Baltimore's police commissioner is demanding a review of the decades-old practice of funneling the city's multimillion-dollar towing business to a small circle of companies without requiring them to compete for contracts.
Other city officials, including Mayor Stephanie Rawlings-Blake, are also calling for a closer look at the towing system — just days before the contract was scheduled for a two-year renewal.
A federal probe that netted 30 Baltimore police officers in an alleged kickback scheme involving an uncertified tow company has also triggered scrutiny of the city's $4 million towing business. While the 10 city-certified companies were not implicated in the investigation, the case has shone a spotlight on the arcane and poorly documented process of awarding the lucrative contract.
The companies — known as "medallions" for the police-issued stickers affixed to their trucks — have had a lock on the city's towing business for at least three decades, elbowing out competitors by expanding their fleets to cover more territory. One of the companies forfeited its state business certification two years ago but continued to operate under its exclusive city contract.
Police Commissioner Frederick H. Bealefeld III refused last week to sign a contract that would have renewed the 10 companies' agreement with the city for two years. Bealefeld wants to review the process first, a spokesman said. "We need to get our house in order and figure out what's going on," said spokesman Anthony Guglielmi. "From what we can gather, it's a pretty old system that could probably use some updating."
Rawlings-Blake is seeking a "comprehensive review" of the towing system, which is administered jointly by the city's Department of Transportation and the police, according to a spokesman.
And Councilman James B. Kraft said he plans to convene a hearing on the towing program before the Judicial and Legislative Investigative Committee, which he chairs. "Given the nature of these actions, and given concerns that have been raised before, I think it's worth us taking a closer look at the whole process," Kraft said.
City officials were unable to explain the system by which the 10 companies have been awarded the contract — or why the process of obtaining a medallion is not competitive. But officials say the medallion arrangement benefits the city by guaranteeing quick response and safe service for vehicles that have been disabled in an accident or are illegally parked.
The medallion tow companies pay an annual fee of about $500, with an added charge of $100 per tow truck. The city receives a fraction of the money that the medallion towers bring in. Companies charge $130 to $140 per tow for the Police Department; the city receives $7.50 of that under a deal approved in 2009. Before that, the city did not receive any of the towing fee.
If a vehicle owner asks for a tow anywhere other than the city's impound lot, the medallion tow companies can charge $300 or more, according to their contract with the city. By comparison, the Department of General Services has a contract with Auto Barn — also a medallion tower — to haul city vehicles for $60 each.
Owners of other towing companies say the city's medallion program grants an unfair advantage to a tight-knit group.
"There is no way anybody could possibly get a foot in the door," said Robert DeShazo, who has been repeatedly refused a medallion for his company, Pulaski Towing. "We have a dictatorship going on in the city. There's one small group of people who has everything, and everyone else is dirt poor."
Greg Norman, owner of Premier Towing in Woodlawn, said he has tried periodically to apply to become a medallion company but has been told the city is not accepting new ones. "All we're saying is, give everyone else an opportunity," he said.
Sonny Appolonia, who owns Baltimore Towing Co. in North Point, said he has been denied repeatedly. "The medallions have it locked up so tight that no one else can even get in," he said. "These guys get larger and larger, and they don't let anyone in."
Paula Protani, leader of an association of medallion towers, called the other companies "sore losers."
"Everyone thinks we're the fat cats, money is just thrown at us … and that's not necessarily true," she said. "The system will only allow for so many people. The people who are in there, we're doing our jobs properly and sufficiently to maintain our contracts."
Protani is a manager at Frankford Towing, which is owned by Dick Bonnett. He and his family members own two other medallion tow companies, Mel's Towing and Ted's Towing, she said.
The medallion towers are required to maintain high levels of insurance, pass employee background checks, be bonded and arrive within 20 minutes of being called. But city officials were unable to say last week how the companies were held to these standards.
Aaron's Towing, in the 2100 block of Kirk Ave., was suspended from the towing program Friday after a Baltimore Sun reporter informed city officials that the company had been barred from doing business in the state since 2008. The company had failed to file property reports since 2007 and had a lien against it because it owed unemployment insurance tax, according to state officials.
Owner Edith Scott estimated that the business owed about $30,000.
Yet Aaron's Towing had signed a new contract with the city after losing its state certification and continued to operate. Guglielmi, the police spokesman, said it was unclear how the lack of certification escaped the notice of city officials.
Officials were also unable to explain why new medallion stickers had not been issued since 2007. The trucks currently bear medallions that expired two years ago.
Councilman Robert W. Curran, who closely follows towing issues, said that although the medallion system has shortcomings, it does give the city some oversight. "Towing is an ugly business, but at least when you have the medallions, you have some control," he said. "We control the rates; we control the activities."
Wednesday's federal indictment focused on police and towing operators who skirted the city's medallion program. Seventeen city officers were charged — and more than a dozen others suspended — in an extortion scheme in which officers are accused of receiving thousands of dollars in kickbacks for steering accident victims to a nonmedallion tower. The officers received $300 per car, and one pocketed more than $14,000 over two years, according to court papers.
Medallion tow companies have also been the subject of troubling allegations.
A 1998 investigation by the Sun revealed that the medallion companies, which are required to dispatch trucks from geographically scattered sites, had responded to thousands of calls from fictitious "ghost garages." After conducting a five-year investigation into the matter, the Police Department suspended Berman's and Frankford — the two largest medallion tow companies — for two weeks for using false addresses.
And in 2008, the deputy director of Baltimore's Transportation Department resigned after The Sun revealed that he had violated city law by buying a boat from Bonnett, the owner of Frankford Towing. Bonnett, the son of a longtime city councilman, had purchased the boat at a Transportation Department auction a week before and had been lobbying transportation employees to raise tow fees at the time.
Last year, city officials considered privatizing tow lots and towing operations, and issued a request for offers for the program. Only one company, Auto Return, which manages Baltimore County's towing operations, applied.
After months of closed-door debate, the city's spending board rejected the bid two weeks ago. Transportation officials decided that they would have lost as much as $1 million under the deal with Auto Return, said Adrienne Barnes, a department spokeswoman.
"The city would like to perform more analysis into towing operation reorganization before making such a financial commitment in the current economic climate," Barnes said in an e-mail.
But Sam Singer, an official with Auto Return, said the city would have made money under the contract. His company had pledged to make $1 million in repairs to the tow lot on Pulaski Street within the first six months, he said. Auto Return would have done away with the medallion system and required tow companies to bid to be sub-contractors, Singer said.
The medallion tow companies met with Auto Return and were displeased with the money that it would have offered, Protani said.
"The fact of the matter is, we could not afford to work for them in the way they pay their people," Protani said. "The medallions said, 'We'll try to convince the city that we can do the job better.'"
Council members say the medallion tow companies lobbied city officials to reject Auto Return's offer because they would have lost money under the deal. At a luncheon work session with Rawlings-Blake late last year, council members — especially President Bernard C. "Jack" Young, Rochelle "Rikki" Spector and Curran — expressed concerns about the Auto Return deal.
The medallion towing companies are frequent donors to political campaigns. Frankford Towing gave Young $1,000 in November.
The newest member of the council, William "Pete" Welch Jr., has benefitted from the towers' largesse more than any of his colleagues in the past year. Welch, who was appointed in January to fill the seat vacated by his mother's retirement, received $3,500 from tow companies between July and October.
The towing companies and their employees gave at least $7,000 to then-Mayor Sheila Dixon during her 2007 election campaign. City Council Vice President Edward L. Reisinger has received $9,500 from Auto Barn over the past decade.
The contract with the 10 medallion tow companies was scheduled for approval by the city spending board on Wednesday, but that action has been sidetracked by Bealefeld's objections.
Baltimore Sun reporter Jessica Anderson contributed to this article.