Auto Recycling eNewsletter

For immediate release - June 2007

Written and published by Mike Gibson and Ron Sturgeon, www.autosalvageconsultant.com, Email Mike. To register for future free issues, visit http://www.autosalvageconsultant.com. Don't forget to watch for our management articles monthly in Recyclers Power Source Magazine, or posted at our web site.

This Month's News

Feds say auto-accident fraud ring busted, 22 indicted on charges of staging wrecks for insurance proceeds, June 1, 2007 By Jason Trahan / The Dallas Morning News

To the motorists who had to maneuver around them, the late-night wrecks probably looked no different from the dozens of fender benders littering North Texas roads every day. But at least 20 crashes between 2002 and 2006 weren't accidents, according to authorities. Federal law enforcement officials say they have uncovered a massive scheme involving a group of defendants who are accused of buying junked cars, laundering the titles mostly through Arkansas, insuring them in Texas, staging crashes, claiming fake injuries and collecting more than $1 million in insurance proceeds.

"It was a well-organized conspiracy," said U.S. Attorney Richard Roper, whose prosecutors secured a 71-count indictment accusing 22 people in the conspiracy Thursday.

"They went to great lengths to arrange these accidents." Law-abiding drivers pay the real price, he said.

"Insurance fraud affects insurance companies," he said, "but also consumers who face paying higher premiums."

The indictment mentions 20 wrecks, but prosecutors say the group staged up to three times that many throughout Dallas-Fort Worth. Most of the vehicles used in the scheme were bought from salvage yards, then titled in Arkansas, prosecutors said. "Arkansas doesn't put 'salvage' on the title," Mr. Roper said. "Therefore, when the title is re-introduced into Texas, the salvage has been laundered off the title," enabling the vehicle to be insured for more money.

People allegedly injured in the wrecks went to chiropractic or other medical clinics that inflated injury claims, according to prosecutors. Several North Texas law firms are named in the indictment, but not as defendants. The firms, according to the indictment, handled many of the damage and injury claims the scammers made to insurance companies. No lawyers or law firm employees were named as defendants, however. In addition, several chiropractic clinics are mentioned in the indictment as having treated some of the so-called patients, but only one chiropractor was charged.

Federal prosecutors would not say whether anyone at the other chiropractic or injury clinics mentioned in the indictment, or any of the law firm employees, were in on the scam, citing an ongoing investigation. An attorney for one of the lawyers who is not charged in the indictment, but whose firm handled some of the claims, said his client's firm is cooperating with the investigation.

"We're aware that the firm was used as a vehicle for other people's fraud," said Mick Mickelsen, an attorney for Dallas lawyer Trey Allen. "Neither Trey Allen nor any employees of his firm have been charged with any wrongdoing."

When asked how allegedly illegal claims could have been filed through the firm unbeknownst to supervisors, Mr. Mickelsen said most were handled by one of the firm's Vietnamese employees working with Vietnamese clients. Most of the defendants named in the indictment are Vietnamese. "All this is going on in another language," Mr. Mickelsen said. "It's difficult to have the supervision over those cases that you would over English-speaking cases."

High scrap metal prices prove a mixed blessing for junkyards, ST. James, Minn. Lacrossetribune.com

In his auto salvage yard, John Kuebler is working a forklift. He scoops up cars flattened into neat rectangles by a hydraulic crushing machine. He piles them onto the bed of a semitrailer. The stacks of cars are so tidy even the truck driver is impressed.

"Hey, that's a good-looking load though, John," the driver said. Peering out from the cab, Kuebler counts the stacks. Normally he puts 18 cars on the trailer. This load is a little smaller because of some extras tucked in between the vehicles.

"Actually there's only 12 on there," Kuebler said. "There's a lot of farm machinery in between them. About 24 ton."

The car body is whats left after a careful disassembly process. There are all sorts of metals in an automobile or truck. Some are worth more than others. Nearby is a pile of tire rims.

"Of course we take them off the car before we crush it because they're aluminum and they're worth more money than the car material," Kuebler said. "So they're ready to go anytime we want to load them."

The rims are worth $10 or more apiece, depending on that day's scrap market price. Catalytic converters bring $30 and up. They contain a precious metal, a type of platinum. Even the smallest cars are worth at least $150 in scrap metal. Big cars can be worth two or three times that value or more.

"There," Kuebler said, pointing. "The boys are stripping one."

As he watches his workers carefully remove a gas tank, Kuebler said the high metal prices bring headaches as well as profit. Theft is a constant worry. Kuebler owns two yards in St. James, roughly a half-mile apart. He said watching both yards proved impossible. "We don't store too much over at that yard anymore," Kuebler said. "We used to store, we smelted aluminum and stored it over there, we lost 80,000 pounds one night. Which kind of hurts us."

The aluminum was worth about $64,000. Kuebler believes it was a professional job. The thieves drove a truck into the yard and loaded every 40-pound ingot they could find. No one was caught in that case. The chief deputy in the local sheriff's office, Lee Bouma, said another aluminum theft from the yard was solved.

"It wasn't too long ago one of our deputies had found a vehicle nearby and in the back of the car was the ingots that he was, recycling aluminum, and melting them into ingots and that's what was found in the back of that car," Bouma said.

Bouma said scrap metal theft seems to rise in lockstep with scrap metal prices. That seems to be true everywhere. In Duluth one landlord lost thousands of dollars in copper wiring. The nation's metal thieves have favorite targets: aluminum house siding, copper air conditioner coils, aluminum beer kegs, even bronze statues. The scrap is recast into new products. John Kuebler said the scrap metal from his St. James business can go anywhere in the world. About half of all U.S. scrap metal exports go to one Asian nation.

"I think most of it will wind up in China," Kuebler said. "They're just upgrading their whole country and they're using a lot of this stuff."

The booming world market means continued good times for this salvage yard in southern Minnesota. The auto parts taken off the junkers are also valuable. In fact, they're still the most profitable part of the business. Walking through the yard, John Kuebler said he's always on the lookout for good metal. "I can tell you aluminum, stainless, copper," Kuebler said. "I can tell 50 feet away, I can tell you. But I've been in it for 40 years."

One of the biggest changes he's experienced is linked to high scrap prices. Kuebler said he sees more relatively young cars in his junk yard then in the past. Vehicles that are maybe 10 years old or so. It's a simple equation. The scrap metal and parts value of the vehicles is more attractive than paying' for repairs.

Wind damages Nordstrom's Auto Recycling, By Alan Van Ormer, Garretson Weekly, May 25, 2007

Strong wind caused an estimated $30,000 in building damage and $10,000 in lost inventory at Nordstrom's Auto Recycling, southwest of Garretson, ND, sometime after midnight Tuesday. "It was like a microburst or small tornado," Shannon Nordstrom said.

The strong wind blew a maple tree onto the back of a building where customers can pick up parts and where the company processes transmissions and motor cores. In addition, two pickup cabs were blown off a rack, and two van bodies were picked up and dumped on their sides. A second building also was damaged. Cleanup has been completed. Crews rearranged and moved parts to different areas in order to continue operations. The roof, rafters and one sidewall are being replaced in the larger building.

Stocks Finish Week Higher, By Alan R. Elliott, Investors.com., Posted 6/1/2007

Trading turned stubborn in late afternoon, with indexes leveling off without giving up much of their gains from earlier. Volume trended lower across the board. Stocks had surged early in the day on news of improved jobs, inflation and manufacturing data. The NYSE composite was up 0.5% at 2:54 p.m. ET. The Nasdaq rose 0.4%. The S&P 500 held onto a 0.3% gain, well off its morning highs. The Dow maintained its 0.1% gain. Volume turned 2% lower on the NYSE and was 8% lower for the Nasdaq. Gainers continued to lead by a comfortable margin, with leading stocks continuing to stage solid moves. Shares of Wimm-Bill-Dann (WBD) spiked up 8.36 to 88.11 on strong volume. Hanover Compressor (HC) stepped up 0.71 to 25.71 on twice average volume. It was the third straight day of gains for the oil and gas field equipment and services provider. On the day's downside, Blue Coat Systems (BCSI) reversed lower, losing 1.48 to 42.51. LKQ (LKQX) also tanked, losing 1.14 to 23.83. The big-volume move dumped the auto parts recycler's stock 3% below a recent 24.53 buy point on a 26-week cup-with-handle base. Shares remained above their 10-week moving average and 9% below their May 23 high.

How's Business?

"If you believe that some day it's going to happen, some day it probably will happen. You just have to make sure you're there when it's happening, and ideally you're at the front of the parade, and the principle beneficiary of when it happens, but it's not a kind of thing where you just sort of sit back and wait." - Steve Case

AutoSalvageconsultant.com was formed in 2001 to help recyclers improve their businesses. With over 50 years of experience in 3 staff members, the group is THE definitive source for recyclers' management and training needs. Mike Gibson and Tammy Sturgeon joined the team in 2003, and bring a wealth of experience to the team, plus more resources, as there have been more requests for help than Ron could meet. The founder, Ron Sturgeon is past owner of AAA Small Car World. In 1999, he sold his six Texas locations, with 140 employees, to Greenleaf. In 2001, he founded North Texas Insurance Auction, which he sold to Copart in 2002. In 2002, his book "Salvaging Millions" was published to help small business owners achieve significant success, and was recently reprinted and published in Chinese. In June 2003, he joined the new ownership and management team of GreenLeaf. He also manages his real estate holdings and investments. You can learn more about how to help your business at www.autosalvageconsultant.com. Mike can be reached at 628 SW Rand Drive, Burleson, TX 76028, (preferably) email Mike, or 817-925-8430.