By on January 20, 2013

Fraud Rule Number One: no matter how cute your girlfriend may be, do not include her in the picture on your fake ID.

Welcome to Part Two of our exclusive series on the rollicking world of Los Angeles luxury car buyers defrauding automakers, banks and dealers. In Part One we looked at Lemon Law scofflaws and odometer clockers. Today we will examine the crooked schemes that can be used to obtain the vehicle of your dreams. We will begin with the case of robber Baron Haghighi, who last month tried to con a few cars out of several Southern California high-line dealerships.

Mr. Haghighi has been running fake check scams in the state of Washington since the 1990s and was recently released from prison. Apparently thinking that Cali dealers would fall for his ruse as had several Washington retailers, he presented himself as an Egyptian entrepreneur wanting to purchase several vehicles, in one case a fleet worth nearly $400,000. I am going to write you a check, said Haghighi, here is a letter from my bank verifying my funds. Composed on the letterhead of the Bank of Alexandria, the document is priceless:

…We hereby verify to you, with full bank responsibility, the availability of funds in the amount of Thirteen Billion United States Dollars ($13,000,000,000.00 USD) on deposit in our bank….(the funds) are to be maintained on deposit in our bank as of the date of this letter until 2010…

Haghighi and his rubber checks were dismissed from the LA stores with a flip of a wrist and a yawn from their sales managers. Los Angeles dealers see so many attempts at customer fraud they can identify dullards like this clown in about five seconds.

Exports

Although Haghighi was a novice in a city of seasoned crooks, his aim was likely the same as the pros: to dispose of the scammed vehicles in the lucrative car markets of China or Russia. This is part of the sea change in the past few years in criminals’ motivation to defraud banks and automakers out of cars -  the strategy has switched from perps actually driving the vehicles to today’s tactic of disposing of them overseas. The money that can be made on these so-called “floaters” is flat-out stupid. A 2011 Mercedes-Benz C-Class recently purchased for $22,000 at a California auction sold to the end user for $46,000 in the Chinese gray market. The new Ford F-150 SVT Raptor is currently commanding three times its MSRP in China, or over $160,000.

Most luxury automakers penalize dealers for exporting new vehicles outside the United States, but there are always stores looking for the quick buck. The greedy sales manager who gets a call from someone looking to buy five BMW X5s at full MSRP and all of them black – the most popular color for exported vehicles – knows the cars are likely floaters but might do the deal anyway and pray the factory never finds out. The buyers then typically sell the units to their overseas connections for a percentage of the profits.

 

Los Angeles is a hotbed of export activity due to its proximity to ports and because sales tax is not collected upfront of leases in California, allowing those exporters who do not pay cash to shell out only for license and title fees. In some cases, they have no intention of ever making the payments, leaving dealer, bank and automaker all pointing fingers at each other as to who is to blame for the swimming Bimmers.

Identity Theft

Though still the most common car acquisition scam, the number of cases of perps using identity theft to obtain a vehicle is on the decline thanks to the rise of companies like LifeLock that monitor credit bureau inquiries, and vigorous enforcement of the law. Driving around town in a stolen car nowadays also exposes you to the latest license-plate recognition technology used by law enforcement. Identity thieves nowadays are either amateurs who swipe relative’s documents and are usually quickly apprehended, or professionals who are looking to launch the vehicle on a slow float to China.

The pros are hard to catch by dealerships and banks, as they can create phony driver’s licenses in the victim’s name that are undetectable by stores’ fraud-fighting devices, have verifiable sham employers, and can throw down Academy Award-worthy acting performances.

The professional crooks are unfazed by the fact that most Los Angeles car dealers require a thumbprint from all buyers as part of their efforts to combat fraud. This process has led to a few instances of amateurs suddenly claiming they need to use the restroom and fleeing the dealership.

Sub-Leasing

This is the most complicated of car scams, and to banks the most frustrating.  It begins with a confidence man finding clients with bad credit and promising them he will get them financed on a new vehicle – for a fee of course.  He then recruits and pays a credit “mule,” a person with an excellent FICO score, to apply for a car loan or lease and actually take delivery of the vehicle with the agreement the con man will make the payments. He then hands the car off to the first customer and charges him several hundred dollars per month more than the negotiated payment. The crook makes one or two payments to the bank to throw them off the scent before he skips out. Meanwhile he keeps collecting the higher payments and the mule is getting collection calls from the bank.

Leave it to a group of criminals from the city of Glendale – LA’s fraud capital- to attempt the ultimate combo platter of automotive ploys. During a two-year period in the mid-2000s the gang stole over 200 vehicles by utilizing sub-leasing and ID theft. They subsequently reported the cars stolen, collected on the insurance proceeds, and donated the vehicles to their own fake charity which then shipped them to Russia. This overambitious bunch of bandits was eventually caught.

Falsifying Credit Applications

This scam is as old as the finance office – customers lying about their income, bank account balances or employment on a credit application in order to appear more credit-worthy to an automotive lender. Though traditionally done at the encouragement of dealership personnel (“Let’s just put down that you make $4,000 a month, OK?”), car buyers themselves are often guilty of fibbing. Both client and dealer may now access a number of websites that can produce fake account documents to fool a bank. Dealers caught in this act can face prison time plus lenders have long memories and a culpable dealership may have a hard time getting future loan applications approved.

Legend has it that one of the pioneers of producing bogus bank statements and W-2 forms to inflate a customer’s net worth and income was Houston’s Landmark Chevrolet (“Landshark Chevrolet” to the locals) during the 1980s, one of the chain of dealerships once owned by the notorious and now-bankrupt Bill Heard Enterprises.

(Houston is arguably the runner-up auto scam capital behind LA due in part to its dealerships’ history of hiring the type of shady, desperate employees that white collar fraudsters seek out. Consider the characters that have made the news in the past few weeks alone: a Houston Chevrolet dealership sales manager was shot and killed by a salesperson, the owner of another Chevy store was charged with the sexual assault of a 16 year-old girl, and a salesman was stabbed and shot on the lot of his Honda outlet. The city’s car scammers are also clueless: two men were recently arrested after renting an Altima from Hertz and then trying to sell it with a forged title claiming the car’s owner was named Marcus Hertz.)

 

Car Brokers

Compounding the fraud problems in Los Angeles is the fact that scammers will often hide behind car brokers. These operators, also known as “buyer’s agents,” charge dealers a fee of between $200 and $2,000 for the privilege of working with their clients. There are about 200 of these “bird dogs” in the LA area and they account for about 5% of luxury auto sales. Many brokers provide a valuable service to non-English speaking customers and to celebrities or shoppers who don’t want to endure the car buying process.

The problem lies in the fact that a few of the brokers are basically pond scum. Weak state licensing requirements means that literally anybody can become a car broker in California. Banks report that over 50% of the consumer fraud in Los Angeles can be traced to these companies. Working through a broker means the swindler never has to set foot in a dealership, and the broker is often their accomplice in an identity theft or falsified credit application scheme. One car broker was recently caught submitting the same fake bank statement on behalf of numerous clients.

Dealership managers grumble about brokers but know that if they do not work with them their neighboring dealer will. Sacramento lawmakers will likely never ban these parasites as they consider car dealers to be the root of all evil, so why pass any law that might help them? In addition, in 1965 the United States filed suit against General Motors and its Los Angeles Chevrolet dealers, accusing them of restraint of trade by conspiring to refuse to work with brokers and “discount houses,” and that suit still hangs over dealers’ and distributors’ heads like smog in the LA Basin.

Free Parts Cars For All

Finally, a LA dealership recently discovered that a returned loaner car had its engine replaced with one that had been thrashed. It turns out the con artist persuaded a buddy who owned the same brand of automobile to have it serviced at that dealer and obtain a loaner car of the same model as his with the bad engine. After swapping the motors and other parts, they returned the loaner.

The dim-witted delinquent who recently asked a dealer for a loaner with a specific VIN sequence, probably to insure the car had the correct engine, transmission or trim level needed for the replacement parts for his friend’s old vehicle, was thrown out on his ear.

Ta-Ta from La-La Land…

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23 Comments on “Tales From The Cooler: The Land Of The Crooked Car Buyer – Part Two...”


  • avatar
    Dave M.

    Great article Virgil! I’ll second your motion on Houston – I get the shivers driving on 45 and 59. Went by Subaru and Honda dealerships to get some cargo area measurements and I felt dirty when I left….
    not just from the sales staff but the clientele as well.

    That’s not to mention the hundreds of small, shady BHPH places around. I feel badly for the honest folks in the business….it’s got to be hard on them.

    • 0 avatar
      needsdecaf

      The sheer number of BHPH car “dealers” that are on either side of 45 between the Woodlands and the Loop is staggering. One can only guess at the level of avarice, deceit and fraud that occurs there on a daily basis.

    • 0 avatar
      redav

      I agree. I am honestly disturbed by the shear quantity of BHPH places as well as their wretchedness. I was looking for a used car recently, and not having experienced these placed before, followed up on ads that took me to several. Long story short–I’m not doing that again.

      But I have found a dealership in Houston that does a good job, so they aren’t all bad.

  • avatar
    Zackman

    Simply amazing. There must certainly be a big payoff for those unscrupulous souls willing to take the risk.

    Makes my mothly payments from a legitimate car purchase seem trite. I’ll stay legal, thank you very much.

  • avatar
    PrincipalDan

    The things people think of, a legit job would be less work.

    • 0 avatar
      mitchw

      Maybe it’s the thrill.

      • 0 avatar
        Dynasty

        Its the thrill!

        Its just the way some peoples brains are wired. Sure, they could theoretically use their use their “talents” for good. But its not who they are.

        Just like some people naturally excel at figuring these scams out and putting bad guys in jail. It is their personality type as well. How their brains are wired.

        Best case scenario is the crooks would be good. But they’d be totally bored with life and not really contributing anything to society anyways. Then the other side of the coin is, an equal amount of people who excel at law enforcement would be looking for new work as well. Not really doing something they enjoy, or are good at. And not contributing much to society either.

        Its just the order of the universe.

    • 0 avatar
      Crabspirits

      …for you and I, yes.

      Some people are just wired to scheme and think evil. They automatically believe it’s the best or easiest way.

  • avatar
    ant

    I don’t quite understand the Sub-Leasing scam…..

    What name goes on the title, the guy with the good credit score, or the sub leaser? both?

    How does he keep a good credit score doing that?

    I dont get it.

    Interesting write up.

    • 0 avatar
      tooloud10

      I didn’t understand that one, either. What’s in it for the guy with the good credit score? A few bucks? Seems like most people with excellent credit scores wouldn’t have any use for a quick buck on something like this, ’cause if they need quick money that badly to take a risk like this they could just use their excellent credit to obtain that money directly.

      • 0 avatar
        DenverMike

        Exactly. You guard your excellent credit (score) like it’s an original Hemi ‘Cuda convertible. Prospective employers, landlords, or girlfriends may be checking it too. An excellent credit score tells how responsible you are, but a bad one says you’re probably a liar/cheat in addition to irresponsible. I will co-sign a cellphone, but the bill is coming to me.

    • 0 avatar
      Athos Nobile

      I got it, didn’t even have to read the whole explanation. It’s the guy with the perfect FICO score. Which will lose.

      The preys for this scam are people usually needing cash or looking for some quick buck and hence lend their _____________. It usually ends in tears.

      A similar scheme is made to the Venezuelan government to take currency from credit cards. As the controls get more elaborate, it becomes more expensive or complicated, however the profits that can be achieved in Bs are vulgar, so it doesn’t matter. Black market price sits at the moment at around 4-5 times of official value.

      The fu$%^@&rs with the charity really got creative.

    • 0 avatar
      NulloModo

      The guy with the good credit score is the one really getting conned in that scenario. There are three people involved in this the Mastermind Crook, the Mule (the guy with good credit) and the guy with bad credit who can’t get approved for the car on his own (to borrow a term from car dealer slang will call him The Roach).

      The Crook recruits The Mule and tells him that he has a third guy (The Roach) who wants to buy a car, but needs someone with good credit to go on the paperwork. The Crook assures The Mule that either The Roach or himself will make the payments, and that the The Mule will get some kind of monetary compensation for the role he plays.

      The Crook then has The Mule sign for the car, and collects payments in excess of the actual requires amount from The Roach (either telling him the payment is higher than it really is, or letting him know that the additional amount is his fee for arranging the deal). The Crook pays the first couple payments to the bank, though he still makes money because he is collecting more from The Roach than what the bank actually requires. He may or may not end up giving a certain amount of this back to The Mule as the ‘fee’ he earned.

      While theoretically The Crook could go along this way for quite some time and still make money (as long as The Roach keeps making the payments) he instead keeps collecting money from The Roach while not paying the bank. Since The Roach is not on the loan/lien for the car, he is not contacted by the bank, thinks everything is dandy, and keeps sending money to The Crook, who pockets 100% of it. Meanwhile, The Mule is getting calls from the bank about the payments being past due, and likely can no longer get in touch with The Crook – he’s screwed.

      Eventually the bank will track down the car and repossess it from The Roach, who may be upset with The Crook, but will also likely now have a hard time finding him.

      The Crook makes out like a bandit, The Roach ends up without wheels again, and is out the money he paid in payments (though he did get a car he couldn’t have gotten on his own for a period of time) and The Mule ends up with a major ding on his credit and a lot of questions.

      • 0 avatar
        Virgil Hilts

        Excellent detailed analysis, NulloModo.

        Like with all fraud cases, it is often difficult to figure out what exactly went down.

        Two twists on sub-leasing:

        1. There are cases when the Crook actually makes the payments to term. This drives banks crazy as this is a clear violation of the lease or retail contract but since they are collecting all the money and cannot prove who has the car, not much can be done.

        2. Some of the Mules are in on the scam and not only do they not care about their credit – probably because they have other means of illegally establishing an identity – but they refuse to cooperate with the law or the bank if caught.

  • avatar
    Dynasty

    How does one dispose of their legally purchased vehicle on the black market?

    I’m not trying to make a mint, just enough to equal what I paid.

  • avatar
    deanjet

    I know a guy who scammed a rental car company out of a good set of tires. He rented the same car as his daily driver. Took the rental home, swapped wheels and tires. Returned rental car with completely worn out tires, never a word was said from the rental car company….

  • avatar
    markholli

    How to make a quick million:

    1. Make friends with the Chinese mafia.

    2. Buy 10 Ford Raptors at $43,000

    3. Ship Raptors to China…cost? Maybe $5000-7000?

    4. Sell Raptors for $150,000 on Chinese gray market.

    Easy-peesy.

  • avatar
    packard

    The last paragraph of the article about the parts car scam reminded me of
    a scam from the early 60′s in NYC. The crooks conspired with the management of “all day” parking garages. The crooks would look for late model cars with v-8s and swap the v-8 with a six. This seems like an incredible amount of work. Reader’s Digest published an article about this scan and recommended that you look under the hood before leaving a long term parking garage.

    • 0 avatar
      Lorenzo

      An engine swapping team with the right tools can get the job done very quickly. All they have to do is get the car running with the junkyard replacement engine, all the “features” don’t have to work. The owner won’t realize the swap has been made until he notices the car doesn’t run the same, and/or some things don’t work, and takes it to a dealer or mechanic to get it checked out. By then the swappers are long gone.

      • 0 avatar
        econobiker

        Wasn’t that scam also part of a Tom Wolf book on the surfing culture? That the surf bums running VW vans would easily swap out a clapped out engine with one from a long term parked VW van or Beetle due to the ease of engine swapping.

  • avatar
    schmitt trigger

    WOW.
    As another poster wrote, some crooks are pretty clever and cunning and could make very decent money in a legit business……wait, they are already in a legit business, they are called Wall Street Investment bankers…

    • 0 avatar
      econobiker

      And add standard bankers to that list given their recent ability to shed potential Federal RICO offenses’ such as money laundering (HSBC anyone?), like water off an otter’s stomach….


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