BMV leaders knew of overcharges, top deputy says

Top officials at the Indiana Bureau of Motor Vehicles were told the agency was improperly overcharging Hoosiers millions of dollars, but they secretly kept doing it for at least two years to avoid budget troubles, a former deputy director alleges.

The explosive accusation comes in an 88-page deposition taken last week as part of a class action lawsuit pending against the BMV in Marion Superior Court. The suit seeks to recoup $30 million to $40 million that the BMV overcharged Indiana motorists for personalized license plates, vehicle registrations and dozens of other services.

In the deposition given under oath, Mathew Foley, the BMV's former deputy director for fee management, testifies that he told agency officials as far back as 2010 or early 2011 that many of the agency's fees exceeded what was authorized under Indiana law.

Foley said his warnings included emails, meetings, and other communications with the BMV's deputy commissioner, controller, a staff attorney, and several program directors, he said.

Foley said he also told Scott Waddell — who was chief of staff and later BMV commissioner — that "there were problems with the charges."

Waddell, who left the BMV in December, did not respond to a message from The Indianapolis Star. But he said in a deposition that his first indication the agency may have been overcharging customers came when the lawsuit over drivers license fees was filed in March 2013.

"We were completely blindsided by it," he said.

BMV spokesman Josh Gillespie declined to comment to The Star, noting the agency does not talk about pending litigation.

The new revelation could have an impact on how many Hoosiers are due reimbursements and how much they are owed.

The lawsuit alleges the BMV concealed and continued the overcharges, which, if proven true, would void limits on the time period for which customers can seek refunds. Absent that "fraudulent concealment," the statute of limitations would allow refunds going back only six to 10 years.

The overcharges may date back to at least the early 2000s.

Foley also said agency officials did not want to cut fees or refund customers for the overcharges, which have been estimated to be as much as $60 million to $80 million. Instead, he said BMV officials tried to rewrite regulations to match what was already being charged.

"In my opinion only, I believe that there was an effort to rewrite the regulations so they matched the fees being charged rather than refund the fees to the taxpayers," he said.

It is unclear why, but those new regulations were never put into place and the overcharges continued until last year.

The agency's actions, according to Foley, were driven by money.

"There was a concern that the BMV would need to potentially lay off employees or go back to the well and borrow money again when they had very publicly repaid the last of its government — or state-borrowed loans the prior year," he said.

Foley's warnings to BMV officials came under the administration of Mitch Daniels, a governor who prided himself on fiscal restraint and his efforts to professionalize the BMV, which was notorious for long wait times when he came into office in 2005.

State budget documents show that from 2006 to 2013, the BMV returned more than $47.6 million in unspent funds from its budgets.

Daniels, now president of Purdue University, said through a spokeswoman that he heard nothing about the overcharges before leaving office in January 2013. He declined to comment further.

Gov. Mike Pence said through a spokeswoman that he would not comment on ongoing litigation.

The BMV admitted last June that it had overcharged drivers for operator licenses. Then in November, it agreed to refund $30 million to motorists in a separate class action lawsuit involving those excessive charges.

The agency also has admitted overcharging for dozens of other fees. The overcharges acknowledged by BMV ranged from $11 on antique vehicle registrations to 50 cents on motorcycle endorsements for operator licenses.

Those overcharges are the target of the pending class action lawsuit that was filed in October. Both lawsuits were filed by attorney Irwin B. Levin of Indianapolis firm Cohen & Malad LLP.

"This is the way the judicial process is supposed to work," Levin said. "As (former U.S. Supreme Court) Justice (Louis) Brandeis said, 'Sunlight is the best disinfectant.'"

BMV officials have said they didn't realize motorists were overpaying until March 2013, when the first lawsuit was filed, and didn't know the full scope of the problems until after an independent review concluded last fall.

Foley's testimony raises questions about that time line. He doesn't pinpoint exact times and dates in his testimony, but he said he informed his superiors about his findings sometime in 2010 or early 2011. His job at the time was to review the agency's rate structure. Foley, who left the agency in January 2012, declined to be interviewed.

In his deposition, Waddell, the former commissioner, said the sweeping fee review Foley was conducting stopped after Foley left the BMV.

The total amount sought in the new lawsuit could more than double the $30 million the state paid to settle the first lawsuit. The BMV fees at issue in the new lawsuit date back to at least the early 2000s on nearly 30 different services. Foley said in his deposition that the errors leading to the overcharges date back to a previous administration.

The initial lawsuit prompted Pence to order the independent review of other BMV charges. The examination revealed Foley had been correct — the agency had been overcharging for some additional services and also was undercharging for others.

The BMV has, however, refused to release a financial accounting for those errors.

In the lawsuit involving overcharges for drivers licenses, the BMV offered refund checks or credits on future transactions. For the other overcharges the agency acknowledged in September, the BMV is only offering credits. The new lawsuit asks the judge to order the BMV to offer refund checks, as well as interest, because officials concealed the errors.

The revelations in Foley's sworn deposition raise serious questions about the agency's conduct, said Gerry Lanosga, president of the Indiana Coalition for Open Government.

"Citizens have a right to expect an agency that discovers a problem like this to make it public and do something to fix it," he said. "This underscores a need for vigorous public disclosure laws and also warrants an inquiry from the inspector general's office."

Julia Vaughn, policy director of the government watchdog group Common Cause Indiana, said Foley's statements about the conduct of BMV officials is disappointing.

"Now," she said, "the citizens of Indiana are stuck coming and going. They were burdened for years with the higher fees, and now, as taxpayers, they will have to underwrite the payment of any settlement or penalties in the lawsuit."

Call Star reporter Tony Cook at (317) 444-6081. Follow him on Twitter: @indystartony.