Houston’s Wild West towing system blamed as car-flipping scams boom
Diana Ploch remembers the disorientation immediately following the September 2018 collision that totaled her Toyota — “just trying to make sense of what was going on.” The airbag from the 2006 Camry had exploded into her face, leaving her dazed. The last thing she was thinking about was what to do with her car.
“I was sitting on the ground, and the tow truck driver came over and said, ‘Here, you got to sign this right now; we’re taking the car to the impound lot,’” she recalled. “They were just so authoritative, I didn’t even think to question them.”
Her parents, who met her at the vehicle storage facility, were worried and equally distracted. When a worker from the tow lot thrust paperwork at them to sign, they did so without much thought. Ploch recalled thinking it was odd how he held one over the other and folded the top form in half so it was unclear what her father was signing. It was only months later that she learned they had been part of a scheme regulators say is taking the Houston area by storm: car flipping.
Storage facilities are limited by law on what they can charge own
ers of vehicles from socalled incident management tows following accidents. Ploch’s father, however, unknowingly had granted the storage facility permission to move his car to a body repair shop — with an almost identical name, located at the same address and owned by the same person — which quickly ran up more than $1,700 in fees for “preservation,” “transfer” and “teardown” on the totaled car.
Local police and state regulators say such schemes in which cars are deceptively “flipped” from regulated storage businesses to unregulated repair shops are soaring.
“We get 30 to 40 reports a month,” said Montgomery County Sheriff’s Deputy Roy Leck. “And there’s a lot that don’t get reported.”
During the past couple of years, car flipping cases brought by the Texas Department of Licensing and Regulation, which issues towing and storage licenses, have been exclusively against Houston-area companies, records show. Allstate alone reported recovering more than 120 obviously totaled vehicles per month that had been moved from storage facilities to body shops, an “epidemic” in the Houston area, according to court documents.
Instead of a few hundred dollars, the insurer said it paid an average of $1,500 to the body shops, totaling millions of dollars in unnecessary fees per year.
Sting operation
No one has a single answer why Greater Houston has proved such fertile ground for the ploy — “we’re fortunate it’s only in the Houston area,” TDLR spokeswoman Tela Mange said. Police and even some wrecker companies, however, say the area’s outdated, free-for-all towing system is at least partially to blame.
“It’s a very antiquated system that’s gone away in most other areas,” said Ken Ulmer, owner of SafeTow and executive director of the Texas Towing and Storage Association, as well as a longtime member of Houston’s Automotive Board, which oversees local licensing for wreckers and storage lots.
The local flipping boom has surprised law enforcement and regulators because Houston’s most notorious bust occurred only four years ago.
Among the area’s wrecker drivers and storage facility owners, Ulmer said, it was common knowledge that Stan’s Wrecker, a licensed vehicle storage facility, was flipping totaled cars to USA Auto Collision, an unlicensed body shop at the same Almeda Genoa Road location. “No one in this industry was unaware of what he was doing.”
By late 2015, Houston police had received so many complaints that it mounted an undercover sting operation. Using totaled cars as bait, it staged wrecks in locations investigators knew tow trucks affiliated with Stan’s Wrecker would respond to, recalled Sgt. Lisa Cruz, who led the effort.
Once at Stan’s, the undercover officers confirmed details of the hundreds of complaints. Dazed drivers were being tricked or pressured into transferring their vehicles to the next-door repair shop, which was “charging $3,000 for getting their cars out, for doing nothing, absolutely nothing,” Cruz said. People without insurance often lost their cars, she added.
Further investigation revealed a sophisticated operation: Employees worked from scripts designed to confuse already disoriented drivers fresh off a wreck; company workers slipped drivers deceptive paperwork from behind darkened windows so customers could not identify them; customers who felt pressured often would try to call their insurance companies seeking advice, but said their calls always seemed to fail; police discovered an illegal cellphone jamming device behind the counter.
Eventually, four people were charged with engaging in organized criminal activity. The final defendant, Ricardo Gonzalez, was sentenced to six months in jail after pleading guilty last summer.
Cruz said news of the arrests and sentences led to an immediate reduction in local flipping complaints. For some, though, Ulmer said, the case sent a different message: “People looked at them and thought: ‘Look at how much money you could make.’ ”
Wild West
In many ways, the Houston-area tow business remains the Wild West.
In Harris and Montgomery counties, wrecker drivers cruise major arteries and common crash sites while monitoring law enforcement radios. Police and tow companies agree that with more than 600 registered in Houston, 260 in Montgomery County and nearly 1,000 in Harris County, the supply of wreckers far outstrips the demand.
When police scanners broadcast a crash call, wrecker drivers in the area will “fly to it,” said Sgt. James Cabrera, head of the Towing and Storage Unit for the Harris County Sheriff’s Office. Drivers typically are paid on commission, so it is not uncommon to see a dozen or more trucks crowding even minor twovehicle crashes. The City of Houston contracts with individual companies for crash tows on highways, but not on local roadways.
Different rules apply to a tow driver’s contact with motorists depending on location. Houston bans towing solicitations, but Harris County has no rules against it before police arrive. In Montgomery County, there are rules restricting towers’ contact with crash victims, but “no one really knows about it,” Leck conceded.
The assembled drivers drop small brass chips identifying their companies into a hat. A police officer draws out as many chips as there are cars needing to be towed.
In addition to encouraging wreckers to hurry to crash scenes, the system is economically inefficient, Ulmer said. Due to the random draws, he estimated that fewer than half of the crashes his trucks respond to end up winning tows.
Police say such poor odds can breed a secondary market, where drivers who lose the hat draw offer to purchase the right to tow from the winners. The price by definition will be higher than the official fees set by law — $174 in Houston, $145.50 in Harris County — providing an incentive to pad the bill down the line.
Leck said he has seen printouts advertising bounties a body shop offered to wrecker drivers if they delivered a car from an accident scene — up to $1,000 for 2013-or-newer vehicles, less for older cars. Vehicle storage units are licensed by the state and may charge only $20.64 per day for keeping a car, so unscrupulous owners seek opportunity to generate money to pay the bounties outside the rules at affiliated body shops.
‘Deception, trickery’
“We’re not exactly the most loved businesses out there,” said Jonathan Bruce, a Houston attorney who represents tow companies and body shops. Concerns about a local car flipping scourge are overstated, he said, with most cases brought by insurance companies interested in steering repair work to their preferred companies.
“All the state is doing is operating as an arm of the insurance companies,” he said.
Regulators respond that if distracted drivers can be persuaded or tricked into granting permission to transfer a totaled car needing no repair to a body shop, unregulated businesses can rack up steep and unnecessary fees that someone must pay.
“In a matter of hours, the bill can be $2,000,” Leck said.
Those most familiar with the system concede it needs modernization. Leck said he will present Montgomery County commissioners with a proposal for a stricter towing ordinance later this month. Harris County already is considering contracting with a private company that uses GPS-tracking to closely manage the incident-management towing process, from dispatching only the closest and necessary trucks, to drop-off, where the driver snaps a photo of the vehicle and submits it, Cabrerea said.
Meanwhile, police say they remain hampered by limited manpower. State licensing cases can take years to investigate. Even if a scheme is proven, revocations only last a year, after which the offender can reapply. Until then, it is a simple matter for operators to move assets to a new company, often owned by an associate or relative and located at the same address.
Last August, an administrative judge concluded Rodolfo Meraz, who did business as FM 1960 Wrecker, “used deception, trickery, and misrepresentation to tow (vehicles) from the accident scene to (his) unregulated body shop.” Records show Meraz later transferred his tow trucks to another license he held, for a company called Sixty Wrecker.
In November, after receiving additional complaints against Meraz, TDLR filed another case against the second company. The new company “is merely an alter-ego of, or mere tool to continue the operations of (Meraz’s) earlier towing company, which had its license revoked,” the department asserted in a filing.
Meraz’s attorney, Bruce, said there was nothing illegal about the practice. “The rules provide for that,” he said. “If the state wants to change them, the Legislature needs to do that.”
Slew of fees
Although the Ploches were unaware of it, they had signed forms authorizing workers to transfer their mangled Camry from South West Carzone Auto Storage, a regulated vehicle storage facility where prices were limited by law, to the nearly identically named South West CarZone body shop at the same address, where prices were not regulated.
Records show the shop quickly assessed a slew of fees: $324 for “payout,” a $500 “administrative fee,” $300 for “preservation” and “transfer” and $320 for storage, about double the legal rate. The body shop charged $200 for “teardown,” even though all parties agreed the car was totaled.
At a January 2019 hearing, company owner Subhi Abuhamra admitted the Ploches’ Toyota was a total loss. He acknowledged “flipping has been occurring for a long time,” according to administrative court documents, but added that unless he moved the cars between companies, he would go out of business. Abuhamra did not return a call to his business.
An administrative law judge concluded Abuhamra had “engaged in a calculated flipping scheme.” She recommended he be assessed a $5,000 fine and his storage license be revoked. The license was revoked last July, but state records show the fine remains unpaid.