An evolving — and potentially expensive — scandal in the Travis County tax office regarding automobile title transfers served as a cautionary tale at the Capitol on Wednesday for why stronger tools are needed statewide to combat title fraud.
State regulators “still lack adequate oversight” resources to stamp out the problem, said Steven Ogle, general counsel of the Texas Sunset Advisory Commission. “That was underscored (last week) by the indictment and arrest” of seven people in Travis County — including four employees of the county’s tax office.
The fraud investigation became public last Friday when the arrests were announced. This week, the Statesman reviewed an audit that indicates Travis County could owe the state more than $1 million in uncollected state sales taxes because of faulty title transfers, meaning the paperwork required when vehicles are bought or sold.
The audit, conducted by Travis County, cited title transactions by a private company — Auto Title Service, located on East Cesar Chavez Street — which had been among a handful of small firms performing some of the work for the county. The company wasn’t mentioned in the arrest affidavits related to the fraud investigation.
In addition to the money that may be owed to the state, Travis County Tax Assessor-Collector Bruce Elfant has submitted a budget proposal to county commissioners for the upcoming fiscal year requesting an extra $920,000 to hire 14 additional employees for his office’s motor vehicle division. The request — made prior to the arrests — is aimed at improving what Elfant has acknowledged has been insufficient county scrutiny of the title paperwork.
Ogle, speaking Wednesday during a previously scheduled meeting of the Sunset Advisory Commission, outlined a series of measures designed to beef up the ability of the Texas Department of Motor Vehicles to oversee and regulate title transfers across the state. Every state agency periodically gets a top-to-bottom review by the sunset commission, and the DMV is among those that have been undergoing it this year.
Recommendations for the DMV by the sunset commission’s staff — all of which were developed before the arrests in Travis County — include mandating that counties competitively bid contracts, as well as adhere to “other basic government contracting standards” if they opt to use private companies for title work.
“For example, Travis County has been contracting with the same companies for decades — in one case since 1960 — with no periodic rebidding of these contracts,” the sunset staff report said.
Under state law, all 254 counties in Texas are allowed to authorize, or “deputize,” private businesses to process title transfers for them by enabling them to link into the motor vehicle department’s computer system, but only four do so — Travis, Bexar, Hidalgo and El Paso.
Two of the local companies that Travis County had been contracting with to help it conduct title work have now been kicked off the system by the DMV. Auto Title Service was kicked off in 2017 and has filed a lawsuit against the state to have its access reinstated, while another small company — Universal Auto Title, which had offices on Justin Lane — was kicked off about two months ago.
In both cases, the DMV cited numerous violations of state regulations governing title transfers, including collecting incorrect sales tax on certain types of transactions, processing title applications containing forged signatures and processing transactions that shouldn’t have taken place in Travis County.
Jennifer Riggs, an attorney for Auto Title Service, couldn’t be reached for comment Wednesday.
Previously, however, Riggs said any mistakes made by Auto Title Service were inadvertent and relatively minor. She said the DMV has been pretending “the sky is falling” regarding title transfers because its real objective is to drive the private companies out of business as part of an effort to exert more control over the process statewide.
Regardless, sunset advisory commission staff made clear Wednesday that the state has a big financial interest in making sure title transfers are conducted correctly and above board.
“Title transactions have considerable financial implications for the state in terms of the collection of state taxes and fees, generating about $1.6 billion in fee revenue in fiscal year 2017 alone and $9.8 billion in vehicle sales and rental taxes over the 2016–17 biennium,” the staff report said.
Among other recommendations, the sunset staff is advocating that the DMV be authorized to require mandatory fraud training for anyone tasked with processing title transfers in the state — including in counties that don’t use private contractors — as well as have the power “to audit or perform a compliance review of any entity providing registration and title services and access records needed to conduct audits or fraud investigations.”
Whitney Brewster, executive director of the Texas Department of Motor Vehicles, attended Wednesday’s sunset commission meeting and said she agreed with the recommendations.
“It is critically important to maintain the public’s trust while conducting business on behalf of the state,” Brewster said.