SAN DIEGO — Federal and state investigators in San Diego are investigating at least two automobile subleasing schemes and may soon charge officials of two local firms in connection with selling subleased cars without the owners' or original lenders' permission, The Times has learned.
The investigations are part of a statewide probe of the auto subleasing business.
The San Diego district attorney's office is investigating the activities of three companies: Lease-1 Financial Services, R&S Towing and Koala T. Leasing, according to Deputy Dist. Atty. Robert J. Sullivan.
R&S Towing and Lease-1 Financial, which filed for bankruptcy last October, reportedly were involved in the same subleasing activity, Sullivan said.
Of the 350 cars subleased by Lease-1 as part of the scheme, 150 were sold without the knowledge or consent of the original owners or lenders, claimed attorney Jeff Gardner, who represents 16 people who subleased their vehicles to Lease-1 Financial.
Gardner said the Federal Bureau of Investigation also has been investigating the case.
Two-thirds of the 150 vehicles were sold in San Diego County and the remainder were sold in Arizona, Utah, Texas, Colorado and Minnesota, according to Sullivan. The sales price generally was less than half the book value, he said.
Sullivan said that the state's investigation of Lease-1 and R&S Towing is in an "advanced" stage. The Koala investigation is in a preliminary stage, Sullivan said, but he declined to give details about the company or how its subleasing operation worked.
Sullivan identified the owner of Lease-1 as Robert Dixon, who was using the name Robert Maguire. He said the towing company owner is Robert Mauer. Neither could be reached for comment Monday.
Koala T. Leasing's phone has been disconnected and officials could not be reached for comment.
Attorney Robert Pasulka, representing Lease-1, said his clients will soon convert its Chapter 11 reorganization bankruptcy to a Chapter 7 liquidation.
According to a letter sent to Lease-1 creditors by Pasulka, 91 of Lease-1 Financial's vehicles were leased to Mauer of R&S Towing. Last September, Mauer "stopped making payments" on the cars, leaving Lease-1 responsible for $40,000 in monthly car payments.
As a result of the debt, Lease-1 filed for bankruptcy, according to Pasulka's letter.
The company lists assets of $1,400 and liabilities of $5,600. But "nowhere in the (financial) statements or (bankruptcy) schedules does it list the 350 cars or the monthly payments they're contractually obligated to make, Gardner said.
Operators of subleasing businesses claim they provide a service by taking over car and insurance payments from those who no longer can afford them--thus protecting the original owners' credit ratings. The cars are subleased to those who cannot otherwise lease or buy automobiles because they've never established credit or have bad ratings.
It is a cash-rich business, but companies that are in it usually don't stay around for more than six months or so, investigators say. And the payments that are supposed to be made to banks and other original lenders--who generally are not told that the car is being subleased--often are not made, according to a number of law enforcement officials and bankers.
"When you've got several tiers of subleasing, you can't expect to make a profit. It just isn't possible," Sullivan said. "But the last man who ends up selling the car makes the money. Some lien holder five contracts ago is the person not getting the payments and not knowing where the hell the car is."
"Fraud isn't really difficult to prove in a case like this," Sullivan said. "Generally, you have victims on both ends of the transactions. The penal code has a section on money being misappropriated. Also, the victims who are subleasing the cars (to others) don't know the cars are being sold out from under them, so you have a false pretense grand theft case.
"The difficulty is showing who had criminal intent and why," he said. "And attempting to identify and locate business and bank records is time-consuming."
The San Diego investigation is part of a statewide effort by authorities to stamp out auto subleasing schemes that have spread into several major cities.
An Anaheim company that folded last year spawned at least two dozen imitators in California. And the operations of those companies have become the focus of stepped-up civil and criminal investigations in San Diego, Orange and several Bay Area counties.
Meanwhile, the Legal Aid Society of Orange County, representing a victim of an Anaheim scheme, has filed a civil suit aimed at banning the so-far unregulated auto subleasing business throughout the state.