Towing Companies: Prize Contract Breaks Law

(Updated) Competitors of a towing company with a city-granted monopoly have hit the law books — and may have found a wrench to throw into a lucrative contract. But city attorney Victor Bolden said they’ve got it all wrong.

The competitors, eight towing companies, two months ago called for a public hearing to look into monopoly concerns about the city’s new contract with Crown Towing. Now, frustrated by a lack of aldermanic action, the towers have a brought a new charge: the city is breaking the law by allowing Crown to collect auto taxes from city residents.

That charge is spelled out in a petition filed with the Board of Aldermen’s Finance Committee on Thursday by attorney Robert Oliver. It’s the second petition filed by Oliver on behalf of eight city towing companies.

The first petition, filed on March 11, called for a public hearing to discuss the city’s towing contract with Crown Towing. Oliver argued that the city is breaking city law in two ways: illegally lowering the amount towers can charge for certain tows and contracting with only one company — Crown — for the removal of all cars with overdue taxes.

City officials said those charges were baseless. See story here.

Now, the eight towers have come forward with the new charge. Thursday’s petition says it is a violation of state law to empower Crown Towing to collect outstanding municipal car taxes.

State Banking Commissioner Howard Pitkin said ​“it appears” Crown Towing does need a license. He said a letter has been sent to Crown Towing seeking more information. Meanwhile, the matter has been referred to the legal staff at the department’s Consumer Credit Division, who will determine if a law has been violated.

On Tuesday afternoon, city corporation counsel Victor Bolden (pictured) said the towing company’s charge has overlooked an exception that should allow Crown Towing to collect taxes, as long as it is not the company’s primary business. Bolden and other city officials defended the city’s towing system. They said criticisms have not come from taxpayers but from other towing companies, who have an agenda of making more money.

License?

According to the city’s website, if your car is towed for unpaid taxes, and the tax collector’s office is closed, ​“payments may be made and a release issued at Crown Towing, 388 Crown Street. Cash (exact amount) is the only accepted form of payment.”

“This procedure is a serious violation of state law,” states the latest petition. ​“Crown is acting as a Consumer Collection Agency in violation of the Consumer Collection Agency laws of Connecticut. Conn. Gen Stat. Secs. 36a-800 and 36a-801.”

The petition says that state law requires anyone collecting taxes on behalf of a city to be licensed by the state commissioner of banking and to post a surety bond of $5,000. Furthermore, such a tax collector is required by state law to have an insurance policy of at least $2 million against loss of money, including from ​“fraudulent or dishonest act of any employee.”

Attorney Oliver writes that he does not believe Crown Towing has been licensed or posted a $5,000 bond. ​“I wonder if it has the Two Million Dollar insurance policy,” the petition states.

“It appears that they do need a license,” said Kathleen Titsworth, spokeswoman for the Connecticut Department of Banking, on Crown Towing. ​“They haven’t done a license.”

Crown Towing has not posted a $5,000 bond or secured a $2 million insurance policy, Titsworth said. ​“I’m sure if they’re not licensed then they haven’t done those things.”

Titsworth said the matter has been referred to the Consumer Credit Division. Historically, unlicensed tax collection has sometimes resulted in ​“civil money penalties,” Titsworth said. The amount of the fine varies according to circumstances. If a law violation is found, Crown Towing would be held responsible, not the city, she said.

Commissioner Pitkin stressed that no violation of the law has yet been determined.

The towing companies’ petition closes with a repeated call for a public hearing to discuss the previous complaints and the new charge of breaking state law.

In a separate filing on Thursday, Oliver invoked the federal Freedom of Information Act to request a copy of the city’s contract with Crown Towing.

It was ​“bad enough to ignore the municipal towing ordinance,” Oliver said on Thursday, but to ​“run afoul” of state law is even worse.

Oliver sought to make it clear that he is not alleging any fraud or negligence on the part of Crown Towing, only that the city has failed to follow state law.

Crown Towing owner Jeff Hansen did not return calls for comment.

City Hall Responds

On Tuesday afternoon, Bolden gathered with other city officials on the fourth floor of City Hall to respond to the towing company petition.

Bolden opened a book of state statutes and pointed to Sec. 36a-800, the same law cited by attorney Oliver. The statute defines ​“Consumer Collection Agencies,” which are empowered to collect taxes and must be licensed. Among the exceptions to the title of ​“consumer collection agency”: ​“persons not primarily engaged in the collection of debts from consumer debtors who receive funds in escrow for subsequent distribution to others.”

That definition includes Crown Towing, which clearly does not have tax collection as its primary business, Bolden said. ​“They’re a towing company.”

The towing company is therefore exempted from the statute and is not required to be licensed, Bolden said.

City Controller Mark Pietrosimone (pictured) sought to place the city’s contract with Crown Towing into context. It’s intended for the convenience of the taxpayer, it saves money, and it addresses problems associated with previous systems, he said.

Over the last five years, the city’s towing-for-taxes system has ​“evolved to a very efficient, very simple program,” Pietrosimone said. Previously, the city had a number of problems, including ​“overly aggressive” towers, who would tow cars in error and the lack of 24-hour car retrieval after towing.

The contract with Crown Towing has solved those problems, Pietrosimone said. Now, when a car is towed, ​“you know exactly where to go,” he said. And taxpayers can get their cars back at any hour.

Crown and the city are linked by computer so that there is very efficient ​“live” data sharing, said city tax collector Maureen Villani. Checks and balances ensure that there is no fraud, she said.

The efficiencies of the contract with Crown save the city $200,000 per year, Pietrosimone said. ​“We have a very smooth-running type of program now.”

The other towing company’s have a ​“vested interest” in complaining about the contract with Crown, Bolden said. They want to charge more money, and they want to make it more difficult for people to get their cars, he said. ​“It’s not the agenda of taxpayers, it’s the agenda of towers.”