Operations

Philadelphia Fleet Supervisor Charged in $400K Fraud Case

March 09, 2016

The Philadelphia District Attorney has charged a former city fleet supervisor and two body shop owners for an insurance fraud scam that stole $400,000 from the city’s Office of Fleet Management. Fleet Team Leader Robert Otterson allegedly colluded with the shop owners to send work to the shop and approved use of the shop despite knowing it didn’t have required equipment, according to the District Attorney’s Office.

Otterson, Ronald Galati Sr., and Ronald Galati Jr., have each been charged with three counts of theft, one count of criminal conspiracy, and 178 counts of tampering with public records or information. If convicted on all charges, the Galatis and Otterson could face up to 1,280 years of incarceration.

In 2010, The City of Philadelphia’s Office of Fleet Management solicited a bid for area automotive shops to receive overflow repair work. In order to become a designated overflow site, auto body shops had to pass an initial inspection and compete in the bidding process. The body shop offering the lowest quote would be the contract’s primary repair facility, and the second lowest bidder would become the secondary repair facility. 

Fleet Management named Pacifico Ford as the primary contractor and American Collision, owned by the Galatis, as the secondary repair facility. Galati, Sr. allegedly secured the contract because he colluded with Robert Otterson, who was a fleet management team leader and licensed appraiser, to manipulate the bidding process. Otterson not only told Galati the amount he should bid for the city contract, but he also passed the shop through the preliminary inspection despite the fact that the shop did not own the required inverted squeeze-resistant spot welder, according to the District Attorney.

Otterson had the ability to direct where city cars would be repaired. The DA's office stated he would write the initial appraisal for each vehicle’s anticipated repairs, endorse and authorize any additional costs, and approve Galati, Sr.’s fraudulently inflated repair and labor costs. As payment, Galati, Sr. would then share some of the proceeds with Otterson.

The office found that the labor hours listed on American Collision’s appraisals were often three times greater than the amount of labor hours anticipated by Fleet Management, and that American Collision frequently billed for auto parts that Fleet Management had already provided to the shop for repairs. Based upon the review there were discrepancies on 182 repair jobs. Some examples include:

  • American Collision billed approximately 200 hours of labor for repairs to one city vehicle that Fleet Management had estimated should take 57 hours.
  • Photographs of one damaged vehicle show that the car only had a few scratches to the rear bumper. Fleet Management had estimated that it would take approximately 16 hours to repair the vehicle, but American Collision presented an invoice for 113 hours.
  • Another city vehicle was sent to American Collision with $4,000 worth of pre-purchased parts that were necessary to complete the repair. The internal investigation found that invoice charged the city $6,000 for the same parts that had already been provided to the shop.

Pacifico’s estimates were almost always identical to Fleet Management’s original estimate. However, even though Pacifico was the primary contract shop, it received only 115 cars between 2011 and 2013. In comparison, American Collision received 192 cars because Otterson sent more repairs to American Collision contrary to the status as the secondary repair facility.

The office’s Insurance Fraud Unit’s investigation also found that Otterson would burn the inflated estimates in a fire pit in his backyard after he had provided the amount to Galati, Jr. 

Between May 1, 2010, and May 30, 2011, Otterson made 115 calls to the Galatis and only three phone calls to the manager of Pacifico. The investigation also uncovered 10 e-mails that discussed the city contract sent from Otterson’s personal e-mail account to Galati, Jr.’s e-mail account.

In late 2012, at the conclusion of the investigation, the Office Insurance Fraud Unit notified the Office of Fleet Management that Otterson would be charged. In 2013, the Galatis and 40 co-defendants were indicted and charged with operating a large insurance fraud scheme from their body shop. Those charges along with these new charges are scheduled for trial in September 2016.

Fleet Management terminated Otterson when it found out about the fraud and began its own internal investigation. Otterson is now out on bail and is awaiting trial.

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