Tow firm’s tactics revealed - East Valley Tribune: Mesa

Tow firm’s tactics revealed

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Posted: Sunday, December 3, 2006 5:20 am | Updated: 4:29 pm, Fri Oct 7, 2011.

A Mesa towing company reaped hundreds of thousands of dollars by hooking up wrecked vehicles, bringing them to its impound yard and then towing them a second time to a body shop in order to inflate charges.

Cactus Towing used these types of fees to drive charges so high that the owners often lost title to their vehicles after they were towed to the company’s headquarters on 10th Street, according to an 18-month investigation by the Maricopa County Sheriff’s Office.

Cactus took ownership of up to 70 cars a week, many from low-income customers who signed away their vehicles to pay off inflated towing bills. Cactus also claimed title to luxury cars that weren’t picked up by their owners quickly enough.

“Well, if you got a guy that’s got three-hundred-and-some-odd dollars or $400 in charges on his car, the poor (person) is probably going to lose it,” former Cactus contractor Mark Brammer told investigators. “So the deal was to make it as difficult for a guy to pick up his car as he could.”

The sheriff’s investigation into Cactus Towing reveals what some employees and associates say were questionable business methods the towing company used for years as it expanded its operations across the East Valley.

Cactus’ power stemmed from exclusive towing contracts with the Arizona Department of Public Safety, Mesa and Chandler — through which it controlled many of the law enforcement tows in the East Valley during the late 1990s and early 2000s.

The law enforcement contracts were key to Cactus’ success, according to the investigation. When a car breaks down, the owner can call any towing company that person chooses. But if someone is in a crash or arrested, a law enforcement agency calls for the tow, which accounts for a majority of the business.

The East Valley tow contracts held by Cactus gave it a steady flow of some 3,000 cars through the company’s tow yards every month.

Government audits and law enforcement inquiries into the company show that it used its influence across the East Valley to squeeze customers and increase profits under the guidance of owner Lee Watkins and General Manager Todd DeMasseo.

Former Cactus employees and associates told investigators that the company had been involved in dubious dealings that included systematically overcharging customers, theft from vehicles that were brought to Cactus’ tow yards and creating two sets of billing invoices to cover up customer overcharges.

“They had a habit of overcharging customers and insurance companies — they charged them for fees that were not allowed under the police contracts,” said sheriff’s office spokesman Lt. Paul Chagolla.

The sheriff’s office compiled more than 10 binders of information about the investigation into Cactus Towing. Those documents were recently made public under the state’s public records law.

It’s the first public look into a probe that started with a March 2005 sheriff’s raid of Cactus Towing’s offices and the homes of Watkins and DeMasseo.

Watkins sold Cactus in June to Phoenix-based Rush Auto Recyclers. But the investigation has continued, and the sheriff’s office has sent the investigation to the Arizona Attorney General’s Office.

So far, no criminal charges have been filed, and the attorney general’s office refused to comment on the case.

Kent Nicholas, an attorney representing Cactus, said Watkins’ former company has lost no contracts, despite the government scrutiny.

“He feels that these people (who) brought forth the complaints have an ax to grind — like former employees — and also a competitor,” Nicholas said.

Watkins and DeMasseo declined to comment, Nicholas said. Repeated phone calls to Watkins and De-Masseo were not returned.

The investigation has been criticized by some as a political grudge against Watkins by Sheriff Joe Arpaio.

Watkins backed former Arpaio opponent, W. Steven Martin, in the 2004 election for sheriff.

A DPS audit of the agency’s $1.2 million contract with Cactus that inspected charges for November 2002 found that $8,000 in unauthorized charges had been billed to East Valley motorists that month.

The sheriff’s probe took the matter much further. It found $220,000 in bad debits by Cactus through contracts the company held with DPS, Mesa and Chandler.

Sheriff’s detective Robert Flanagan interviewed several former Cactus employees and associates in 2005. Much of the information came from Mark Brammer, who ran Arizona Collision Repair, and Mark Phillips, a former tow yard manager.

According to the investigation:

Brammer and Phillips told investigators that Watkins and DeMasseo sought kickbacks from local body shops and extracted referral fees from attorneys for personal-injury lawsuits. Attorneys and body shops were asked to pay fees to Cactus to receive wrecked vehicles and referrals from clients who had been injured in a crash.

Meanwhile, the pair put in place a system for stalling customers as a way of inflating tow bills. Customers with high bills were encouraged to sign away the titles to their vehicles as a way to clear the debt.

Cactus also was aggressive in filing for titles on “abandoned” vehicles at its yard. Those were available through the Arizona Motor Vehicle Division after 45 days.

Owners would call Cactus about the vehicles, but, in some cases, they wouldn’t have the money to pay the tow bills until after ownership had changed.

And then there was just plain old theft, according to the men who were interviewed by detectives. Car radios, rims, music CDs, gift-wrapped packages and construction tools were taken from some of the towed vehicles.

Some of the vehicles towed into Cactus had tool boxes in the bed and easy-to-pawn items like power drills.

Brammer told investigators that he gave a construction worker from Iowa $50 out of pity. The Iowa construction worker was nearly crying when he found out all of his tools were gone from his truck, Brammer said.

“If that stuff winds up missing, you’ve almost put that guy out of work,” Brammer told investigators. “He was a little tiny guy, thank God, otherwise he might have just punched me.”

Central to Cactus’ business was what investigators called a referral “program.” Body shops that kicked money back to Cactus saw wrecked cars steered their way, said former employees. Shops that didn’t sign on didn’t receive cars from Cactus.

Christopher Ferrante, who owned Gilbert Collision and a Mesa body shop, said two Cactus employees approached him in 2000 about being part of Cactus’ program, which would have required him to pay 10 percent of the repair bill as a kickback to Cactus for the business. A typical repair could run $5,000 to $10,000.

Ferrante stated in the report that two badly damaged cars showed up at his shop after his talks with the guys from Cactus. Ferrante, a former law enforcement officer, told investigators he had a tape of a call with Brammer asking him “You like those cars I sent you?”

Ferrante said he complained to Mesa attorneys, who said there was nothing illegal about what Cactus was doing. Ferrante said he never joined Cactus’ referral program.

“I could see what was going on and it bothered me that a company that was basically acting as an agent for the Mesa Police Department would just run roughshod over everybody in town — and that would include impunity, no fear of any kind of retribution or anything,” Ferrante told investigators.

Cactus’ contract with DPS differed from the one with Mesa because it stated that Cactus couldn’t solicit business. Brammer said he was one of the Cactus associates who was in charge of luring what he called “marketing fees” from attorneys and body shops, apparently ignoring the provisions of the DPS contract.

Brammer told investigators that in a “really good month” he referred 10 or 11 car crashes to attorneys.

Brammer claimed he would tell customers about an attorney only after they requested one. Investigators, however, contend that Brammer gave the names and personal information of people who had been involved in crashes directly to local law firms that worked with Cactus.

The law firms would then contact Cactus’ customers in an attempt to represent them. The Cactus business made as much as $150,000 a year in attorney referrals, but revenue had declined in recent years, Brammer said.

“Accidents are fairly good but then again to be honest with you, that’s turned into the gutter. People simply are not hurt, with the air bags and everything else,” Brammer said.

Cactus’ stall tactics on customers were systematic, employees told investigators.

Cactus’ drivers were told, for instance, to bring a wrecked vehicle back to the Cactus impound yard so that a second tow and a rehook fee could be charged.

Cactus had many opportunities to charge extra fees once the cars were on its lot. Tow truck drivers, for example, were given instructions and incentives to wrap plastic around a wrecked vehicles’ broken or lowered windows to protect them, regardless of whether they needed it.

Trickery also was used on a regular basis, according to the investigation.

Frank Escobar, a former Cactus tow driver, told investigators that customers were told their vehicle had to be taken to a Cactus tow yard, even if they requested it be sent to a specific body shop.

Sheriff’s records show that customers with insurance were billed $199 for the second tow. Customers without insurance would be charged $45 for the same service.

It didn’t stop there. Former Cactus employee Victor Gomez said tow drivers would unnecessarily roll down a vehicle’s windows so the company could charge for covering them with tape. The drivers would cover the windows with plastic wrap and then charge $65. For cars with power windows, drivers would intentionally drain the batteries after they rolled the windows down as a way of covering their tracks.

“If you’ve got a roll of plastic that costs you $15 and you’re making $15,000 on it, are you caring about wasting a little of that plastic?” Phillips said during an interview with investigators.

Invoices show other miscellaneous costs could drive a customer’s tow bill as high as several thousand dollars.

Watkins had a policy of not allowing tools in the tow yard, ostensibly because an employee had hurt himself with a screwdriver and Watkins was concerned about the liability issues, Brammer said. So, if a customer wanted to remove a license plate from a totaled vehicle, Cactus would charge $15 for the car to be towed temporarily off the lot so that the owner could unfasten the plates. It would cost another $15 for the car to be towed back.

In some cases, customers never saw these fees. They were given a handwritten invoice from the tow truck driver or a “half sheet” that showed no breakdown of their charges, Phillips told investigators. Insurance companies often handled the entire affair, and clients never bothered to find out what the total charges were.

The sheriff’s raid on Cactus in 2005 turned up a log of hidden invoices in the company’s computers that showed the actual tow charges, some unauthorized under tow contracts.

Cactus bypassed specific restrictions outlined in its lucrative law enforcement contracts — sometimes simply by renaming a service. For instance, the DPS contract didn’t allow Cactus to charge a fee for a car that tumbled down into a ditch for a “rollover.” So some of the invoices show an “upright” fee. Phillips told investigators it was part of his job to mislead customers.

“We’ll go out there and charge $200 because I had to pull an extra chain off the truck,” he said.

Cactus also had sophisticated ways of stalling customers from claiming their cars, which drove up costs and sometimes led to Cactus taking ownership of the vehicles.

Gomez told investigators that he was warned never to speak Spanish at Cactus’ yard or during business transactions. In some cases, Hispanic customers were turned away from claiming their cars because they were told no one at Cactus could communicate with them. For that day, Cactus would tally another $21.50 storage fee.

It wasn’t easy to contact Cactus either, said former employees. The office didn’t have a fax machine and employees checked a post office box where the company’s mail was sent just a couple of times a week, Phillips told detectives.

Cactus’ customers were told they had to show an Arizona driver’s license, a car title and registration in order to claim a vehicle — none of which could be done over the phone. Lienholders were told they needed written permission from the owner to release the vehicle.

Owners and lienholders who visited Cactus with all the correct documentation sometimes were told that the car just wasn’t ready to be released.

Brammer told investigators that all the little inconveniences at Cactus were done on purpose and often targeted low-income people.

Brammer said guys “living paycheck-to-paycheck” would come to the tow lot with a hefty bill and an insurance policy that might not cover the charges. Customers were encouraged to sign over the their car titles to clear the bill.

But it wasn’t always low-income people who were preyed upon by Cactus, according to the investigation. In one instance, DeMasseo specifically instructed employees to erase records related to a Lexus sedan that was outfitted with $10,000 of stereo equipment so that Cactus could claim its title, Phillips said.

State law says that a tow yard can’t pursue a title on an abandoned vehicle until after it was available for 10 days and an owner hadn’t claimed it.

Brammer said, however, that Cactus routinely started the paperwork through the MVD to claim title to vehicles within five to 10 days.

The woman who owned the Lexus lived out of state and was concerned that something could happen to her car, Phillips said. She called the tow yard concerned that she might lose the vehicle because “her son (told her) that you guys sell cars all the time,” he recalled. Because the owner had contacted the Cactus tow yard, the company should have waited to pursue the title on the vehicle so that the owner would have time to claim it, Phillips said. But that didn’t happen.

“The day we got title on that car, we erased everything on the computer under the instruction of Todd DeMasseo,” Phillips said.

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