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The curious case of the Porsche Boxster |
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Written by Vaughn Palmer
Vancouver Sun
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Tuesday, 22 July 2008 |
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The pricey sports car was damaged in an accident and declared a writeoff by ICBC's claims division.
But it gained a second lease on life after being turned over to the corporation's material damage, research and training facility.
The now-infamous in-house "chop shop" went to work on restoring the supposed writeoff. For the outlay of almost $9,000 in parts and a considerable amount of free labour, it was returned to full roadworthiness.
The refurbished Porsche was then turned over to a dealer and sold via wholesale auction.
The vehicle transfer documents neglected to disclose the extent of the work done on the car, consequently the new owner had no way of knowing his Boxster was previously damaged goods.
But at some point in 2006, the buyer discovered the truth and took it to the seller, who referred the case up the line to the motor dealers' association.
Armed with evidence of what might loosely be called fraud had you or I had done it, the association in January 2007 went directly to ICBC's special investigations unit.
The unit is the in-house crime fighting force at the government-owned insurance corporation. Over the years it has busted many an auto theft ring, exposed many a staged accident. Staffers know a chop shop when they see one.
Though the focus is catching outside wrongdoers, the unit also helps with insider investigations, making it the ICBC equivalent of the internal affairs department at the police force.
It was the obvious place to go with the evidence regarding the Porsche. And the complaint brought forward by the motor dealers did spark an internal review at the insurance corporation.
The review also bore fruit. Five other vehicles were significantly rebuilt by the repair facility in 2006 and then resold, without the full extent of the work being recorded as required on the vehicle transfer documents.
The review also found that three of the five were sold to ICBC employees, suggesting a pattern of insider involvement that surely invited further investigation.
Plus the review turned up evidence of "poor internal cost accounting . . . internal labour costs were not included in calculating the cost of the repair."
Hmmm . . . now what's that all about?
It likely related to a significant change of policy at ICBC not long after the B.C. Liberals came to power.
The repair facility has been around for 20 years, and the main purpose was and is, as the full name suggests, research and training.
ICBC employees and industry personnel are trained in best practices for repairing vehicles. The facility also conducts research into vehicle safety, more efficient repair techniques and other matters.
But in 2002-2004, ICBC embarked on a led-from-the-top drive to increase revenues and improve the corporate bottom line.
In the case of the repair facility, this meant new performance targets specifically aimed at enhancing revenues from recovery and repair of vehicles.
Up to that point, these salvage operations were incidental to the main business of the repair centre.
Staff would appropriate a vehicle that had been broadsided in an accident to experiment with new ways to straighten the frame
If the technique proved to be successful, the restored vehicle would be put out for auction. The revenue would be dutifully recorded on the books along with the cost of any parts that went into fixing it.
But now that the repair facility was becoming a revenue centre, these transactions assumed a new importance in terms of the corporate accounts.
Salvage Operations Analysis and Review (SOAR) was the name of the revenue program and the number of vehicles acquired, rebuilt and sold for purposes other than research did indeed soar.
The facility was expected to show a profit on each transaction. One way to do that was to record the proceeds from the sale but not all the costs that went into restoring the vehicle to roadworthiness.
In the case of our friend the Porsche Boxster, they charged only the cost of the parts, none of the labour or overhead. Had they done so, that initial review found, the transaction may have been a money-loser.
To recap, the review arising out of the case of the surreptitiously rebuilt Boxster turned up three elements of what proved to be a full-blown racket involving the repair facility -- misleading paperwork, compromised employees and cooked books.
This, mind, was January 2007. It would take a full year and another round of whistleblowing before ICBC would finally shut down the racket.
The reasons for that delay constitute one of the most disgraceful aspects of this scandal, as I will explain in a subsequent column.
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Last Updated ( Sunday, 07 September 2008 )
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