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40 Arrested in Vast Car Theft Scheme

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TIMES STAFF WRITER

In what investigators say is the largest international auto insurance fraud case ever, federal and state authorities announced Friday they have arrested 40 suspected members of a car theft ring that allegedly shipped luxury cars from California and Nevada to China for resale and then filed false insurance claims in the United States.

Federal officials said masterminds in the scheme helped recruit other suspects to buy, rent or lease luxury cars, then shipped them overseas. When the cars reached Hong Kong, or sometimes while they were in transit on container ships, suspects reported them stolen and collected the insurance money.

In Reno, Nev., officials unsealed indictments against nine suspects Friday, including three whom they say enlisted car shoppers with sound credit records to purchase high-priced cars from dealerships there.

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The buyers were supplied with up to $12,000 to make down payments on the vehicles, said Jerry Hill, supervisor of the FBI’s Reno office.

The plot resulted in about 120 cars, many of them Mercedes-Benz, BMW and Lexus models, being shipped through the ports of Los Angeles and Long Beach and resold in Hong Kong for up to four times their U.S. retail value, authorities said. Losses from the insurance fraud were estimated at $6 million. The cars were recovered.

“The scam artists thought they could outsmart the system,” California Insurance Commissioner Chuck Quackenbush said. “But as with most scam artists, they were outsmarted by the system. The doors will ultimately be slammed shut on anyone who tries to commit insurance fraud.”

Law enforcement officials said 33 suspects from California, including 13 from the San Gabriel Valley and 17 from Sacramento, have been arrested, many of them over the last three months.

Six have pleaded guilty. Two more Californians are fugitives who may have fled to Hong Kong, authorities said.

Investigators say they recovered fraudulent sales contracts and shipping manifests pointing to a complex web of smugglers.

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“This was a fairly sophisticated criminal enterprise. They get all the money back at this end, and sell them for three to four times the value at that end,” Hill said.

“Not the typical dirt bag. These are thinkers.” In the wake of Friday’s arrests, car theft experts said they were only beginning to understand the magnitude of the problem.

The National Insurance Crime Bureau estimates that more than 200,000 stolen cars are exported from the United States every year, resulting in losses of $7.5 billion. In September, investigators recovered 16 cars that had been smuggled though the San Pedro Bay ports to Thailand.

“Los Angeles-Long Beach has anywhere from 4,000 to 7,000 vehicles reported as being exported annually. The amount being shipped out of there could be double or triple that,” said Mark Stowell, the insurance crime bureau’s vehicle theft manager for 13 Western states.

“Unfortunately the volume of traffic precludes any real viable inspection process. It’s not that difficult to get the cars out.”

With more than 18,000 containers streaming through the ports each day, close inspection has become next to impossible, investigators said.

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“It’s a time-is-money issue,” Stowell said.

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