When Title Tricks Won’t Wash

California extradited the Titles Unlimited president from Alabama. He was convicted and spent a year in jail

Say you hit the proverbial collector car lottery and find a 1957 Porsche Speedster that has been sitting in a barn for 40 years. The only problem is that the farmer lost the title 38 years ago. Like most states, your DMV purged its records after the car went unregistered for five years, and it can’t issue a replacement title. Now what?

In many states, you can title the car with an affidavit from the owner that explains the situation. The DMV will verify the VIN on the car is the same as on the affidavit and that it is not on the stolen car list, and you’re home free. If that won’t work, you can use the services of a car title service.

Alabama, Texas, Louisiana, Arizona

Car title services are found in the “no-title” states, which don’t issue certificates of title on older cars and simply register them if they see a bill of sale. The most popular locations, likely because of the very small number of questions that they ask, are Alabama, Texas, and Louisiana, with Arizona being the newest up-and-comer.

The procedure is pretty simple. First, you give the title service a bill of sale, transferring the car to them. Second, they take that to their local DMV. No need to inspect the car or the VIN; just pay the modest fee and DMV gives them a “certificate of registration” confirming that they own your car. Third, they give you the certificate along with a bill of sale transferring the car back to you. Last, you take those documents to your state DMV. Generally through a visual inspection, they verify that the VIN on the car is the same as on the certificate and not on the stolen list and-voila!-you get your own certificate of title, registration, and license plates. Typical title service cost is about $235, and it’s all perfectly legal.

This is called “title washing,” but so far we’ve been honest. Let’s change that and consider your basic scam artist who takes a $25,000 ‘Cuda with a 340, adds a rebuilt Hemi motor, and then restamps the block and VIN to match a real Hemi car. After $235 for title services, he has a “matching-numbers, factory-original Hemi ‘Cuda with verifying title” that he can sell to you for very big bucks.

Replica cars, genuine problems

California Deputy Attorney General Robert Morgester, who prosecutes title washing cases, says the biggest problem areas are replica cars and hot rods. He gives two examples. Say you buy a new rolling chassis from a Cobra replica manufacturer, a drivetrain from elsewhere, and put it all together for a total cost of about $65,000. Or, you buy a ’32 Ford hot rod with modern, high-horsepower running gear for $50,000 from a shop that built one from scratch, using all new parts ordered from catalogs.

Neither car was produced by an actual car manufacturer, so the only way to title them is as Special Constructed Vehicles (SCV). That’s easy, but the tough part is passing emissions testing.

According to Morgester, historically there have been three ways to do that in California:

1. Meet the emissions requirements for the year in which the SCV is first registered; so for a car built this year, that would be the 2008 regulations.

2. Use the SB100 program, which allows up to 500 SCVs per year to be treated as having been built in the year in which they replicate; in our examples, 1965 and 1932.

3. Meet the rules for the year the engine replicates. So if you are using a new engine that is built to 1965 standards, you would have to meet 1965 regulations, which is to say, none.

But Morgester says that things have changed. Using the year the engine replicates was recently determined to be contrary to California law. Anything already titled under that approach is grandfathered, but no more can be titled that way. The SB100 option used to be quite viable. But once the word spread that Morgester was prosecuting these cases, the 500 annual SB100 slots started disappearing within six hours after becoming available; they are distributed on a first come, first served basis. The first approach, meeting current smog rules, is the only one that is freely available for most people, and it’s the tough one.

Sales price lies motivate investigators

Back to the $235 title service option. Run the car through an Alabama title as a 1965 or 1932 Ford, and California DMV will have to give full faith and credit to the other state’s title determinations and issue a California title. They will only verify that the VIN on the car matches the VIN on the title, not that it matches any VIN actually assigned by Ford. Without a national VIN database, they have no practical way to do that. Emissions testing? No problem. Cars from 1932 and 1965 are exempt.

If that was all, Morgester and the state wouldn’t get that excited. But, Morgester says, “Most people who lie about the origin and vintage of the car to get around emissions testing don’t stop there. They also lie about what they paid for the car [saying it cost much less than it actually did]. That costs the state of California very serious money, because the annual registration fees are based upon the value of the car.”

Morgester estimates there are about 70,000 illegally titled cars in California, representing a revenue loss of about one-third of a billion dollars in sales tax and registration fees.

Big fish fried

Titles Unlimited, out of Alabama, was very active in processing titles-a valuable service. But it was charged with knowingly assisting customers in understating the values of the cars and their years of manufacture-a bad, in fact illegal, activity. (For instance, kit cars were purchased for $40,000-$60,000, yet were usually registered as older Fords with a value of just $5,000.) Morgester says their customer list read like a Who’s Who of specialty collector car auction houses and dealers. He had the Titles Unlimited president extradited from Alabama to stand trial in California and won a conviction. The president ended up spending a year in jail.

Morgester also prosecuted Boyd Coddington, who he says was really pretty straight up. He built a couple of cars from scratch that he titled through a title service, but he didn’t register either of them, and they went out of state. As a result, California really didn’t lose any revenue. When confronted with the situation, Coddington was honestly unaware that he had done anything wrong, and thought this was “just the way that it was normally done.” Consequently, Coddington was able to plead guilty to a misdemeanor to resolve the matter.

Small fish fried too

The small fish are pretty easy to fry. Morgester works with trained DMV staff and California Highway Patrol officers who are on the lookout for these cars. Morgester explains, “Say our replica Cobra gets stopped for a traffic ticket. The registration says it’s a ’65 Ford, but you know right away that it can’t be real. After all, the guy’s driving it on the street! Or, the ’32 Ford gets stopped. The officer knows it isn’t original, because an original ’32 frame couldn’t possibly hold up that big V8 hot rod motor.

So the officer asks how the owner got it registered. Most people fumble a bit, and then readily admit exactly what happened.”

Bingo. Title cancelled, forced to pay up all the registration fees that have been avoided, penalized with fines, and left with a car that you can’t drive anymore.

Morgester has sympathy for those who buy these cars from others and are unaware of the title problems. Their titles still get cancelled, and they can’t drive the car on the street without meeting the rules. That leaves them with a pretty worthless investment in the car. But sympathy is as far as it goes.

California rules are spreading

If you’re going to buy a replica or custom-built car, check the title carefully. If it’s registered as an SCV, make sure it will properly meet emissions requirements, and that it can be titled in your state without difficulty. If it’s registered as the model and vintage of car it replicates, be aware that it probably has an illegal title and registration.

Don’t think you’re okay because you don’t live in California. Morgester has been contacted by several of his counterparts in other states who asked for advice about how they could do the same thing.

If authenticity is important, don’t rely on the title. Try to trace the car’s title history; just keep in mind that Carfax and similar services aren’t much use for collector cars due to their age. If you see one of the no-title states in the car’s pedigree, be suspicious. The car isn’t necessarily a bad car; the barn find Speedster example above illustrates how a title service company can provide a very useful, legitimate service. But they can also be used to perpetrate frauds.

Since you can’t rely on the title, properly authenticating the car means going back to factory records. Documentation from the factory (such as Porsche Certificates of Authenticity), or from organizations such as the Shelby Registry or Pontiac Historic Services, can be invaluable. However, take the extra step to procure them directly from those sources, as there have been cases of counterfeit or altered documents. Also, know that many manufacturers place duplicate VINs in hidden locations in their cars. Learn where those are, and how to check them. In Oregon, for instance, you can take your car to a local Highway Patrol office and ask for a VIN inspection.

In the end, if you use a title company for legal purposes-to establish ownership of a barn-find with no title, for instance-you are fine. But if you use the service to attempt to cheat the state out of its registration fees or sales tax, or to avoid meeting emission requirements, you could find yourself with no title, no registration, no car, and possibly behind bars. That doesn’t sound like a very good deal to me.