Each participant could face up to 1280 years of incarceration for defrauding the people of Philadelphia
PHILADELPHIA (March 9, 2016) – Philadelphia District Attorney R. Seth Williams today announced that after a review by an Investigating Grand Jury he is charging Ronald Galati, Sr. (DOB: 11-10-50); Ronald Galati, Jr. (DOB: 12-8-77) and Robert Otterson (DOB: 2-26-66) for their role in an insurance fraud scam that stole over $400,000 from the City of Philadelphia’s Office of Fleet Management.
The three are each charged with one count of Theft by Unlawful Taking (F2), one count of Theft by Deception (F2), one count of Theft Receiving Stolen Property (F2), one count of Criminal Conspiracy (F2) and 178 counts of Tampering with Public Records or Information. If convicted on all charges, the Galatis and Otterson could face up to 1280 years of incarceration for defrauding the people of Philadelphia.
“Ronald Galati, Sr.; Ronald Galati, Jr. and Robert Otterson thought that defrauding the people of the City of Philadelphia of over four hundred thousand dollars was a good idea; it wasn’t. And I can assure them that my Office and our partners in government will do everything we can to ensure that they are punished to the fullest extent of the law,” said Philadelphia District Attorney Seth Williams. “I would like to take this opportunity to thank the men and women of the Investigating Grand Jury, the City of Philadelphia and the Office of Fleet Management, Assistant District Attorney Dawn Holtz, my Office’s Insurance Fraud Unit, the Pennsylvania State Police and all the investigators who contributed to this case for their hard and important work.”
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 second lowest bidder would become the secondary repair facility. Each bidder also had to own an inverted squeeze-resistant spot welder at the time of the pre-bid inspection. Fleet Management named Pacifico Ford as the primary contractor and American Collision, which is located at 1930 S. 20th St. in Philadelphia, as the secondary repair facility. Galati, Sr. 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 American Collision through the preliminary inspection despite the fact that the shop did not own the required welder.
American Collision’s designation as a secondary contract shop was mutually beneficial to both Galati and Otterson. Otterson had the ability to direct where city cars would be repaired. He also 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 ill-gotten proceeds with Otterson.
Fleet Management terminated Otterson and began their own internal investigation as well. The DAO 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 two hundred hours of labor, at a rate of $30 per hour, for repairs to one city vehicle. Fleet Management estimated that the repairs should take fifty-seven 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 sixteen hours to repair the vehicle. American Collision presented an invoice for one hundred and thirteen hours; and
- 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 American Collision’s 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, they received only 115 cars between 2011 and 2013, and American Collision received 192 cars because Otterson sent more repairs to American Collision contrary to the status as the secondary repair facility.
The DAO’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. In addition to finding charred paperwork, investigators also discovered receipts for a $2,000 watch, new awnings for approximately $2,000, a water heater for $2,000, new carpets for $700, new windows for approximately $8,000, a Harley Davidson for $9,000, and receipts for multiple guns that were purchased with cash.
Between May 1, 2010, and May 30, 2011, Otterson made seventy-eight calls to Galati, Sr. and twenty-eight calls to Galati, Jr. During the same time period, Otterson only made three phone calls to the manager of Pacifico. The investigation also uncovered that there were ten e-mails which discussed the city contract sent from Robert Otterson’s personal e-mail account to Galati, Jr.’s e-mail account.
In late 2012, at the conclusion of the investigation, the DAO’s Office Insurance Fraud Unit notified the Office of Fleet Management that Otterson would be charged. In January of 2013, Ronald Galati, Sr. and Ronald Galati, Jr., along with forty co-defendants, were indicted and charged with operating a large insurance fraud scheme from their body shop, American Collision. Those charges along with these new charges are scheduled for trial in September 7, 2016.
Ronald Galati, Sr. remains incarcerated without bail awaiting his September trial. Ronald Galati, Jr. and Robert Otterson are currently out on bail, also awaiting trial, and have waived their preliminary hearing. All parties have agreed to have these new charges added to their previous case.