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Scamming "Cash for Clunkers" By: Katherine Mangu-Ward
Reason Magazine | Wednesday, August 05, 2009


We'll call him Mr. Sparkles. When we met to discuss his cash-for-clunkers scam, he wore a navy blazer and tie—perfect camo for a D.C.-based criminal. Over chicken makhani and naan at an Indian restaurant in Dupont Circle, Mr. Sparkles poured out his story: a sordid tale involving high-wire deception, threatened friendships, and a couple of Nissans.

Earlier this summer, when the Obama administration's plan to offer large subsidies to get old cars off the road and encourage people to buy efficient new ones became public, Mr. Sparkles arranged a deal with a friend. We'll call him Mr. Crayon. For $1,000 Mr. Sparkles would take possession of a spare clunker owned by Mr. Crayon. Not just any clunker, but a far clunkier clunker than Sparkles' own 1994 Accord station wagon: a 1994 Nissan Pathfinder. With a blazing combined mileage of 15-miles-per-gallon, the vintage Pathfinder would be eligible for trade-in when the so-called cash-for-clunkers program kicked in. And so the scam was set in motion.

Early summer 2009, Mr. Sparkles was tooling around in the Pathfinder, feeling good about his scheme. The two conspirators were on the verge of a title transfer when a complication developed. The details of the plan were released, and it became clear that only someone who had owned and insured the car for the previous year could take advantage of the $4,500 government subsidy for new car buyers.

The plot thickened. Mr. Crayon—who had no interest in acquiring a new car—would retain the title, while the understanding persisted between the two men that the ill-gotten government gains would fall to Mr. Sparkles. Mr. Sparkles shopped for the optimal cash-for-clunker car value, and they waited, eying each other nervously.

On Monday, July 27, the program went into effect, but suddenly—a twist! Clunkers were getting converted to cash at a furious rate, and Mr. Sparkles, previously elated with the incipient success of his plan, unexpectedly found himself facing a dark Thursday night of the soul. "Cash for Clunkers: Suspended!" screamed the headlines. The program ran out of money in less than a week. Mr. Sparkles calls the Thursday night "one of the low points of my life." Despondent, he could only reply "Saw it. Sucks" to an email with a story about the suspension of the program at 8:45 p.m. When Mr. Crayon confirmed that their worst fears had been realized after 11 p.m. that night, Mr. Sparkles replied tersely: "Yup. My life sucks." Would the whole scheme come toppling down, Mr. Sparkles stuck $1,000 in the hole with a clunkier clunker than before? Could the friendship between Mr. Sparkles and Mr. Crayon survive?

But at 10:21 am the following day an email went out to the conspirators containing an AP story about the revival of the Cash for Clunkers program with the subject line "Keep hope alive!" And a promise of $2 billion in (unspent) stimulus fund from Congress later, the plan was back on.

On Saturday, "Mr. Crayon" bought a new car.

Mr. Sparkles doesn't live extravagantly. He says his government-subsidized 2009 Nissan Versa sedan is the first new car he has purchased since 1987. Here's the final math: The car cost $11,998.50 at the till, including tax and fees. The Feds subtracted $4,500 from the bill. That's $7,498.50 plus the $1,000 that changed hands between friends.

A brand new sedan for less than $9,000 ain't bad. But the price could have been better, he says. His first stop for the trade-in was Passport Nissan in Alexandria, Virginia, because the dealership had a slightly cheaper "Internet price" available. But the Versa was popular with the newly-declunkered, and by the time he arrived the best price the dealer would offer was $1,000 higher. As with higher education and houses, when the government offers to cover a chunk of your costs, savvy sellers know to jack up the price.

But eventually a car was secured. Mr. Sparkles picked it up this morning, in fact. Technically, the car isn't his yet. Mr Sparkles will have to drag Mr. Crayon to the DMV in a week or two to have the title transferred. But Mr. Sparkles reports that "it's just like any other used car purchase at this point."

And so ends our tale of how a clever huckster outwitted the President of the United States.

The point isn't that cheating is rampant. It probably isn't. As Mr. Sparkles points out, the confluence of fitting clunker quality with a friendship strong enough to withstand a fairly pricey illegal transaction and a Saturday at a Nissan dealership must be fairly rare.

There has been more than enough discussion about how much good, if any, the program will do for the American economy or the American people in the long run. (Much of it here on this very site!)

But take Mr. Sparkles' tale as a cautionary one—a study in how to turn a good, smart, resourceful man to a life (OK, a summer) of white collar criminal scheming. All it took was a lump of seemingly free cash from Uncle Sam. By his estimation, Mr. Sparkles spent 40 hours planning and executing this scheme, with the time in the DMV still ahead of him. He calls the program "terrible, hideous." But once the prospect of getting Obama to buy him new car loomed large in his imagination, Mr. Sparkles' mind started churning on ways to scoop up some of the cash being scattered around.

Like the clunkers turned to scrap as part of the deal, Mr. Sparkles' time was a deadweight loss to the economy. That time and money could have gone to something else, with no destruction of working hours or '90s cars involved. Likewise with the car dealers, thousands of whom jumped through hoops to become cash-for-clunker eligible dealers. With the right friends, the right government program, and the right beater car, it could happen to any of us.




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