Loophole spawns millions of fake Texas paper vehicle tags
Scammers create fictitious dealerships to gain access to DMV’s online system
Temporary tags are, it seems, a permanent fixture around Houston.
Everyone sees them, many flapping in the wind on the backs of cars in front of them on the freeway. They are on BMWs parked in the back of Sharpstown apartment complexes and Audis idling outside the Westin Galleria.
Often, even the untrained eye can spot an obvious fake. Those are easy for police to spot: the entire month is written out — Texas uses only three letters — or the font is not the block style the Texas Department of Motor Vehicles uses.
Other forgeries take a more trained eye like those of Travis County Precinct 3 Constable’s Office Sgt. Jose Escribano, who runs one of the few task forces ferreting out fake tags.
More alarmingly, Escribano said, many are not forgeries at all. They are legit temporary tags in the Texas system put there by illegitimate businesses, via a loophole so big they are driving cars and trucks through it and onto the streets.
Escribano and a handful of other investigators estimate as many as 2 million bogus Texas tags are on vehicles across the country, in part because it is so easy to gain access to the state’s online tag printing portal — and so tough to shut criminals down when they do.
“You can get one in an igloo in Alaska if you pay for it and have a printer,” Escribano said.
Texas DMV officials declined an interview request, citing an ongoing federal investigation into the fraudulent license tag rings that started last year. In a statement, department spokesman Adam Shaivitz
said the agency was working with law enforcement and the auto industry to strengthen safeguards. Texas has about 5,000 new car dealers, but more than 20,000 used vendors, according to the DMV. Among those, a handful are complete frauds, dealers that exist only in DMV records.
Vidor Police Capt. Ed Martin said the loophole has made Texas the “laughingstock” of vehicle enforcement authorities nationwide. From his perch near the Louisiana border, Martin said he has seen tractor trailers coming into Texas with temporary tags.
“You’re coming in with a Texas buyer tag,” Martin said. “How?”
The why also worries the few officers focused on the issue. Skirting costs for vehicle registration, avoiding toll charges or keeping salvaged cars — such as those damaged in a flood — on the road by selling them to unsuspecting buyers are among the motives. Drivers are saving about $100 skipping registrations and vehicle emission testing, meaning a big loss when tax assessors and communities lose out on the millions in unpaid collections. Toll agencies write off the trips, unable to connect the owner to the bill.
More sinister connections are rampant, however. The issue of bogus paper Texas tags became so prevalent in New York, tied to robberies and carjackings, that the police department advised patrol officers to check any fake Texas tags and all 17 digits of the vehicle identification number stamped on every car or truck. NYPD provided officers a field guide specific to Texas tags.
Numerous Texas crimes also have featured fraudulent tags:
• The car that struck and killed Nassau Bay officer Kaila Sullivan on Dec. 10, 2019, had a stolen temporary tag, that the car dealer never reported stolen.
• The getaway car used in the Aug. 21 robbery killing of a New Orleans policeman at a Galleria-area restaurant displayed a temporary tag. Authorities familiar with the case said it was one of a handful connected to the same vehicle.
• Two men who kidnapped Jonathan Hernandez-Venacio, 27, from a Del Valle home near Austin’s airport on June 7, 2020, sped off in a pickup with fake tags.
Refugio police, U.S. Customs and Border Protection and the Texas Department of Public Safety have made several drug busts in the Rio Grande Valley related to drugs stuffed in illegally tagged cars.
“I am not saying the tag caused it, but they were masking the fact in all sorts of crimes,” Escribano said.
Phony temporary tags do not receive the law enforcement attention of other crimes. Houston police, which aided the Travis County investigation along with others, said through a spokeswoman that most of its auto crimes unit was focused on catalytic converter thefts.
Meanwhile, legal drivers often grimace when they see paper tags, even in a state where thousands of cars change hands daily, mostly at smaller used dealerships and private sales.
“I know it is terrible, but when I see a paper tag on a used car, I wonder if it is real,” said Michael Johnson, 39, who lives near Texas Southern University. “I just slow down and let them pass.”
Tags for sale
What could be the largest fraudulent tag scam unraveled last year, when the DMV shut down four fictitious car dealerships that issued a combined 585,000 temporary Texas tags.
In May, three people were indicted in federal court in Houston for the scheme, charged with 15 counts, related to conspiracy and wire fraud. Leidy Areli Hernandez Lopez, 39, of Houston was charged along with Octavian Ocasio, 49, of New York, and Emmanuel Padilla Reyes aka Christian Hernandez Bonilla, 31, whom authorities have yet to find.
The investigation spanned from Austin to New York and included Houston police and the Harris County Sheriff’s Office. Prosecutors accuse the trio of advertising the tags on Facebook and Instagram. In a video now removed from YouTube, a man in New York offers tips on how best to position the tags, and details of how to acquire them.
Federal prosecutors in Houston declined to discuss the case’s specifics because it is not resolved, but said they are unaware of any other recent federal indictments related to the mass sale of fake Texas tags.
Prosecutors, in a May indictment, allege the trio were able to take advantage of a flaw in how DMV allowed vendors on to the state’s licensing portal. Attorneys listed for Lopez and Ocasio did not respond to requests for comment or were unreachable.
Most states issue temporary plates so vehicle buyers have a few weeks to fully register the vehicle and conduct inspections where needed. In the interim, the temporary plates provide some proof that the car is not simply stolen, salvaged, should not be on the street or otherwise suspicious.
In Texas, car dealers register and are issued a number that identifies the business. That number allows the dealer to access the portal maintained by DMV, which allows them to print their own tags as vehicles are sold.
Getting access to the system requires an online application, a $700 fee and proof the dealer has a physical location and a sign. Applicants then must show identification.
Oversight among state departments that handle vehicle registration varies, but most have more stringent standards for approving dealerships than Texas, which has higher standards for barbers than it does for entry into the DMV system. Many states require approved dealers to have fingerprints on file with the state, making fraud more difficult.
Lopez, Ocasio and Reyes are accused of using fake identities, fraudulent photos of office space and fake lease agreements to gain access to the system, and selling tags using fabricated car sales. It took investigators months to verify the dealerships did not exist, document how sales taxes were not being paid on the alleged purchases, and then shut off access to the online portal.
Tags were delivered to people via email, as a PDF, which the person could amend every two months to update the date. Unless police know what the they are looking for, the tags are legit — because according to Texas’ online system they are.
Through one of the four fictional car dealerships, the people involved in the scheme were able to create 430,000 tags before the Texas Department of Motor Vehicles shut down their access after 17 months. Between May and July 2020, another fake dealership was able to generate 108,000 tags. Two other phony firms identified by prosecutors generated about 50,000 combined, all through the webDealer portal maintained by DMV.
Tough sales pitch
The three companies are among dozens shut down by authorities.
The ill-gotten tags set off a cascade of problems for police, made even more difficult because the DMV has been reluctant to give law enforcement direct access to the database, or verify the details fraudsters and legitimate businesses are using.
That has created a system where even if a patrol officer runs a fake tag it will come back as valid unless the officer recognizes the name of the dealership as one of the bogus firms.
The flaws then poison other records relied on by police. The DMV database uploads into the Texas Law Enforcement Telecommunications System, the data police rely on to run plates. Fake names and fake tags essentially are laundered through the system, then shared nationally because TLETS connects to dozens of other national police databases.
Closing the companies takes months, but what frustrates some police is that closing the loophole seems to be taking longer.
As it was shuttering fake dealerships last year, the DMV also was forming a consumer protection advisory committee, aimed at curbing illegal tags. That led to lawmakers toughening the tag rules in HB 3927, adding oversight requirements of the system to DMV and giving the agency the ability to quickly turn off the online privileges of suspected scofflaws and cap the number of temporary tags a dealer can issue.
“The maximum number will be based on quantifiable metrics including time in operation, sales data, expected growth, and expected market changes,” Shaivitz said in an email.
The changes were not met with eagerness from some car sales companies.
“There is a great deal of concern among our membership,” Robert Braziel, legislative affairs director of the Texas Automobile Dealers Association, told a Texas House Committee.
Auto dealers, concerned about the effect turning off or toughening use of the online database, opposed HB 3927, while conceding there are problems.
“There is a problem and there do need to be looks at solutions,” Braziel told lawmakers.
What remains unclear is when they will happen, as motor vehicle regulators — made up mostly of car dealers — decide how to close the loophole. The requirements lawmakers passed in May went into effect Sept. 1, but give Texas DMV and unspecified amount of time to create the rules and regulations and begin applying them.
“Until we do something about it, the bleeding will continue,” Escribano said.
Think you can tell a real Texas temporary vehicle tag from a fake? Take our quiz at houstonchronicle.com/faketags