[Congressional Record (Bound Edition), Volume 145 (1999), Part 1]
[Senate]
[Pages 1306-1308]
[From the U.S. Government Publishing Office, www.gpo.gov]



                    WRECKED CARS, ON THE ROAD AGAIN

 Mr. LOTT. Mr. President, I rise today to call our colleagues 
attention to an article that appeared in the January 8, 1999, edition 
of the Washington Post. It is important because it touched on a serious 
and growing problem plaguing our nation's consumers and motorists 
everywhere. Under the title, ``Wrecked Cars, On the Road Again,'' the 
Post writer detailed how easy it is for a person to unwittingly 
purchase a rebuilt salvage vehicle completely unaware of the car's 
previous damage history.
  At this time Mr. President, I ask unanimous consent to have printed 
in the Record the January 8, 1999, article from the Washington Post.
  The article follows:

                [From the Washington Post, Jan. 9, 1999]

   Wrecked Cars, On the Road Again--Repaired U.S. Test Vehicles Pose 
                Safety Problems for Unsuspecting Owners

                          (By Cindy Skrzycki)

       The huge concrete barrier rolled down a track at 20 miles 
     an hour and smashed into the 1996 Mustang GT convertible. The 
     Mustang fishtailed, the windshield shattered and the side of 
     the car was heavily damaged.
       This Mustang was essentially cannon fodder in a regular 
     series of safety tests conducted by the government--in this 
     case, to determine whether the fuel system would stay intact 
     in an accident. The car passed the National Highway Traffic 
     Safety Administration test and, as usual, the Government 
     Services Administration sold it at an auction on July 2, 
     1997. Stamped at the bottom of the GSA's sales receipt: 
     ``Salvage Only--Not to be Titled for Highway Use (wrecked/
     inoperable).''
       So why did David Staber end up tooling around Cadott, Wis., 
     in the Mustang after paying $9,500 for it? And why did Daniel 
     Mencheski of Green Bay, Wis., sink $22,000 into a 1995 
     Chevrolet Tahoe that had been rear-ended by a moving barrier 
     in another government test?
       You have to go back to Arkansas, where investigators 
     believe a car salesman figured out how to doctor the bills of 
     sale from the GSA and pass the cars off as any other damaged 
     used car. In other words, cars sacrificed to the altar of 
     safety by the government are illegally finding their way back 
     to the street--where they constitute a safety hazard.
       ``All of these cars have gone through some form of 
     destructive testing and have extensive to severe damage. 
     There's no assurance they could be repaired or meet safety 
     standards,'' said Philip Recht, deputy administrator of the 
     NHTSA, who called it ``the ultimate contradiction of our 
     mission and whole compliance program.''
       It's a problem that happens all too often in the used car 
     business, in which unsuspecting buyers purchase cars with 
     ``washed'' titles that remove any warnings that the cars may 
     have been in accidents and sustained damages that would make 
     them junk in some states.

[[Page 1307]]

       Bernard Brown, a Kansas City, Mo., lawyer who specializes 
     in car fraud, said there may be as many as a million vehicles 
     totaled, rebuilt and resold to unsuspecting consumers every 
     year.
       The NHTSA case also highlights the patchwork of state laws 
     and requirements for obtaining a vehicle title that allow it 
     to be driven and considered safe.
       ``We have handled cases of persons suffering severe 
     injuries in accidents caused by improperly rebuilt wrecks. We 
     have had experts examining large numbers of unsafe, rebuilt 
     wrecks. We have seen documentation on tens of thousands of 
     rebuilt, totaled wrecks retitled by states with `clean 
     titles' that show nothing of the cars' salvage histories,'' 
     Brown said.
       Overall, since the inception of the crash-test program in 
     the 1970s, NHTSA has damaged 7,120 vehicles at four test 
     sites. No one has traced the history of all of those cars, 
     but there may be many more back in commerce, posing unknown 
     safety problems for their owners.
       The agency alerted the Department of Transportation's 
     inspector general's office, which is handling the case.
       Carfax Inc., a computerized vehicle-history service in 
     Fairfax, has been working with NHTSA to identify how many 
     cars and trucks are likely to have been fraudulently titled. 
     It reviewed the histories of 494 cars that NHTSA crashed from 
     1995 to 1998, coming up with the 25 that were repaired, 
     retitled, and sold to unsuspecting owners.
       Carfax found another 67 that were retitled, but some of 
     those may be ``branded'' as salvage. That means they may be 
     driven in some states and, in others, they could be used only 
     for parts. Scott Fredericks, Carfax director of consumer 
     marketing, said it's likely that ``a goodly number [of the 
     67] are back on the road, which is a hazard to consumers.''
       Legislation stipulates that funds from the GSA auction 
     sales be returned to NHTSA to help pay for more vehicles for 
     its crash-test programs, which cost $2.7 million in 1997. The 
     auctions raised about $290,000 in 1996 and nearly $570,000 in 
     1997.
       In the case of the Mustang, the GSA sold it to Ben Still of 
     Century Auto Sales in Benton, Ark., who paid $5,037 by check. 
     Century Auto, in turn, sold the vehicle to a used car and 
     salvage dealer in Hortonville, Wis., with what appeared to be 
     a ``clean'' Arkansas title, according to documents acquired 
     by the Post. Still's name is on the GSA official receipt, 
     according to a copy obtained by the Post.
       Investigators said the Wisconsin dealer then sold the car 
     for $9,500 to Staber, who took ownership on Nov. 6, 1997. The 
     Mustang had only 720 miles on the odometer.
       Staber, who owns Cadott Auto Recyclers and buys as many as 
     500 damaged vehicles a year, said he spent another $8,000 to 
     repair and repaint the car, which retailed for about $28,500.
       ``I know what I'm doing, but this one got me,'' said 
     Staber, who is suing the Wisconsin dealer from whom he bought 
     the car. ``I saw the title and I never suspected the fraud. I 
     don't like losing $18,000. I work too hard for my money.''
       Mencheski's Tahoe also was bought from a GSA auction by the 
     same Arkansas dealer for $6,678, according to the receipt 
     from the auction sale. It then took a circuitous route 
     through northern Michigan before reaching Green Bay, Wis., 
     where Mencheski bought it.
       The vehicle now sits in Mencheski's driveway without a 
     title and is undrivable. Mencheski said it will cost him $400 
     a month in loan payments for the next six years; he borrowed 
     against his 401(k) retirement account to buy a used minivan 
     to replace the useless sport-utility vehicle.
       He, too, is suing the dealers who handled the Tahoe before 
     he bought it.
       ``I wanted one with a clean title,'' said Mencheski, who is 
     a lineman for Wisconsin Electric Power Co. ``It had less than 
     100 miles on it.''
       Here's how the process worked: Over time, investigators 
     said, Century Auto made 13 purchases at GSA auctions. Century 
     Auto then sold three of those cars--Staber's Mustang, another 
     Mustang and Mencheski's Tahoe--to Michael Schmidt, president 
     of Schmidt's New London Auto Salvage Inc. in Hortonville. 
     Those transactions are documented in the official paper trail 
     that followed the cars from the auctions to titling in 
     Wisconsin.
       ``Our investigation indicates Century Sales fraudulently 
     obtained an Arkansas clean title, number 9720521491, on July 
     24, 1997, by submitting a fictitious GSA purchaser's receipt 
     and authority to release property. The document submitted did 
     not have the language that was on the original document,'' 
     said a letter that the Wisconsin Department of Transportation 
     sent to Staber. Mencheski got a similar letter.
       The warning on the bottom of the receipt saying the car was 
     for salvage only had been erased.
       Investigators believe Century Auto made up ``new'' GSA 
     bills of sale, excluding the warning. At the bottom of those, 
     the company allegedly stated the make, model year, the 
     vehicle identification number and odometer reading. A few 
     signatures and dates also were altered, the receipts show.
       Still did not return phone calls. His lawyer in Little Rock 
     had no comment.
       What apparently happened next was that Still or his 
     associates took the ``clean'' sales receipts to get Arkansas 
     titles for the cars--and got them with no problem.
       Roger Duren, of the Arkansas Office of Motor Vehicles, said 
     either the GSA bill of sale or another government form known 
     as ``Certificate to Obtain Title to Vehicle,'' which 
     transfers a vehicle from government ownership to the auction 
     buyer, is acceptable.
       The title certificate is supposed to be stamped by GSA 
     ``Not to be Titled for Highway Use'' and would have been a 
     flag to state examiners. In the case of the Mustang, at 
     least, the form mistakenly did not carry that warning, GSA 
     officials said, and Still or his associates did not present 
     that form.
       Still--in Arkansas--then told Schmidt he had three cars 
     with collision damage that were drivable, Schmidt said. Still 
     advised that they would go fast. He wanted the money in 
     advance, sight unseen. He promised clean Arkansas titles, 
     according to Schmidt.
       ``As soon as we saw them, we knew they were crash-test 
     stuff,'' said Schmidt. But the titles didn't arrive until 
     Schmidt agreed to sign ``as is'' forms and accept the cars, 
     Schmidt said that when Still wouldn't take them back, he 
     decided to sell the Mustang and the Tahoe.
       Schmidt sent the Mustang convertible to a salvage auction 
     in Appleton, Wis., and Staber was the high bidder. Schmidt 
     said he told Staber everything he knew about the Mustang. 
     ``At the time, I didn't know you couldn't drive a crash-test 
     car,'' he said.
       The Tahoe was sold at a private salvage auction to a dealer 
     in Michigan, who took it to a repair shop in Green Bay owned 
     by Mencheski's brother-in-law. The brother-in-law thought the 
     Tahoe would be just the four-wheel-drive his sister and her 
     husband were looking for.
       The other vehicle bought by Schmidt was a Mustang coupe, 
     which he sold for parts.
       ``So, who should be at fault? I'm just the guy in the 
     middle,'' said Schmidt, who believes the blame lies with 
     ``the people who issue the titles.''
       As for Still, investigators are looking at whether he 
     forged the signature of a federal official, altered a federal 
     document and gave false information to the Arkansas Office of 
     Motor Vehicles.
       Staber and NHTSA learned about the Mustang's unlawful title 
     when Staber had transmission problems and took the Mustang to 
     Jim Carter Ford in Eau Claire, Wis. Ford Motor Co. checked 
     the vehicle identification number and found it was a NHTSA 
     test vehicle, which voided the warranty coverage, according 
     to documents from the investigation.
       A month later, the Wisconsin Department of Transportation 
     told Staber he was driving a fraudulently titled government 
     test vehicle.
       In the wake of the discovery, NHTSA has alerted consumers 
     on its World Wide Web site to vehicles that have been in the 
     crash-test program for the years 1996 through 1998.

  Mr. LOTT. In this case, the vehicle had been totaled as part of a 
government crash test. After being demolished by the National Highway 
Traffic Safety Administration (NHTSA), the vehicle, which the Post 
called ``cannon fodder,'' was sold at an auto auction. It was then 
rebuilt and sold to a used car buyer in Wisconsin who had no way of 
knowing that he purchased a crash test car. Apparently, as the article 
suggests, he is not alone. There may be thousands of government crashed 
vehicles that have been returned to the road for normal highway 
driving. Think about that. Thousands of NHTSA crash-tested cars back on 
America's roads and highways.
  This consumer, like millions of other used-car purchasers across the 
country, fell victim to the fraudulent practice known as ``title 
washing.'' In the Wisconsin case, a clean title was easily obtained 
bearing no indication of the vehicle's previous damage history. Since 
the vehicle's checkered past was concealed, the buyer ended-up paying 
thousands of dollars for a structurally unsafe car that posed a threat 
not only to his well-being, but to the safety of everyone with whom he 
shares the road.
  Mr. President, during the last Congress, Senator Wendell Ford (D-
Ky.), and I co-authored The National Salvage Motor Vehicle Protection 
Act to begin closing the dangerous loopholes that allow unscrupulous 
rebuilders to take advantage of used car consumers. The Act would have 
dramatically improved public disclosure by requiring that totaled 
vehicles be designated ``salvage vehicles.'' It also required that 
rebuilt salvage vehicles be inspected to ensure that stolen parts were 
not used in the repair. Additionally, ``rebuilt salvage vehicles'' 
would

[[Page 1308]]

have a decal permanently affixed to the driver's side door jamb. The 
bill also contained a provision requiring all previous brands on a 
vehicle to be carried forward to each state retitling the vehicle.
  As my colleagues are aware, the practice of selling rebuilt salvage 
vehicles as undamaged used cars costs consumers and the auto industry 
nearly $4 billion annually. It is estimated that every year, as many as 
one million vehicles are ``totaled,'' rebuilt, and placed back into 
used car commerce. In some states, as many as 70 percent of all 
``totaled'' vehicles may return to the roads after being purchased by 
unsuspecting citizens. While most states require some type of 
disclosure on a vehicle's title to indicate its history, the 
requirements vary from state to state, and it is the resulting 
hodgepodge of conflicting state laws that allows dishonest rebuilders 
to obtain ``clean'' titles.
  When a title has been laundered, all future purchasers are deprived 
of important information alerting them to potential problems with the 
vehicle. These later buyers may include private purchasers or 
automobile dealers. Dealers typically purchase used vehicles from 
auctions and from their customers as trade-ins, and then sell them to 
used car consumers. In such cases, both parties are victims.
  Congress acted on this problem by adopting legislation in 1992 
directing the creation of a task force to examine the problems 
associated with salvage vehicles. The task force included a diverse 
group of stakeholders who concluded that the lack of uniformity in 
state laws allows unscrupulous rebuilders to easily wash titles and to 
subsequently sell rebuilt vehicles as undamaged. It also noted that 
rebuilt vehicles could be a risk to the driving public. Among the task 
force's recommendations was the development of federal legislation to 
create uniform definitions and procedures for titling salvage vehicles.
  The National Salvage Motor Vehicle Protection Act was based largely 
on the task force's recommendations. I do not want the recommendations 
of a federal task force to collect dust. All too often, Congress does 
not follow through with the recommendations of commissions it creates. 
Here is one of those instances where Congress wants to implement them--
a majority of both chambers want to enact them. A widely diverse 
bipartisan group.
  This much needed legislation received the formal support of 57 
Senators, including the distinguished Minority Leader, Tom Daschle, 
Senator McCain, Chairman of the Commerce Committee, Harry Reid, and 
other colleagues from both sides of the aisle. It also garnered broad 
bipartisan support in the House of Representatives which approved 
similar title branding legislation by a vote of 333 to 72. Even though 
this non-partisan consumer-friendly legislation was widely supported by 
both chambers of Congress, it fell victim to a steady stream of 
misrepresentation. Throughout the legislative process in both chambers, 
a number of significant changes were made to address the concerns of 
state attorneys general and consumer groups. Unfortunately, even after 
these changes were adopted, the National Highway Traffic Safety 
Administration, a direct contributor to this national problem, opposed 
this modest but important bill as a bargaining chip for its own agenda.
  Mr. President, it is my intention to reintroduce auto salvage 
legislation during this session. I have given NHTSA the opportunity to 
review and comment on the proposed bill. I welcome NHTSA's input and I 
am hopeful that the Administration will join with us, and the American 
Association of Motor Vehicle Administrators, the experts on titling 
matters, to foster national uniform titling requirements.
  It is time to put politics aside to protect the public from the 
practice of title washing and the greed of dishonest 
rebuilders.

                          ____________________