The State of California Targets Street Rod Owners for Potential Fraud

This might be old news, but I just read it on another site and thought it might be of interest to some.



From the Desk of Al Liebmann

Hands Up!
The State of California Targets Street Rod Owners for Potential Fraud

By Brian Brennan
On Wednesday the 6th of October, 22 law enforcement agents and other individuals from the State of California, Department of Justice Fraud Division, Department of Motor Vehicles, California Highway Patrol, Department of Automotive Repair and others arrived with guns drawn and flak vests on at the shop of Boyd Coddington Hot Rods & Collectibles (La Habra, California).

No, this wasn't the making of an episode of American Hotrod but rather a bonified attempt to serve a warrant issued and carried out by duly vested officers for the purpose of investigating Boyd Coddington on the suspicion of fraud. The alleged fraud charges stemmed from an ongoing investigation by the State of California that has for the past several years been limited to the kit car industry but has now been expanded to the street rod industry. The State of California is looking for cars that meet one or more of the following criteria that would lead to registration or license fee fraud.


Street Rodder has learned via e-mail communications with Robert Morgester, the Deputy Attorney General Special Crimes Unit for the State of California Department of Justice, "The California Attorney General's Office has been conducting an investigation into the fraudulent registration of replica vehicles. The initial investigation was limited to Cobra replica vehicles due to known VIN sequences. We are aware that the same fraudulent vehicle registration issues apply to other replica vehicles and hot rods.

To correct a common misunderstanding of California law, it is a felony to do the following:
1. Register a vehicle where the year of vehicle is misrepresented;
2. Register a vehicle where the value of the vehicle is understated; or
3. Register a vehicle where the year of the vehicle is misrepresented to avoid compliance with California smog laws.

Any of the above actions are a felony in violation of Vehicle Code Section 4463(a). Additionally, the above actions constitute the crime of perjury, in that all statement of facts contained in California DMV documents are taken under penalty of perjury."

In speaking with Boyd Coddington he told SRM that the State of California seized certain company records for further investigation. Boyd also told SRM that three license plates were removed from vehicles within his consignment shop. These vehicles were built decades ago by the likes of Fat Jack and Pete & Jake's. Apparently the state of California is looking into any improprieties that would lead to the state being "shorted" tax or registration dollars.

cont.


Boyd also told SRM that he had to show records proving such vehicles as the Whatthehey and the Alumatub were legally registered and taxed, which they were. He also had to show records on two of his Boydster's that were built and given away as to how they were registered and how were the vehicle's values determined and did the new owners pay the appropriate taxes. At the time of this writing it appears Boyd's business has done everything according to the law but that SRM has been told the investigations will not stop with his shop. Boyd was singled out because of his "visibility" on the television show American Hotrod and that other California builders would soon be paid a visit.

Additionally, SRM learned that law enforcement officials, it is believed were California Highway Patrol, recently visited the Labor Day Cruise, held annually in Costa Mesa at the fairgrounds, looking for "suspicious" vehicles. When asked what constituted a "suspicious vehicle" it was determined that any fiberglass car is suspect.

Again, according to the Office of the Attorney General from the State of California, its Department of Justice, "To date, the ongoing investigation has identified at least five other out-of-state companies that have provided fraudulent vehicle purchase agreements and titles to California vehicle owners. The companies are in Alabama, Nevada, New York and Florida. The Attorney General's Office believes as many as 70,000 vehicles have been illegally registered in California through these scam operations.

The California Department of Motor Vehicles is in the process of canceling registrations that involve documents obtained from Titles Unlimited. (Titles Unlimited is believed to have provided false documents to Californians that cost the state more than $1 million in tax revenues and license fees over the past two years, and as much as $14 million since 1975, when the company began operating.) The Attorney General's Office also has notified law enforcement officials in more than 20 counties regarding residents who titled their cars through the company for possible prosecution."

Attorney General Bill Lockyer of the State of California tells us that an Alabama man was convicted on felony charges for issuing false vehicle titles in a scam that has cost the State of California millions of dollars in lost tax revenues and license fees.

"This illegal operation provided false information regarding the purchase of expensive vehicles to hundreds of Californians, which allowed them to avoid smog requirements and pay reduced sales taxes and vehicle registration fees," Lockyer said. "At a time when California and its residents are forced to confront painful budget choices, these scam artists defrauded the state and all law-abiding taxpayers who have done their part to get through our economic slump. We will continue to investigate to ensure these tax cheats are brought to justice."

Street Rodder has contacted SEMA and they are immediately investigating to see what options rodders have, especially the thousands of rodders who have operated in good faith for decades and have done nothing to raise the suspicion of the state. To all street rodders this is the single most important subject to be addressed by our industry in all the years that any of the staff members can recall. Stay in touch with Street Rodder: we are on top of his developing story and will bring www.streetrodderweb.com readers more information as we get it.

I was at my local CHP office today making an appointment for inspection and new VIN, and the officer relayed that they are starting to crack down heavy on the potential illegally registered customs and street rods.

Your average Accord is not suspect unless you registered it as a 1966 Shelby GT Fastback.

That is one of the many reasons that the 500 SPCN (special construction) numbers went so quickly this year. It was not just the "kit cars" but the hot rodders that were trying to catch up with the enforcement of CA law.

A Special Construction vehicle (such as a kit) can be licensed using the year of engine as the basis for registration. There are a few other detail, but that is the big one. Using the engine year requires that smog equipment for that year engine be inplace when inspected or tested by the BAR (bureau of automotive repair). This becomes a concern for the Cobra and hotrod guys when they build using a more modern or "younger" engine. If they put a crate motor in the car, they need to meet current smog requirements in regards to smog equipment and engine emissions.

I can't say for sure, but those with older VW engines can register as a special constrution based on engine year and submit to smog testing every two years (in CA). The coveted SPCN number that were exhausted in a day and a half made the car smog test exempt and allowed registration based upon engine year OR model year replicated.

it's getting ugly

Could increase the valuation of current registered kit cars and rods in California. I think I'll put my speedster up for sale....including all extra parts....$42,000... any takers ???

Hey Bates,

send me a note offline with a good time and number to call.

I think I will use the Cert to register a Briggs & Straten powered Speedster. The gas milage will be killer. Top speed 15mph.

Patrick Friel

In Pa and NJ, it is not that difficult of a process to properly title a street rod or kit replica, patience does help though.

If the built vehicle is done in a craftsman like manner with attention to the your states required safety requirments and equipment, remit all component reciepts, if a donor vehicle was used as a major component then that title has to be in your name, photos of the completed vehicle, the necessary MV paperwork completed properly and have a safety inspection done.
I have dealt with both NJ and Pa on numerous projects and have yet to hit a major snag.

Guys, this is not limited to CA. When I was looking at how to best register the IM build I surfed a lot of cobra forums. Evidently there have been cars impounded at shows and on the road in at least 4-5 states in the South Central US. I read of one Cobra owner arrested on I-35 in KS, cuffed and the car taken by the state.

Much of this comes from the guy in Alabama that was doing titles for some time. When I checked my local tag agent he gave me a heads up that states were communicating now. So, I am doing the MSO straight through the state and titled as they see fit. I'll pay a chunk of sales tax too. It's a Brave New World.

FWIW,
Jim

It's starting to sound like here in Finland. I'm always been envious for you to be able to build your cars so freely. Here you have to use more than 50% of your donor car parts. So for exampla I'm not able to convert my car to IRS or rear disckbrakes. And it's all because of taxes.
In new cars price maby 40% is taxes. New Chrysler PT Cruiser starts from 28000

In Iowa they have a specialty car registration, but it is mainly to make sure nothing on your car is stolen and that the car has an appropriate VIN plate. It also gives the DOT guys some cool cars to look at for a change!!!

Yeah I bet! Watching corn grow all day probably takes its toll. It sure would be nice if all states had the same reasonable view of these cars.

janne- it's all about the money here. it's not a question of safety or anything sensible like
that. but i have followed vehicle maintenance/customizing in other countries such
the uk and germany for years. we've been getting away with quite alot here compared to them. up until not to long ago a yearly vehicle inspection in nj (usa) was nothing more
than a quick walk around to check for lights, signals, horn etc..but times are changing.

God forbid they should do something about street gangs or drug dealers. But of couse, those guys are armed and most of the rodders aren't.
ed

This issue appears to be spreading across the country. I was planning on begining my project when I settle in AZ (post-military retirement). Can anyone educate me on the registration issues of a JPS or Vintage kit in Arizona? Thanks.

Ed,

Right on!

Bruce

Ed,

That says it all.

Jim

I'm moving to Nevada, this state suck! D-man

What happen to the edit tap, I forgot the "s" in sucks. D-man

Greg.

Someone may reply and answer your Q. In the meantime I would suggest you contact your state/local KitCar Club. They should have your answers since many of the older kits were VW based.

Jim

Here it is Greg. I would call their president, join up, and go from there.

clubs.hemmings.com/clubsites/azkitcar/home.htm

As far as I can see, speedster reps are still volkswagens, the value of these volkswages is actually overstated seeing that they should be stated at a value between $15,000 and $25,000. And the year is not mirepresented because it is still a type one VW nomatter what body it has on it.

Does anyone have a contact in Florida, or know of any issues I should be aware of when registering my 2001 VS? I heard that the rules change depending on what area of the state you are registering the vehicle in.

Greg,

Arizona was real easy with my TR 550. The most important thing you'll need is a Manufactuer's Statement of Origin (MSO) it's a form that your Kit Manufacturer should supply to you.

Aaron

Mike, your statement is not completely accurate. Some P-car replicas built on a custom tubular chassis which does not use any part of the original VW pan can't be called a Volkswagen. There are different schools of thought as to how these cars can be or should be registered. In my case, I received an MSO (Manufacturer's Statement of Origin) and a complete 14-digit serial number. Consequently, My car is registered as year of manufacture (2004) with a make listed as "Specially Constructed". I had to pay the tax for a new car, but I won't have anyone breathing down my neck for any purpose whatsoever. Incidently, we do not have vehicle inspection in Tennessee (yet) or smog checks (which I could pass) in this part of the state (yet).
John H

John, you're right, the tube chassis cars in California are a whole different story. Registering one of those as a VW is a crime. I was thinking of the VW based cars.

To JDaniel; with a VS you shouldn't have any type of problem since it is registered as a VW Bug (year whatever) and comes from the shop with the original title. I didn't have any problems over here, except that they use some stupid ass formula for calculating excise tax for cars when imported (a regular VW Bug pays around $800.00, yet a new VS with the original VW Bug title pays around $5,600.00 for the "improvements").