San Francisco City Attorney, California Attorney General jointly seek recovery of millions in vehicle towing and auction scheme
San Francisco City Attorney Dennis J. Herrera joined California Attorney General Bill Lockyer today in filing suit against City Tow for defrauding the City and State of hundreds of thousands of dollars in an elaborate auction-rigging scheme company officials operated for more than a decade. The City and State are seeking funds due to both jurisdictions as well as punitive damages for fraud that could reach into the millions of dollars. The City Attorney and Attorney General filed their civil action, originating from a whistle blower’s complaint, in San Francisco Superior Court.
“The City will no longer allow itself to be victimized by a company that has repeatedly violated its duty to the citizens of San Francisco,” said Herrera. “As a result of our investigation, changes have already been made to ensure that no city contractor has the ability to repeat this kind of fraud in the future. And we’re pleased with the cooperation we’ve received from the Department of Parking and Traffic toward that end.”
“The only thing more aggravating than finding your car towed is learning that the towing company is ripping you off in the process,” Lockyer said. “Our lawsuit seeks to haul City Tow into court where they can be held accountable for the fraud they’ve perpetrated on San Francisco and California.”
Pick Your Part Auto Wrecking, an Anaheim based corporation doing business as The City Tow, has contracted with San Francisco to tow abandoned and illegally parked cars from City streets since 1987.
City Tow’s operation involved the towing of hundreds of vehicles daily. Most vehicles are typically stored for only short periods before owners pay fees required to retrieve them. State law authorizes City Tow to auction unclaimed vehicles to recover its own towing and storage costs. Once City Tow’s costs are covered, however, City Tow is supposed to report the sale and forward funds to the City and County of San Francisco to cover outstanding parking tickets. City Tow must then pay all remaining funds to the State of California.
Auctioning as many as 200 vehicles per week, City Tow manipulated its auction process, defrauding state and local governments of auction proceeds rightfully due them while also depriving members of the public of the opportunity to bid fairly on unclaimed vehicles.
* City Tow itself made winning bids at its own auctions, in effect “buying” vehicles from itself and placing title in the company’s name. In many such “sales,” however, money never actually changed hands; transactions went unreported, depriving the City and State of revenue rightfully due to them, while dozens of expensive and desirable vehicles went for use as company cars for Pick Your Part managers throughout California.
* City Tow obtained authorization from the State Department of Motor Vehicles to auction vehicles that were never, in fact, put up for auction. Instead, vehicles were purchased by City Tow employees and associates in sweetheart deals that were never open to the public. Other vehicles authorized for auction were simply shipped to various Pick Your Part locations in Milpitas, Hayward and elsewhere and “parted-out” for lucrative markups.
* City Tow allowed certain bidders at vehicle auctions to purchase vehicles for a price lower than the highest bid — a practice whose principal beneficiary was frequently City Tow itself. In such cases, City Tow would improperly report the discounted price to the City and State as the winning bid, again depriving taxpayers of revenue to which they were rightfully due.
* City Tow inflated its liens on unclaimed vehicles by over-charging for storage, deducting costs above and beyond the amount it was permitted to collect under state law. City Tow thus deprived the State and City of excess auction proceeds due to them.
“We’re pleased to be working side-by-side with Attorney General Lockyer once again on an issue of great importance to consumers and taxpayers alike,” City Attorney Herrera concluded.