State lets tow firm off the hook in fraud claims

The state has decided not to prosecute Stoneridge Recoveries, the controversial vendor that had the city’s most lucrative towing contract for eight years, on allegations of insurance fraud.

The Department of Commerce and Consumer Affairs, which in 2010 launched a criminal investigation into Stoneridge’s pricing practices on police-initiated tows, decided recently to take no action against the company.

The insurance industry had turned over evidence to the state, raising questions about inflated prices.

A company attorney in 2011 acknowledged to the Star-Advertiser that Stone­ridge had overcharged some customers, but blamed it on employee errors, not something intentional, and said the excess charges were refunded.

Stoneridge had the exclusive contract for police-initiated tows in Oahu’s busiest zone — downtown to Maka­puu — from 2003 until 2011.

Its tenure was marked by numerous consumer complaints, city fines, legal fights and accusations of questionable business practices.

Brent Suyama, a DCCA spokes­man, said the department closed the investigation without taking any action against Stoneridge, but declined to specify the reasons.

Attorney Mark Kawata, who represents Stoneridge, said the state did not inform his client why the case was closed.

Kawata said company officials fully cooperated with the state’s investigation, providing numerous documents and answering questions at more than one session.

Prompted by the investigation, Stoneridge reviewed its internal procedures and made significant changes, leading to far fewer complaints the last year or two of the contract, Kawata said.

Suyama said DCCA investigators looked at about a dozen cases in which questions about possible overcharges to insurance companies were raised.

One insurer previously told the Star-Advertiser that its staff examined 17 Stoneridge invoices from 2010 and found evidence of overcharging in all 17 cases.

Consumers were disappointed about the state’s decision not to prosecute.

"How can there be so many complaints and no action?" asked Celeste "Sally" Cheeseman, a Mililani real estate agent. "It just shows that (the city) hires these towing companies and lets them get away with whatever."

The problems under the Stoneridge contract contributed to the city’s decision last year to switch to a new system, making one vendor responsible for all police-initiated tows on the island. Previously, Oahu was divided into multiple zones, and exclusive contracts were awarded for each one.

Leeward Auto Wreckers, which took over the islandwide contract Nov. 1, had a rocky start.

The Star-Advertiser revealed in mid-December that the company was overcharging customers in hundreds of cases. Based on the newspaper’s findings, the city ordered Leeward Auto to refund the excess charges and imposed fines against the company.