Tourists, Straw Buyers and exotic cars...

What do tourists, straw buyers and exotic cars have in common? Bit of a stretch isn't it? South Florida's economy is heavily dependent on tourism, one aspect of the tourist economy is the car rental business. We experienced a new twist in the car rental business down here in Miami a few years back, rather than offering the regular cast off General Motors, Dodge or Ford product new companies popped up around town that offered Exotic cars for rent. Sounds like the perfect compliment to the Miami vacation, why not cruise around South Beach in Ferrari...

Run around Coral Gables in a Lamborghini...

Pull up to the nightspots in a Rolls Royce...

Perfect, come down to Miami, rent an exotic car and look like a big shot for a few days. Check out the rates, Ferrari Spider for $1400 per day, Lamborghini spider for $1395 per day or a Rolls Royce for $2,900 per day. Not bad considering you got the use of a $200k+ car for a day.

There is a problem though, very few of the "entrepreneurs" behind these exotic car rental companies had the financial wherewithal to purchase the vehicles needed for these ventures. More often than not people renting these cars would find out (usually the hard way after they'd been pulled over by a cop) that the exotic cars that they had rented weren't in the name of the company that they rented it from but instead were titled to individuals. Can you imagine renting a car from say Hertz then pulling out the registration and finding out the car belonged to say Juan Martinez? Out of all the so called exotic car rental companies down here in Miami, only a handful were operating legally, that is only a handful were actually purchasing cars in their company name and renting them out as a normal car rental company would. The rest were resorting to all manner of methods to acquire their rental fleet, anything from getting cars in their personal names, using Straw Buyers or at worse, taking over payments from people who could no longer afford the cars. Think about it, rather than purchase the cars outright and lay out a ton of money, if you could use someone elses credit to lease a car, it's a win, win situation. Say the lease payment is $3,000 per month, you rent the car out two days per month to cover the expense and the rest is gravy. Perfect.


This exotic car rental business became a haven for fraudsters towards the end of the real estate bubble. The same tricks of the trade they employed in defrauding banks on bogus real estate deals, transitioned nicely into this car rental scam, straw buyers, bogus loan applications, bank and insurance fraud, etc. What makes no sense to me is how the cops never put two and two together and realized that the guys running these businesses had an extensive history in other types of financial fraud. We'll take a closer look at one such exotic car rental operation tomorrow.

Condo conversions, straw buyers and mortgage fraud!

What a great mix!  During the peak of the real estate bubble we experienced a trend where real estate investors would buy up multi unit rental buildings or townhouses and then convert them to condominiums which they then resold at huge profits.  Nothing wrong with that.  I personally watched a few friends make hundreds of millions of dollars doing these condo conversions, things were going along swimmingly until the real estate bubble started to deflate, that's when things started to get really interesting.  Investors that purchased these types of properties after the market peaked found themselves with units that they paid way too much for and quickly found that there was no legitimate buyers for their grossly overpriced units.  The saving grace for these property owners?  FRAUD!  

Here's a story from California that sums up one such situation to a t.