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City towing vendor inflated its fees [The Honolulu Star-Advertiser]

By Rob Perez, The Honolulu Star-Advertiser
McClatchy-Tribune Information Services

Dec. 16--The company that recently became the city's exclusive vendor for handling police-initiated tows on Oahu overcharged roughly 2,000 motorists whose cars were towed in the first month and a half of the contract but now promises to offer them refunds for the overpayments.

Hans Tandal, operations manager for Leeward Auto Wreckers, which became responsible for police-initiated tows Nov. 1, acknowledged that the company charged higher hookup and mileage fees than what it proposed in its contract offer and blamed the mix-up on company officials' misunderstanding of documents they received from the city.

"We're not going to step into doing something wrong right from the beginning," Tandal told the Star-Advertiser. "It was just a misunderstanding."

Leeward Auto was charging a $65 hookup fee, rather than the $60 it proposed in its offer to the city, and $7.50 per towed mile, rather than the $7 it proposed, inflating each bill by at least a few dollars and sometimes significantly more, according to a review of roughly 100 of its accident-tow invoices obtained by the Star-Advertiser.

In some of the more egregious cases, customers overpaid around $50 to more than $100 based on the inflated hookup and mileage fees, the newspaper found.

By state law, towing companies are able to charge up to $65 for hookups involving non-consensual tows and $7.50 for each towed mile.

The discounts that Leeward Auto offered in its written bid were among the reasons the city selected the company -- which had no prior experience overseeing police-initiated tows -- over four competing vendors.

Despite that written bid, Tandal in a Friday morning interview with the Star-Advertiser initially defended the higher rates, saying the company was able to charge them based on city documents that were part of the signed contract package. He said the company decided to charge the higher rates to make the contract financially more viable.

But once the newspaper questioned the city about Tandal's comments, Leeward Auto executives were summoned to an impromptu meeting with city officials Friday afternoon. After that meeting, Tandal contacted the Star-Advertiser to say the company had misinterpreted the documents.

He said company executives immediately told Leeward Auto offices to switch to the lower rates and that roughly 2,000 customers affected by the overcharging would be notified beginning this week that they are entitled to refunds of any overpayments.

Johnny Brannon, a city spokesman, said in a written statement that the city had received no complaints of alleged overbilling prior to the Star-Advertiser's inquiry and therefore had not conducted an in-depth audit of the new contract.

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But after the newspaper's inquiry, the city intends to demand from Leeward Auto a complete accounting of all charges for police-initiated tows, a plan to refund any overcharges and a plan to ensure compliance with contract terms, Brannon said.

If the company charges more than what the contract specifies, he added, it would constitute a breach of the agreement.

Noting that the city takes contract enforcement and consumer protection seriously, Brannon wrote, "The city greatly appreciates the newspaper bringing this issue to our attention."

Asked what monitoring the city does to ensure compliance, Brannon said the police monitors Leeward Auto's performance and the city's motor vehicle control unit investigates submitted complaints. Since Nov. 1, five have been submitted, all dealing with late responses, and they are under investigation, he said.

Brannon said five complaints in that period is average and that the city generally is satisfied with the company's performance, excluding billing.

This is the first time the city has turned to a single company to oversee all of Oahu's police-ordered tows, which include vehicle accidents, parking violations, expired tags and stolen-vehicle recoveries.

Previously, the island was divided into 13 zones, and towing companies competed for the exclusive contracts for each zone. Before Leeward Auto took over, the city was dealing with about five vendors.

The city switched to the new system partly because officials believed having a single vendor would result in more efficiency and better, more consistent service -- something considered a major benefit given the numerous motorist compliants generated over the years under the old system.

When terms of the new contract were disclosed, however, towing executives who lost out on the city business but had years of experience with police-initiated tows immediately voiced concerns about the financial viability of Leeward Auto's deal. They questioned whether the company could survive given the steep $60,000 premium it pays monthly to the city while charging the lower hookup and mileage rates and imposing a $165 cap on those combined charges, regardless of the distances of those tows.

In a handful of invoices reviewed by the Star-Advertiser, Leeward Auto charged more than the $165 cap.

"It surprised me that Leeward started to not abide by the contract from day one," said Paul Perry, whose company, All Island Automotive Towing, was part of a team that submitted an unsuccessful bid to the city. "We knew their proposal wouldn't pencil out. And we anticipated them doing this, but not from the get-go."

Tandal acknowledged that some cases of customers getting charged more than the cap had been missed by the company's monitoring efforts and inadvertently went through. He attributed those cases to new employees and subcontractors learning a new system.

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Several auto insurance companies, which typically pay the towing bills for insured vehicles in accidents, were not aware of overcharging problems when contacted by the Star-Advertiser.

But Tim Dayton, who heads GEICO'sHawaii operation, said his company subsequently did spot-checks of some Leeward Auto invoices and found the higher hookup and mileage rates across the board. He said the insurer intends to seek refunds from the company.

The fumbled start to the new towing contract casts an unflattering light on a city service that has had more than its share of embarrassing low points over the years.

Charles Katsuyoshi, who retired in 2006 as the city's contracts administrator, said many of the past and current problems stem from the fact that three different city agencies oversee aspects of the towing agreement.

No one agency, he added, wants to assume overall responsibility for oversight.

"Too many things just fall through the cracks," he said.

One of the more recent lowlights in the city's towing saga came in 2010 when the Star-Advertiser disclosed that the vendor handling the island's busiest tow zone was under criminal investigation by the state's insurance fraud unit. Auto insurers said questionable business practices by Stoneridge Recoveries led to inflated tow bills for motorists.

Stoneridge eventually lost that contract, but the criminal investigation continued.

Ryan Shinsato, staff attorney for the state's insurance fraud investigation branch, last week told the Star-Advertiser that investigators have wrapped up their work on the probe and a decision on whether to pursue charges against the company is pending.

Before Leeward Auto's Tandal acknowledged that his company had overcharged customers, he told the newspaper that the first month and a half under the new contract had gone well. He said the company handled nearly 1,500 police-initiated tows in the first month -- roughly 50 percent more than the average in the months before Leeward Auto took over.

That increase was an indication the company had put together an efficient system, Tandal added. "It speaks volumes," he said. "Overall, we're delivering."

Kalihi resident J.C. Lopez, 20, has a far different assessment.

He was among the 2,000 or so motorists who were overcharged by Leeward Auto. He said he didn't realize he was overpaying when he handed the company $227 in cash last month to recover his Lexus -- towed because of a traffic infraction -- from a Kapolei lot.

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When he learned later about the overcharges, he said he was angry and predicts the other 2,000 motorists will react similarly.

"They're all going to be mad," Lopez said. "Who wouldn't be? It's not fair."


(c)2012 The Honolulu Star-Advertiser

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Distributed by MCT Information Services

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