A good DMV investigator is very helpful in weeding out the bad apples that give the used-car industry a bad name,” said Bill Dohring, the Sacramento lobbyist for the Independent Automobile Dealers Assn. of California.

“Most of the guys in the field are helpful and not abusive,” said Dohring, adding that “the DMV’s concept is to work with business rather than against it.”

“These people are always willing to help us,” said Jim Upp, executive director of the Motor Car Dealer’s Assn. of Orange County. Upp said his organization’s relationship with the DMV investigators has been “a very productive association for both sides.”

Since 1980, membership in the new-car dealers’ group has nearly doubled, from 80 to 140. Upp said newly licensed dealers must attend an orientation session sponsored by the DMV, but after that, most have very little contact with investigators.

“The only time I’ve ever seen one is when I went for a dealer’s license,” said Charles Patterson, chairman of Royal Chevrolet in Westminster. Patterson said he has been a car dealer in Orange County since 1966. Meanwhile, King is spending a lot of time on odometer rollback cases, which, since October, 1986, can be prosecuted as a felony. He said the primary target for rollbacks are high-mileage, leased vehicles that may look good, but have worn-out engines. By rolling back the odometer and reducing the mileage, an unethical dealer can earn more money on a sale.

“It’s considered a theft because the buyer has been deceived,” King said. “Two or three years later, the car starts smoking, and the buyer can’t understand why.” He said dealers who roll back odometers “get smarter every time. They get together after one has been prosecuted and compare notes.”

Before joining the DMV, King worked as a state prison guard. Five years ago, he left the DMV to work as a state fish and game warden along the Orange County coast. His biggest challenge was trying to figure out who was chopping the beaks off pelicans along the coast. But, after a year, King said he returned to the DMV because he missed the challenge of complex fraud investigations.

A typical DMV case was brought against Mahmoud Seoud, a Santa Ana gray market car dealer. Seoud collected about $10,000 in deposits from customers seeking imported luxury cars. When Seoud failed to produce the cars, he allegedly repaid his irate customers with bad checks and pocketed $23,000 from the sale of a Mercedes-Benz he had been asked to sell on consignment.

“We got the Orange County district attorney to charge him with grand theft and for issuing the bad checks,” said Special Investigator Jim Barnes.

On Jan. 9, 1986, Seoud was arrested. Shortly afterward, he was released on $25,000 bail.

But Seoud hasn’t been seen since, and Barnes believes he fled to his Egyptian homeland.

“Mr. Seoud is gone and will probably never appear,” said Barnes.

VEHICLE THEFT AND RECOVERY Orange County

Total Vehicles Total Vehicle Total vehicle Registered Thefts Recoveries 1985 1,810,888 11,583 8,347 1986 1,885,665 14,529 10,896 up 25.4% up 30.5%

Orange County (Jan. 1, 87 to March 31, 1987)

Autos Stolen: 2,192 Autos Recovered: 1,811 (82.6% recovery rate) Motorcycles Stolen; 383 Motorcycles Recovered: 239 (62.4% recovery rate) Personal Trucks Stolen: 1,226 Personal Trucks Recovered: 971 (79.2% rec. rate) Commercial Trucks Stolen: 21 Commercial Trucks Recovered: 13 (61.9% rec. rate)

Source: DMV budget office and California Highway Patrol