(INDIANAPOLIS) - Federal prosecutors say they've shut down an Indianapolis firm that helped hundreds of people stop making payments on their cars using doctored paperwork to eventually claim outright ownership of the vehicles, in spite of those missed payments.
"It is a complicated scheme," said Indiana Bureau of Motor Vehicles Deputy Commissioner Dennis Rosebrough.
Stephen Dean, of RTV6 reports, one BMV worker is facing federal fraud charges, along with a father-daughter team that operated a business called "Mechanic's Liens Plus" on the west side of Indianapolis.
They're accused of creating phony paperwork so that "mechanic's liens" would be issued against at least 272 cars in the Indianapolis area, allowing the drivers of those cars to stop making payments to the banks and finance companies.
Regardless of how much was owed on the vehicles, the state BMV would end up issuing clear titles for those vehicles, which cut the banks and finance companies out of the equation.
The Indiana Mechanic's Lien Statute for vehicles spells out a process for cars to be sold in the event that mechanics are not paid for work that is performed on a car.
Mechanics are required to notify customers that their vehicles could be subject to a lien when the work is performed, and then the law requires that notices be sent to lien holders of cars, such as finance companies, when a mechanic attempts to use that lien to collect.
In court filings , federal prosecutors accuse the father-daughter team of getting information from a BMV employee to help them quickly file the mechanic's lien paperwork on those 272 vehicles between 2008 and June of this year.
Those court filings spell out that an Indianapolis business known as "Mechanic's Liens Plus" on West Washington Street would create paperwork that indicated work had been done on its customers' cars, when no work was actually performed.
In some cases, the phony repair bills were so high that prosecutors write that finance companies would simply abandon the car and choose not to fight the process. That allowed the BMV to issue brand new, clear titles even more quickly.
"If a bad person out there wants to beat the system and commit fraud, it is really very, very, very difficult for us to intercept that, to detect that," said the BMV's Rosebrough. He pointed out that his agency is not a law enforcement agency and can do very little to verify information that is presented for mechanic's liens.
When asked whether any BMV safeguards had broken down in allowing the titles to be issued in this case, Rosebrough answered, "The rules were followed, the paperwork came in, and... if a fraudulent piece of paper comes in we would have no way of knowing."
Federal fraud and conspiracy charges have been lodged in U.S. district court against the owner of Mechanic's Liens Plus, 58-year-old Joseph C. Woodruff. His daughter, 28-year-old Nisha Woodruff, an employee of the business, was also charged, along with BMV employee Lee Ann Rinehart.
Rinehart joined the BMV staff in July 1997 and most recently worked in the department's document management section.
She was suspended this week when the charges were filed, according to Rosebrough, who said his agency had originally been told to leave Rinehart in her position while Secret Service agents investigated the suspected racket. He said she could be fired, depending on the outcome of the criminal case.
Secret Service agents are not planning to arrest the trio, according to the U.S. Attorney's office. Instead, they will receive orders to report to court for their initial appearances on the felony charges on Dec. 18.
The list of cars that were issued clean titles in this case includes luxury cars, pickup trucks, utility trailers and motorcycles.
A 2006 Mercedes R350, a 1995 Cadillac Eldorado, several BMW X-series cars, a Jeep Grand Cherokee, as well as dozens of other cars are listed on the court filings. A boat and a 2006 Peterbilt truck were also issued clean titles out from under the lenders who financed them, according to the court records.
Federal prosecutors declined to speak about the case on Tuesday, promising to release further details later in the week.
According to their court filings, the mechanic's lien business would file the same sort of paperwork and follow the same pattern for each vehicle:
• Each customer would pay a fee to Mechanic's Liens Plus
• The business would draw up a receipt that showed the driver authorized repairs for the vehicle
• Some of the repair bills reflected high-dollar amounts of work
• Notices that are required under the Indiana Mechanic's Lien Statute were sent to the finance companies that issued loans for the cars, with the phony receipts for repair work attached, as required
• Notices would inform lien holders that the car was to be sold at auction, as allowed by law
• Many banks or finance companies chose to abandon the vehicles and write them off, rather than spend money in fighting the process
• The Indiana Bureau of Motor Vehicles would then issue clear titles to Mechanic's Liens Plus business
• The business would then transfer the titles back to its customer by filling in the portion of the new title devoted to selling the vehicle. In most of the cases, the sale price of the vehicle was listed as $100, even on the new titles for luxury cars.
Indiana law spells out that a mechanic's lien trumps any other lien that might be placed on a vehicle, including a lien placed for failure to pay child support.
Once a new title was issued, banks and finance companies had no recourse and likely had no clue that the repairs that led to the lien had never occurred, according to the court filings.
In addition to the fraud and conspiracy charges, BMV employee Rinehart is also charged with one count of exceeding her authorized computer access at the BMV.
"They know that it's a terminable offense should you violate that access code," said Rosebrough, who pointed out that the BMV employee did not issue fake titles, but rather provided information to the suspected ring-leaders so that they could submit the phony paperwork to the BMV.
Federal prosecutors have filed a forfeiture action, seeking to confiscate any money or property that was derived from the racket.
Typically, federal criminal forfeiture actions require money to be repaid to the victims directly from anyone who is convicted of a crime.
Since none of the car owners has been charged with a crime, many could be able to keep their cars and their clear titles that resulted from this suspected scheme.
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