Wrecks Rise Again : Police Would Like to Drive Stake Through Heart of ‘Ghost’ Cars

The detectives who saw the front half of a Honda in a Sun Valley wrecking yard wrote down its identification number, a precaution in case it rose from the dead.

Which it did.

Two years after detectives found the half-demolished wreck in the auto graveyard, the same Honda--at least, according to Department of Motor Vehicles records--was rolling again.

But only two things remained from the original car: the title document and the three-inch tin strip riveted to the dashboard with the 17-character vehicle identification number, or VIN, that establishes an official identity.

The rest of the car was made up of a similar Honda that had been stolen. Fitted with the salvaged VIN strip from the original car to match the title document, it had assumed the identity of the long-vanished wreck and was sold on consignment through a used car dealer to an unsuspecting Altadena resident for more than $8,000. And when police impounded the car to return it to its true owner, he was out his money.

The growing practice of using “ghost” identities of scrapped vehicles as a cover to sell stolen cars on the legitimate market--a “salvage switch,” police call it--has insurance companies and police at odds. It is almost always an insurance company, taking title to a customer’s “totaled” vehicle, that decides to write off the wreckage and sell it for salvage.

What police are demanding is that the companies work harder to make sure that wrecks remain as scrap so that their official identities cannot be used in stolen car scams.

The insurance companies would rather continue as they have been doing--auctioning off the wrecks of cars that they classify as being too expensive to repair. That helps keep their customers’ premium costs down.

Auto theft detectives, on the other hand, argue that it should be a tip-off that something odd is afoot if what is supposed to be a pile of scrap brings in an unusually high price at auction. The wreckage of the Honda in the Sun Valley junkyard, for example, sold for $4,000.

“We’re talking about burned-up cars and crushed vehicles with no salvageable parts,” said Detective Bob Graybill of the Los Angeles Police Department, who heads the San Fernando Valley’s auto theft task force. “They’re paying anywhere from a couple of hundred dollars up to $4,000 for something that’s worth $125 for scrap metal.”

The solution is not so simple for insurance companies.

“The sale of damaged vehicles through salvage pools is a means to provide significantly lower premiums for automobile insurance to customers,” said Rick Dinon, a spokesman for 20th Century Insurance Co. of Woodland Hills, the sixth-largest writer of private car insurance in California.

Although no statistics are kept on the number of salvaged cars purchased for illegal purposes, police cite rising caseloads as proof that they are proliferating.

“There are so many cars being stolen (for use in such schemes) that there are not enough police in the state of California to deal with them,” LAPD Detective Gary Sims said.

Last year in Los Angeles about 73,000 cars were stolen, 15% of which were never recovered because they were broken down for parts at so-called “chop shops,” they were exported abroad or they had their vehicle ID numbers switched, Sims said.

In the Valley, the percentage of stolen cars that vanish is more than twice the citywide average. Police statistics show that 34% of the 22,376 cars stolen last year in the Valley never were recovered.

To make a car vanish, thieves use the salvage pools and junkyards that are the legitimate end of the line for badly damaged or simply worn-out vehicles.

Salvage pools are operated by private firms, some of which buy wrecked cars directly from insurance companies and place them on view in huge lots, where prospective buyers can inspect them and make bids at regular auctions. Others auction vehicles for a flat fee and the insurance company keeps the remainder.

About 2.5 million vehicles a year nationwide--damaged in accidents or stolen and recovered--are sold at auctions for an average of $1,200, creating a $3-billion market, said Bradley Scott, president and chief executive officer of Insurance Auto Auctions, a Woodland Hills-based company that operates salvage pools in four states.

Some of the cars are purchased by legitimate buyers, such as collectors refurbishing autos or mechanics in search of spare parts.

But others are bought by thieves to get a new identity for the vehicles they steal.

Sometimes the scam works in reverse, detectives said. A badly damaged car will be bought at auction and a similar car will be stolen to provide parts to rehabilitate it, putting it back on the road under its original identity.

And sometimes insurance companies will wind up paying claims on the same car repeatedly. Some cars are wrecked, paid off by insurers, auctioned, refurbished with stolen parts and then resold, said Lt. Rich Henderson of the California Highway Patrol.

“We want to break the cycle,” Sims said. He estimated that if insurance companies would stop selling “total loss” and “total strip” cars, thefts would drop 10% to 15% in Los Angeles County, where 137,000 cars were stolen in 1992.

Authorities argue that in the long run, insurance companies would have the best of both worlds if they surrendered the title to the DMV and broke the vehicle down to its usable parts for resale by licensed dismantlers.

Insurance companies disagree.

“The suggestion that insurance companies could save premiums by not selling the damaged remains of vehicles is to ignore the economics of the issue,” Dinon said. Last year, he said, his company made $10 million by selling salvaged cars, which helped offset the $200 million in claims it paid.

He also said that if insurance companies were unable to sell salvaged cars they would instead repair them--subjecting policyholders to long delays.

Just a week ago, the LAPD received a tip that a salvaged Honda had been re-registered to a Thousand Oaks couple. Detectives determined that the car had been stolen and its VIN switched, Detective Bill Fulton said.

Working with police, the buyers contacted the man who had sold them the car and arranged to get their $10,000 back. When he arrived in Thousand Oaks, Akop Terstepanyan, 33, of Hollywood was greeted by police and arrested.

DMV documents discovered on Terstepanyan led investigators to a Burbank house where they found three stolen cars, all with switched VINs, police said. Parts of at least five other stolen cars and several detached VINs were found in the back yard, Fulton said.

Police later arrested Oganes Terstepanyan, 38, the owner of the house. The Terstepanyans, who are cousins, were arrested on suspicion of grand theft auto and receiving stolen property.

Exporting stolen cars, whose identities have been altered, also is a common problem, Graybill said.

Last month when police searched Oleg Kotlyarevsky’s auto body shop in Van Nuys, they found wrecked cars purchased at salvage pools that had been stripped of their vehicle ID numbers. During a warehouse search at Los Angeles Harbor in San Pedro, police found the missing numbers attached to four stolen Jeeps awaiting shipment to Russia, officials said.

Police suspect that Kotlyarevsky switched the VINs from the wrecks to the stolen cars and used forged DMV documents and planned to export them from the United States. Kotlyarevsky is awaiting trial on possession of a counterfeit title of ownership, five counts of grand theft auto and one count of cocaine possession. Police said they found the drug during the search of his shop.

Sims said he hopes insurance companies will eventually agree to demolish any examples they acquire of the 20 models that are the most popular with car thieves.

On a recent morning, the detective made his way through acres of wrecked cars at a North Hollywood salvage pool.

“This one should be crushed and that one should be crushed,” Sims said, pointing at a completely stripped 1990 BMW and a totaled 1993 Mazda 323--both still fitted with their original VINs--that were destined for the auctioneer’s block the following day.

“I go nuts when I come out here,” Sims said. “It’s just a big, vicious cycle.”