Thefts Plague Construction Industry : Crime: Loss of heavy equipment adds to costs, increases insurance rates for contractors.

An epidemic of construction equipment-related crime is sweeping the county, causing construction delays, increased insurance costs and higher-priced homes and buildings.

If the current rate holds up, the county’s heavy equipment thefts in 1990 will more than double those of last year in terms of reported incidents. San Diego contractors and equipment dealerships reported 38 thefts through the first five months of this year, almost matching the 44 thefts for all of 1989.

Last year, the value of the equipment stolen locally amounted to about $3 million. Nationally, industry losses due to heavy-equipment theft were $1 billion in 1989.

“It really is a plague on the industry,” said Bill Burke, San Diego executive director of the Associated General Contractors, a construction industry trade association. “This is something that has been going on for a long time but has been growing in the last 10 years. We’re not talking about small hand tools, which are pilfered from the job site. We’re talking about major pieces of equipment, the big stuff.”

The rigs, which include tractors, forklifts, backhoes and loaders priced up to $200,000, have proven a lucrative target for thieves emboldened by the ease with which the vehicles can be stolen.

Many of the stolen vehicles end up in the hands of unscrupulous contractors and dealers, usually within 200 miles of where they were stolen, said Gene Rutledge, an investigator with the California Highway Patrol who specializes in construction-equipment theft.

Although a significant amount of heavy equipment theft occurs at equipment rental dealerships, most incidents take place at the work site, where security is often lax.

“It sits out on the job site, and in most instances it is not guarded, though it should be,” Burke said. “You’re talking about millions and millions of dollars in construction material and equipment which sit out in the open and invite anybody in to rip it off.”

Five Southern California counties--Los Angeles, Orange, Riverside, San Bernardino and San Diego--account for 65% of the 1989 statewide construction theft total of 18,184 units stolen, Rutledge said. That figure was up 18% from the 1988 total of 14,885 thefts, Rutledge said.

However, those figures, reflective of the high amount of construction under way, are not complete, Rutledge added. “About 20% to 30% never gets reported,” he said. “We know that because we find (equipment) all the time, and (the owners) say that they never reported it.”

The March theft of a Massey-Ferguson skip loader from an unattended Lakeside residential construction site can be seen as representative of the problem the industry faces. The versatile machine, popular among thieves because it is easily transportable and concealable, was stolen on a weekend, a period during which 90% of equipment theft occurs, according to Don Necochea, manager of the Construction Industry Crime Prevention Program, a nonprofit project set up by the San Diego Construction Industry Federation to combat construction theft.

The loader, used for moving material, had been rented by a developer from San Diego-based Hawthorne Equipment Rental company.

It took workers on the following Monday about half the day to realize that the loader had been stolen, Necochea said. The machine, one of several skip loaders stolen around the county recently, cost about $35,000 and has not been recovered.

The developer was fortunate in that another loader was reordered and delivered in several hours, preventing a large-scale disruption of the work schedule, Necochea said. Others are not as lucky, he said.

If a contractor loses an integral piece of equipment or material that cannot be reordered quickly, costly construction delays could result and countless man-hours be wasted, Burke said.

Reporting the crime even when the equipment is insured can also be financially damaging, Burke said.

“As you keep filing these claims, your insurance costs for that (kind of equipment) keep going up by leaps and bounds,” Burke said. “You not only lose the cost of the material, you’re also increasing the cost of the contractor doing business, which reflects in the cost of a new building, a new home, a new highway . . . . You’re talking big bucks, and it’s all factored into the final costs.”

Precise figures on the thefts’ impact on insurance rates are not available. However, contractors and dealers “who have a higher frequency of theft--their premiums will reflect it,” said John Yonkus, director of risk management for the California Rental Assn., a trade association for the equipment rental industry.

One or two thefts over a period of years will not cause a dealership’s insurance to skyrocket, Yonkus said, but instead might be felt over the long term.

Hawthorne Equipment Rental has had four pieces of equipment stolen in the past 12 months. The equipment had been rented out to contractors and was stolen at the work sites. The total cost of the thefts is estimated at $100,000 but, because of the company’s large size, the thefts are expected to only minimally affect its insurance, if at all, a company spokeswoman said.

Henry Wells, owner of San Diego-based Contractors Equipment Corp., said his firm welds its own secret identification onto the company’s equipment in the event the machinery is stolen. If a thief removes serial numbers or product information numbers, there is still some means of identification for Contractors Equipment to prove ownership, he said.

Burglars broke into the rental firm’s San Diego headquarters on March 30 and stole 18 truck tires and rims valued at $12,000, Wells said. The company’s Oxnard rental yard was also recently hit by thieves. A tractor, trailer and forklift were stolen by burglars who plowed through an 8-foot fence to make off with the equipment, Wells said. The thieves eventually were arrested by Oxnard police after attempting to sell the equipment for $500 to undercover detectives, Wells said.

So far this year, only about 25% of the stolen construction rigs in the county have been recovered, which is consistent with the national rate, Necochea said. By comparison, the recovery rate for automobile thefts is about 85%.

Law enforcement officials cite several factors for the low construction equipment recovery rate. First of all, many law enforcement agencies do not make heavy equipment theft a priority and consequently make little effort to combat the problem, said the CHP’s Rutledge.

Secondly, many police officers do not feel adequately trained in detecting stolen construction equipment and are reluctant to stop and inspect rigs they are not familiar with.

“It takes a little bit of work, period,” Rutledge said. “Some don’t want to give it a full inspection.”

Lastly, there is no state or federal registration of heavy equipment, such as that with automobiles.

“I do think that, if we had some kind of ownership documents, we would be in a better situation,” Rutledge said. “It would aid us greatly in our pursuit of this stuff.”

The thieves themselves often have a detailed knowledge of the construction and equipment industries, Rutledge said.

“The people who steal this equipment today are organized, they know what they are doing and are very professional,” he said. “Ninety-nine percent of all thefts of farm and construction equipment occur only after someone has taken an order for that piece of equipment. The guys that are doing this roam the country cataloguing everything in their mind.”

Despite the widespread contention among local contractors and equipment rental dealers that unrecovered machinery ends up in Mexico, Rutledge said only a minute percentage of stolen rigs end up outside the state’s borders. In most cases, the vehicles are found relatively close to the scene of the crime and in the hands of other contractors or dealers, he said.

Thieves generally tend to have a background in the construction, farming or equipment rental industries, he said.

“Obviously there’s a market for that equipment and that material,” said Burke, of the Associated General Contractors. “If the contractors are buying that (stolen) equipment, then they are dealing with a time bomb” because of the chances of getting caught with the stolen goods. “It’s really stupid to get involved in anything like that,” Burke said.

Carl Mitchell, owner of Bakersfield-based Equipment Theft Prevention company, which markets a hidden identification tool, stole as much $750,000 worth of construction equipment in the early 1980s until he was arrested and convicted in Fresno in 1985 for possession of stolen property. He said he only served five months in jail after cooperating with CHP investigators in recovering the equipment.

Mitchell, who also now acts as a consultant about theft prevention, said the machinery’s size often aided in its theft. In addition, universal keys to construction equipment make it easy to drive off with.

“The size of them makes it easier because most people don’t know what’s going on with them,” Mitchell said. “They assume that you are the person who should be dealing with it. And with the keys readily available, a (thief) can start it up real quickly and not look suspicious because he’s not fooling around trying to start it.”

Rutledge, however, downplayed the importance of the keys, saying that the vehicles can be easily stolen without the keys.

Mitchell gained his insight into theft business through an equipment rental dealership he owned at the time.

“It was really ironic because, for a long time, I was trying to find out who was taking them,” Mitchell said. “I was talking to people, and they would tell me they were getting their stuff stolen. I would say, ‘Gee, how could you lose it?’ I found out how easy it was.”

He said he stole about 40 pieces of equipment three years until his arrest.

“If I had wanted to, I could have quadrupled that,” he said. “It’s just as easy today.”