Abstract

This discussion is intented to explain the issues of vehicle registration as they relate to the Titles Unlimited case. ABSTRACT

• Titles Unlimited was busted for providing fraudulent car titles to California Residents. In the trial that took place uncontested evidence was heard of 613 fraudulent Alabama titles being issued to Californians between 1999 and 2002. It is my understanding that Titles Unlimited was in business since 1976.
• Of those 613 titles 150 were Cobra Kit Cars.
• 17 of the 150 Cobra "Replica" owners were hit with additional registration, use tax and fines on their vehicles for understating their declared value by as much as a third to a half. A Presentation to the California Inspection and Maintenance Review Committee indicates that the fines ranged from $4000 to $16000 in back use tax and registration fees. The presentation also indicates that owners understated the value of their vehicle by as much as 1/3 to 1/2 when compared to the bill of sale.
• Title Washing is the process of registering a vehicle in another state that does not require in person physical inspection of the vehicle before registration. And then bringing the vehicle into California as an out of state vehicle
• Robert Morgester, Deputy Attorney General estimates as many as 70000 vehicles may be involved. He estimates a loss of $284 million dollars to the state
• As a result of the Titles Unlimited Case all out of state titles are being closely scrutized by DMV.
• The debacle potentially could result in putting smog equipment and safety equipment on Hotrods
• Anticipate as yet unidentified new legislation on Transfer of Ownership rules for out of state cars.
• ....More to come on this....Stay tuned.....News at 11

Background:Assume I want to build a hotrod or classic car. There are three ways to pursue it.

• Find a rust bucket, haul it home, non-op it...Then start the project.
• Find a project car someone else started, bring it home...continue the project car.
• Buy one finished or in some intermediate state.

Next -- Complete Building The Vehicle

Bringing the car home and finishing the project just requires money and visits to trade shows, car parts suppliers and swap meets....RIGHT?????--Mechanics of building the car is not the focus of this discussion

Finally -- I Must Register The Vehicle

The final step is vehicle registration in my name. The current registration process and impact of the Titles Unlimited fallout is where this discussion is going.

Steps To Registration

There are three steps to vehicle registration in California:

• CHP VIN (Vehicle Identication Number) Verification
• A trip to the smog referee.
• A trip to DMV with the final registration papers.

Issues At Each Stage

Issues With CHP VIN Verification -- Step 1

The issues with CHP VIN Verification are as follows:

• If you bought the rust bucket finding the VIN is probably not a problem.
• If you bought a vehicle in an intermediate state, finding the VIN may or may not be a problem.
• If you bought a newly manufactured or fiberglass fabricated hobby car, a kit car, or a finished car (newly restored) VIN may be a problem.

Establishment of VIN Year is based on looking at both the chassis, the engine and body. This has very significant consequences at the SMOG Referee. Let us proceed to step 2 -- "The Smog Referee":

Issues at the Smog Referee -- Step 2

A big part of the problem occurs between Step 1 and Step 2.

• General Rule #1 is "To establish the year of the vehicle, a SUBSTANTIAL amount of the parts on the vehicle must be of that year". SUBSTANTIAL is not a clearly defined term.
• If I can show SUBSTANTIALITY, I have a good chance of establishing the year I choose. If I cannot establish SUBSTANTIALITY, DMV and the Bureau of Automotive Repair Smog Referee will declare the vehicle to be a current model year vehicle.
• RUNNING JOKE: THERE ARE MORE 32 FORD ROADSTERS REGISTERED IN CALIFORNIA THAN HENRY FORD MADE.
• General Rule #2 is "Smog to the later of the Chassis Year or Engine Year"
• CAVEATS Of Rule #1 and Rule #2:
  • Some FIFTIES vehicles had breather tubes
  • Some early SIXTIES vehicles had PCV valves but nothing else.
  • 66-75 vehicles had various smog configurations. Not all of these are correctly documented. There is MUCH confusion about the configurations.
  • SB42 -- 1997 -- California Senator Quentin Kopp -- 66-75 vehicles are exempt from the biennial smog check but still by Vehicle Code 27156 required to have the smog equipment on them.
  • The catalytic converter and unleaded gas came into use in 1975.
  • General Rule #3 -- The vehicle must have both smog and safety equipment on the vehicle according to the year of the vehicle.
  • Fallout of Rule #3 -- If I can prove the year of the vehicle to be pre-66, then I only need to put on smog and safety equipment for that year which is nothing. If I cannot, I may end up putting smog and safety equipment on to match the declared year of the vehicle.
  • More Fallout of Rule #3 -- If I can prove the year of the vehicle to be between 66 and 75, then I fall under the SB42 Smog Exemption. While Vehicle 27156 requires that smog for that year is on the vehicle, no one is looking at that configuration. Any random walk through California Car shows will tell you that 90% of 66-75 vehicles have removed the smog equipment
• The TROJAN CAVEAT OF General Rule #3 -- If I cannot prove the year of the vehicle, it is treated as a newly manufactured vehicle and I must put smog and safety equipment on according to the year of the vehicle.
• Who Is Likely To Have A Problem With The Year?
  • If you have one of the 66-75s you are not likely to have a problem
  • It is not very difficult to find manufacturers that will supply you with a complete chassis for the vehicle you wish to build. All of the chassis is new parts and would point to a new (2005) vehicle.
  • It is not very difficult to find manufacturers that will supply you with a fiberglass body for a vehicle. A fiberglass body would point toward a new (2005) vehicle.
  • It is not very difficult to find a manufacturer that will supply you a crate engine that is brand new.
  • If this vehicle is supposed to be a 32 Ford highboy, then you have a problem. If all the pieces are new, then the vehicle is treated as a 2005 vehicle. If the vehicle is part new and part old then we have a gray area. This puts you directly in the middle of this issue. Is the vehicle a replica or the real thing?
  • The issue:
    • You want a new vehicle but you want DMV to recognize it as a pre-66 so you don't have to smog it or put safety equipment on it.
    • DMV will try to tell you that you have a new vehicle.
    • You must prove by the chassis, body and engine that it is an old vehicle. If you can't, you smog it!!!!
    • Dealing with this QUAGMIRE is what brought about Titles Unlimited.

Issues At The DMV

More Of The Problem Occurs Here:

• When you register at California DMV, you sign under penalty of perjury.
• When you register at California DMV, you specify a vehicle make, model and year.
• When you register at California DMV, you specify a mileage.
• When you register at California DMV, you declare a value for the vehicle.
• California requires you to pay a use tax and a registration fee acccordingly.
• An out-of-state used vehicle may not be brought into California until it has 7500 miles on it.

Apparently some car owners are misrepresenting the make model and year to avoid smog compliance....example a Cobra Kit Car newly constructed is represented as a 1965 Ford to avoid smog. Apparently some people are also under-declaring the value of their vehicle in order to pay lower USE-TAX and Registration. Remember these figures are based on 2% of the original sale price. Read the Deputy Attorney General's Presentation to the California Inspection and Maintenance Review Committee.

Read Illegally Registered Hotrods

Putting Things In Context With "Titles Unlimited"

The following puts the General Rules in context with Titles Unlimited:

• Examination of any of the major car shows, swapmeets or magazines indicates that it is possible either to buy parts for your pre-existing project car or buy chassis/body/engine in ANY STATE OF COMPLETION INCLUDING TURNKEY.
• The issue is to plan from the beginning as to how you establish the year of the vehicle. If you buy a new chassis, you can't rely on the chassis to establish year. If you buy a fiberglass body, you can't rely on the body to establish the year of the vehicle. If you drop a new crate motor in the vehicle, you can't rely on the engine to establish the year of the vehicle.
• Go back to General Rule #1. If you ignore General Rule #1, you could find yourself putting smog and safety equipment on that vehicle.
• What options do you have at this point?
  • Enter Titles Unlimited. "Titles Unlimited's" success resulted from querks in state titling laws.
    • Some states do not require in person inspection of vehicles before titling.
    • Some states do not require titles for vehicles over 10-15 years of age
    • California requires in person inspection of any vehicle newly registered in California.
    • "Titles Unlimited's" niche was for a fee ranging from $150 for any automobile to $225 for a Corvette to $325 for a Cobra register the vehicle in Alabama without a vehicle inspection. Because Alabama did not require a physical inspection of the vehicle, your vehicle would stay in California. Ownership was shown by "Bill of Sale" and "Registration".
    • Once registered in Alabama, "Titles Unlimited" returned registration, letter of title from the issuing state and bill of sale from the Alabama Dealer.
    • Then you take that paperwork to DMV in California and register the vehicle. The vehicle comes into California as a 49 states car with all the California exemptions.
    • One caveat of California Law is that a used vehicle from outside California cannot enter California as a used vehicle until it has 7500 miles on it.
  • Example of Using Titles Unlimited Services:
    • Assume I want a 1948 English Ford Anglia Thames as my Hobby Car.
    • Under case #1, I go out and find one and restore it. VIN information is most likely present on one if I can find it. I am not likely to have trouble with registration.
    • Under case #2, I go out and find an aftermarket manufacturer who will build a chassis to measure, a body to measure and throw in any engine I want (example -- long block Chevy 350 V8).
    • The only problem is that I may have nothing to establish the year of the vehicle. I could end up with smog equipment on that long block Chevy 350 V8.
    • I could also end up putting safety equipment such as air bags and fenders on the vehicle in order to register it.
    • If I got caught in this position and didn't know better, I would probably consider using "Titles Unlimited" services.
  • How It Fell Apart:
    • Source Documents: Sacramento Hi Tech Crimes Task Force and Read Illegally Registered Hotrods
      
    • Apparently one person purchased a Cobra Replica from Nevada for $51,385 in 2000. That vehicle was registered in California as a 1965 Ford for $13,500. In some fashion, it got to the District attorney and the person was charged with making false statements to DMV. Vehicle Code 20.
    • This escalated into the conviction of Richard Weaver (owner of Titles Unlimited -- Alabama) for providing fraudulent titles to Californians.
  • In Richard Weavers trial in Sacramento, according to Sacramento Hi Tech Crimes Task Force which is part of the Sacramento Sheriff's Office undisputed testimony was heard that between 1999 and March 2003 613 titles were provided to California Car owners by Titles Unlimited. Of those,the article states that about 150 were Cobra "kit" or "replica cars" fraudulently registered with DMV.
  • Rumor now has it that CHP is going out and physically looking at each of these cars. Rumor also has it that some have been seized.
  • According to the slides provided to the California Inspection and Maintenance Review Committtee, 17 of the 150 Cobra "kit" cars were sampled.
  • Results for the 17 Cobra "kit" cars indicated some were undervalued by as much as a third to a half.
  • According to the slides provided to the California Inspection and Maintenance Review Committee, Registration Fees, Registration Fee Penalties, Use Tax Fees and Use Tax Penalties totalled anywhere from $5600 to $16,000.
  • THAT IS THE TIP OF THE ICEBERG. Potentially any vehicle that has come in from out of state will be examined.

Proposed Solution

What is the solution to this Vehicle Registration Debacle. What I am hearing from the IMRC hearing and SEMA is:

• Some kind of legislative amnesty period with a fine.
• Re-registering the vehicle correctly (details not available now BUT WOULD INCLUDE PHYSICAL INSPECTION OF THE VEHICLE)
• Some form of smog compliance would be included.
• If a person does not come forward during the amnesty period, they would be subject to prosecution.
• Also mentioned was the possibility of CHP and tow trucks showing up at car shows.
• SEMA has proposed street rod legislation.
• Expansion of SB100/SB1578 is also under consideration

Actual Current Status--ll/30/2004

Actual status as of today is as follows:

• The owner of Titles Unlimited is doing a year in prison.
• The Attorney Generals Office Claims there are potentially 70000 vehicles involved
• The Attorney General's Office Claims the State has lost approximately $284,340,000 in revenue.
• I have heard claims that state officials showed up at one big car show in Southern California...No specifics.
• State officials sampled 17 other Cobra Kit Cars and found problems indicated above.
• Robert Morgester, Deputy Attorney made a presentation at the California Inspection and Maintenance Review Committee on November 23, 2004.
• Some currently undefined legislative amnesty is being sought. This is as yet undefined.
• Some form of change in registration procedure is anticipated but as of November 30, 2004 that is undefined.
• Changes to SB100 should be anticipated
• SEMA Street Rod Legislation should be anticipated.
• Updates will appear here as they are available.