Detecting consumer fraud: Salvaged autos

Investigative Reporters and Editors, Inc. The IRE Journal, May/Jun 2002 by Halsne, Chris

CAVEAT EMPTOR.

"LET THE BUYER BEWARE."

But what can consumers do to really protect themselves when everyone from car salesmen to state government officials aren't being entirely truthful? Investigations into how business is really done -- especially behind the scenes -- are critical to providing information those consumers deserve when they're ready to hand over their money.

Consumers duped into buying dangerous cars from Russian mob

I knew doing surveillance on Russian mobsters wasn't the safest idea in the world, but I couldn't bring myself to tell Karin Sumeri's parents. Karin was a young college graduate killed while riding in a used Volvo. The car uncharacteristically sheared apart during a routine accident. The vehicle was rebuilt - totaled by an insurance company several years earlier. Somebody had literally glued the roof back together. Accident investigators say Karin would have lived if the Volvo hadn't been shoddily repaired.

The Sumeris didn't know the car was salvaged. Washington laws don't require much consumer information when it comes to previously totaled vehicles. Used car buyers aren't normally notified when buying wrecked vehicles. There is no requirement the history of the car be revealed. Salvagers aren't even required to get a vehicle safety inspection before returning it to the road. What lawmakers didn't realize until a KIRO Team 7 investigation: The weakness of our state laws has enticed Russian organized crime to take over Washington's salvaged car industry. Incredible profits, with little risk of getting caught, make an enticing formula for criminal enterprise.

Making money

From the undercover van, the thick-necked Russian watchman didn't look too friendly. A caravan of car parts, tow trucks, and freshly repainted vehicles moved past him all day long. Inside a long row of furniture storage lockers, dozens of Eastern Bloc immigrants welded, stripped, and repaired totaled cars.

Most of the wrecked cars came from an insurance auction, held earlier in the week. Our investigative producer had taken a hidden camera inside the auction, and recognized a number of the vehicles in front of us. Our research found the scam generally worked this way: A Russian organized crime moneyman (a Vor) buys dozens of junked cars each day. Many of the vehicles should be sold to scrap dealers, but instead, are farmed out to local Ukrainian- and Russian-owned body shops. The shop owners are not inclined to buy parts to fix up the cars. They usually hire a group of young teenage street thieves (known as patsani) to steal an exact make, model, and color of vehicle as the one waiting for repairs. After swapping out the dented parts for the stolen ones, the organized crime structure has a great-looking vehicle with a clean title (borrowed from the wrecked auction vehicle).

We found parts being "ordered" from as far away as Texas, but the main flow of thefts followed the I-5 corridor from Seattle to Portland to Sacramento. If stolen parts weren't available, the body shop mechanics would make the car look like new cosmetically, but never take the time to do proper repairs. In one case, we found putty and paint being used to make a metal frame rail look straight. The structural integrity of many of these cars made the vehicles dangerous to drive. Legitimate car salvagers have recently been forced out of business. There is simply no way to make money repairing junked cars if you buy legal parts, make proper structural repairs, then sell the vehicle as "rebuilt" to a knowing used car customer.

Breaking every rule

At first, I assumed the rebuilt vehicles would end up inside a shipping container at the Port of Seattle and be sent back to the former Soviet Union for sale. Within a few weeks, however, it became clear there were greater profits to be made locally. We followed car after car from body shops to local lots. In nearly every case, a middle-aged Russian male would ride as a passenger (talking on a cell phone), while a young teenager would drive like a bat out of hell. They broke every traffic rule in the book and, at times, swapped cars in public parking lots.

I was impressed by the amount of profit one of these rebuilt vehicles could bring into the organization. Depending on the quality of cosmetic repairs and the amount of consumer deception used, the Russian mob makes up to $8,000 dollars on a SUV. We posed as used car buyers in a number of lots owned and operated by organized crime associates. As you can imagine, we were never told the vehicles on the lot were previously wrecked and rebuilt. We knew because we followed the vehicles from auction to chop shops to the sales lots. When we ran the vehicle identification numbers (VIN) through Car Fax, many of the vehicles had no documented history of "junked car titles." Others had invalid VINs. A whole new chapter to this investigation began when we asked why.

Over the course of six months, I kept seeing the same names and faces over and over: Pytor, Viktor, Nikolay. My producer and I had no trouble seeing patterns between title records, junk car receipts, and car sales invoices. It was time to tap a well-connected source who could hopefully give us a little perspective. We asked about specific invalid VINs, business names and names of people who we believed were players in the West Coast Russian mob. Some were lower-level thieves and con men, but we also tossed in a few names of people with reported criminal connections on the East Coast and in Russia. We had a call back within the hour. It turns out the FBI and a special Washington State Patrol task force had a full undercover operation already under way. (I do not believe in coincidences: someone tipped federal agents to our work months earlier.)