Hi, it's Westkasova. The Big Take is taking a break this week, so here's an episode you might have missed. You may remember a couple of years ago there were all these news stories in the US about people going to start their cars and finding thieves had stolen their catalytic converter. And then tons of videos popped up on YouTube and the evening news. They showed people brazenly crawling under cars in parking lots and sawing off catalytic converters in broad daylight.
These sixteen cars at Drivers Village in Cicero are now sitting in park after two sneaky thieves stole each of the vehicle's catalytic converters.
Back in mat Onya, this crew was captured on camera by the car's owner. Look at them, jack up the car and off they go. The owner said they had a catalytic converter in the hand.
Turns out, unfortunately, even police vehicles are not safe from catalytic converter thieves.
It was happening all over the country, and it kept happening. That made Bloomberg BusinessWeek contributor Evan Ratleff wonder was this just an uptick in petty crime? Or was there something more going on here? So he went to find out the short answer, yeah, there was a lot more going on here.
People are bringing U hauls and trucks full of them, and you know, they stand there and they price them out, they pay them in cash, and then they're gone.
I'm West Casova today on the big take, Your catalytic converter is worth its weight in gold or platinum to be per sixt Evan. What is a catalytic converter.
Well, a catalytic converter is essentially a device, mechanical device. Before your exams pipe, there's this little structure. It's like a fat pipe connected to skinny pipes. So inside the fat pipe there's what they call in the trade a core.
It's usually like a.
Ceramic core, or they call it a honeycomb core because it sort of looks like a honeycomb from a beehive. And inside of that there are catalysts. And what those catalysts do is they clean the exhaust coming from your engine before it exits the tailpipe. So it takes really horrible gases like nitrous oxide and carbon monoxide and converts them to relatively harmless gases, including carbon dioxide, which is not harmless to the environment but in terms of smog
and ground pollution. So the catalytic converter serves this important function and the actual catalyst the chemical reactions are catalyzed by these three metals that are included in a catalytic converter, which are roodium, palladium, and platinum. They're part of this
group called platinum group metals or PGMs. You'll hear all the time PGMs in terms of catalytic convert and so those metals exist in sort of trace amounts less than a quarter ounce in inside a catalytic converter, and that is where the value lies for someone trying to steal a converter.
And what's so fascinating about that is, for a lot of years, as you say, like trace amounts of these metal e who cares they go to the junk yard, No one give them a second thought, or maybe scrap metal places would take come and see what they could get. But that changed during the pandemic.
Right, the metal prices fluctuate on the open market, and they're pretty rare metals, especially palladium and rodium, Platinum a little less so, but platium and rodium are hard to mine, their kind of byproducts of platinum mines and other minds, so in pre pandemic times they just weren't worth all that much.
And then the pandemic struck, a lot of the mines.
Were closed, particularly in South Africa, which is the predominant place where these metals are mined, and there were also infrastructure logistics problems, supply chain problems, so the prices shot up. Of the metals shut up in an extraordinary way in
some cases. So as the prices started going up, it became more and more valuable to have a catalytic converter, so those prices went up correspondingly, because if you have a used catalytic converter, you can, through a pretty complicated process, extract the metals and sell them back to the market.
So Evan, you said, when you first started looking into this, it was kind of a local crime. But then you started looking a little deeper, and that's when you found, No, those people on the street are the beginning of this really big long global supply chain for the metals inside these converters.
The place where I really discovered that this was a much bigger story. I was actually piggybacking on the back of an investigation that was started by the police department in Tulsa, Oklahoma. And in Tulsa they had the same problem they had all over the United States, which is there were a lot more catalytic convert beginning in twenty twenty.
They tried to figure out what to do about it, and within the Tulsa PD, there was one particular detective who decided that not only should they look at the local thefts and what they call cutters, people cutting them off the cars, but also where did they all go, Like where were they selling them, where was the money coming from? And he started investigation where they ended up
investigating the whole supply chain of these stolen converters. And so I sort of decided to tell the story of how that developed.
So your story starts at in Tulsa, Oklahoma, and it's with a traffic stop, right like so many other stories like this begin.
Yeah, basically pretty routine traffic stop. Someone called in. It was actually an off duty cops saw a pickup truck full of catalytic converters called it in. Because after all these thefts started happening, it became suspicious to be driving around with a bunch of catalytic converters in the back of the truck. It turned out there were one hundred and twenty something in there. They pulled the truck over.
At the wheel was a guy named Tyler Curtis. And Tyler Curtis's I think at the time he was maybe twenty four twenty five.
He had grown.
Up in Oklahoma and he had gotten into the catalytic converter business. And when he was pulled over, what he said in response to why do you have all these catalytic converters was I'm a legitimate catalytic converter dealer. I'm a scrap metal dealer. And they didn't actually charge him with the catalytic converters. He happened to also have a small amount of drugs in his car and an unlicensed gun, so they charged him with that, but they didn't charge
him with the catalytic converters. That traffic stop was sort of the beginning of tracing this whole network because of what they found out about Tyler Curtis.
Next, and so Curtis really did have this business.
Yeah, And that's one of the tricky things about this whole industry was that Tyler Curtis had actually worked. He had learned about the business at a legitimate scrap metal recycling catalytic converter recycling outfit outside of Tulsa, and that's where he learned the business. And then he said, wow, this business is booming. He started his own business. But the question with catalytic converters is how much due diligence are you doing when people show up with these catalytic converters.
And if someone shows up with the truckload, then if they don't have paperwork, they don't show where they came from, you might be buying stolen converters. Now, what the authorities allege was that Tyler Curtis and the people up the chain from him, they really leaned into buying from anyone, no matter how sketchy, even encouraging people to bring stolen catalytic converters. That's the allegation. But it's very difficult to tell if you just look at the catalytic converters where they came from.
Yeah, let's talk about that for a minute, because we talked about how you get underneath the caring and take this thing off, but how do you take off a catalytic converter if you're going to steal one.
Usually if they're going to steal one, they will pull up to a parking lot driveway.
Someone will hop out.
They'll have a jack, like a hydraulic jack, or at least a floor jack. They'll jack up the car really quickly, crawl underneath, take out what's called a sawzle, which is a reticular saw. It's a handheld battery powered saw, and they'll saw the pipe on either end of the converter and then they'll pull it out. They can do it in a couple minutes, throw in the back of the car, drive off.
That's the standard theft.
But once you have it off the car, there's actually no indication where it came from. You cannot look at a catalytic converter and say it came from this specific car.
You can say the make and model.
They have a parts number essentially that you can use to figure out, oh, this was from a Toyota Tundra, this was from a Toyota Prius.
There's not only a VIN number on the converter.
There's not They don't come with that. So that means if you have a.
Whole box full or truck full or warehouse full of catalytic converters. Someone can't go through them and say, oh, these are stolen in these aren't now. A lot of cops will say I can tell because they're rough cut, which means they look like they were cut with a saw instead of unbolted from the car. But the reality is a lot of junk yards where they legitimately cut them off.
They also use sazzles.
They might cut it a little more carefully, but it's very difficult to sort of take someone in a serious case in front of a court and use like the saw mark as the evidence that you're using to try to put them away, right, because if it's in.
A junkyard and the car is junked anyway, and you legitimately want to get the kind of a converter, why would you take time to carefully unbolt the thing. Just take it off.
Yeah, all they're going to do is recycle it. They're going to crush it and take the inner core dust out, and that's going to be smelted and eventually refined back into the metals.
So it doesn't matter how you cut it.
And not only is that a legitimate business, it's an important business, like the recycling of these metals is actually very important, and I think a quarter of all PGMs are actually recycled, and it should be more.
And so you have this strange mixture of this.
Legitimacy and then the illegal side of it, kind of infiltrating into a legitimate business.
And that's exactly what drew you to Tyler Curtis. He's running this business and the converters he's getting are probably coming from all kinds of places, but the cops are really suspicious, and so they decide, all right, we're going to put our eyes on this guy.
Yeah.
I mean they get suspicious of Tyler Curtis in part because they started arresting a lot of cutters street cutters, people who they catch cutting them off cars. And some of those people lead them to another intermediate buyer. They're selling to a guy, and that guy shows up at Tyler Curtis's place. So they put a GPS on this guy's car, and he shows up at Tyler Curtis's place and they say, well, maybe Tyler Curtis is bigger than we thought.
They get a warrant for his iPhone and iPad.
And then they discover oh, he's got links to some larger network allegedly, and then they get a warrant for what's called a pole camera, which is like it sounds a camera that you put on a pole, but surreptitiously, so probably like a utility guy goes out and climbs a pole, puts it outside of his place, and then they're watching his facility twenty four hours a day, and they start to see.
The volume that are coming in.
Pickup trucks pulling up, U haul's pulling up, people with trailers attached pulling up, and they've got fifty one hundred two hundred converters in the back and he's pricing them, or someone he works for him is pricing them. They're paying them in cash, and they eventually calculate that he's handling five thousand to six thousand converters per week.
So that's just people showing up pretty much all the.
Time with loads of converters. So he's really running a booming business. There's millions of dollars coming through. And the crazy thing is that all of it is in cash, Like they're really operating in cash. It's a cash business. And so now that's not all profit he's not making millions of dollars of profit, but he's in the seven to eight figures range in terms of what he's doing
over the course of less than a year. So that's a lot of cash that you need to be dealing with and have around all the time.
So Tulsa is in a very big place. These converters have to be coming from all over the place.
Then, yeah, they quickly discover that they're coming from all over the Southwest. They're coming from Texas, they're coming from Oklahoma, obviously, but they're coming from the Midwest, like some from California. Like they're driving in. People are bringing U hauls and trucks full of them, and you know, they stand there and they price them out, they pay them in cash, and then they're gone. So then it creates this additional question, well, where's all this.
Cash coming from?
And one of the things they discover is that they're packaging them up in these boxes and then shipping them to New Jersey.
After the break, what happened to those catalytic converters in New Jersey? Evan, So the cops are now tracing up the chain. I think the phrase you use in the pieces that they wanted to kind of get the head of the snake.
Yeah, that's what the detective in Tulsa PD, whose name, by the way is Kansas Core, which is an incredible name for someone who's investigating catalytic converter theft, where the prize thing that you're getting is the core and everyone calls it the core in the business. So Kansas Corps was the person who really spearheaded the investigation out of
Tulsa PD. He was the person who essentially said, like, we can get to the top, and yeah, his superior told me, we want to cut the head off the snake.
So Kansas Core traces these catalytic converters from Tulsa to New Jersey and what do they find there?
In New Jersey?
They found this company called DJ Auto, which was operated by a pair of brothers. The older one, his name is Lovin Kanna. Lovin's sort of his nickname, everyone calls him. And the two of them had been in the scrap metal business for a lot long time, you know, recycling all kinds of things, batteries, air conditioners, that sort of thing, and they shifted into entirely dealing with catalytic converters in twenty twenty when the prices went up and it was
clear that this was a huge business. And then pretty quickly they started receiving converters from all around the country. So they figured out how to sort of network with regional players like a Tyler Curtis, who would sort of gather up all the local catalytic converters, put them in a box, ship a bunch of palettes of those catalytic converters to them in New Jersey, and then they would
take it the next step. They built a significant business, not just selling the converters, but also this app that they launched where you could price catalytic converters. So one of the hard things about legitimate or illegitimate business in catalytic converters is that the metal prices fluctuate, so by the time you go to sell it, the price may be different than when you either obtained it legally or stole it, and so on their app, you could actually
check the prices day by day. You could even lock in prices, so you could say I want to lock in this many converters at this price. It's called hedging, so if the price goes down, then you're good and you're not going to lose your shirt over whatever lot you have of catalytic converters. So they were sophisticated operation. And they also were just making money hand over fist. I mean, this is where the money gets really big.
We're talking five hundred and forty five million dollars alleged by the Justice Department over the course of essentially less than three years.
Again in revenue.
That's not their profits, but that's the amount of cash that was passing through this business.
And so they were getting these converters from all over, like when Kansas Core is talking about trying to trace up the line. So you have these guys who are either selling them legitimately from junk yards or other places. We're chopping them off cars and then selling them to another person and then selling them to an intermediary like Tyler Curtis and Tulsa, And there are Tyler Curtises all over the place, and then they're all funneling to New Jersey.
Yeah, So the Conna Brothers had and Digiato, they had a facility. I went there and I interviewed some of the other people that worked next to it, and they said they were just coming in twenty four hours a day, like we're talking to tractor trailers full of catalytic converters. And also they were getting shipments through major freight companies, so they're getting pallettes and palettes of these. Eventually they bought a junk yard, which was a larger place for
them to receive the catalytic converters. And also a junk yard is sort of a natural place where you would also get legal catalytic converters, so I think the authorities would allege that they did that kind of as a cover,
but it's a great place to receive catalytic converters. So they had these facilities, they would receive them from all around the country, and then they take them to the next step, which is they have in the end four decanning machines, which are essentially things that you take the catalytic converter and you stick it in there and it's like a guillotine and it slices it open and then it crushes it and all the dust from the ceramic
core falls into a box. So then you have what's called catalytic converter dust, which is the metals are in there. They're amidst that dust. In fact, they have a special vacuum that vacuums up the dust that kind of drifts into the air. Because that dust that just drifts off of it is also valuable.
You need to collect it all. So they had four of these machines.
They're running them all the time, and they're taking all these converters and they're putting them in boxes and they're sending them on to a refiner based in New Jersey. So that's where the process kind of like moves on to its next step. And these guys were really I mean, they were really living the high life.
You know.
They bought Ferrari McLaren, you know, the highest end cars for hundreds.
Of thousands of dollars.
They bought a big house in New Jersey on a big plot of land, and they were basically scrap metal dealers made good, you know, they were at the top of the industry.
With Gigi Audo. The cops who are pursuing this case have the same kind of question as they do with Tyler Curtis back in Tulsa, which is, how do you tell whether this is a legit operation? How are you able to tell where a crime may have been committed? So how do they start to zero in on their case.
The complicated question for the cops here is they have some intuition that these people are dealing in stolen Caldic.
Converters, but you have to be able to prove it.
And first of all, you have to prove that a certain number of them are stolen, and then you have to be able to prove that they knew they were stolen. Both of those things have to be true if you're
going to win the case or get indictments. Even so, proving that there were stolen converters in there involved essentially tracking who showed up at different places, and then they combine that with sending confidential informants in to sell to these places, and the confidential informance would often come in and tell some story about how I picked these up off a guy who he was chased by the cops and then he hit him in the woods and then he got him back out, you know, elaborate story about
how sketchy they were, in order to establish a sort of trail of evidence that they were buying catalytic converters that they knew had a sketchy origin or knew were explicitly illegal.
You know, they were stolen out of a warehouse, so that sort of thing.
So they sent these guys in there, and did they buy from them?
They did.
It's hard to tell if there were more cases, and I'm sure if it goes to trial, the defense might offer more cases where they might have rejected that. It may be the case that they sent in a bunch and they rejected them and they.
Said, oh, I don't want to buy those.
But they certainly were able to document cases where people came in trying to sell sketchy converters and they bought them all gleefully, according to the indictments.
So Evan, how did this ultimately all unravel Well.
The investigation became extremely sprawling, involved the Department of Homeland Security, It involved police departments all over the United States.
The investigation became.
So large, so unwieldy that all of these different organizations, these police departments and the FEDS and everyone else, the important players, had to get together in Philadelphia for three days to sort of plot the end game of how they were going to take these places down, because they had locations all over the country to sort of pick and choose from, and they wanted to do them all simultaneously, so they came up with a code name, because cops loved to come up with a code name.
They called it Operation Heavy Metal, and.
They picked a day in early November of twenty twenty two when they were going to take everybody down at the same time. The day came and I interviewed actually the next door neighbor to Tyler Curtis's business, and he had actually rented the warehouse to Tyler Curtis and believed
from all outward appearances it's a completely legitimate business. And he was sort of described that morning in November where he was getting a coffee and he just looked out his window and there was a tank outside and there were like shooters on their roof next door, and he was sort of like, what is going on? And he thought, oh, this guy rerounded the warehouse who must be dealing with
drugs and weapons or something. And then he sort of went out and talked to the cops and they told him it was catalytic converters, and he said, well, I don't know, it seems like a little overkill with the swat teams that they brought, but they did that all over the country. They brought in sort of their heaviest tools. They raided the warehouse in Tulsa. They also in Nevada,
in Wisconsin, they did a rate of Virginia. They did multiple raids in New Jersey for the Kanas, So that included their facility and also their home where they had all the fancy cars and their six car garage. This Ferrari is one of several luxury car seas from this one point seven million dollar home. Wednesday, it's where federal agents say DG Auto LLC is based.
You're in Oklahoma.
All raid took place at a facility and Whyner County this morning.
Analytic converter theft ring.
This might be happening in your neighborhood, it's happening all around the country.
One of these defendants is actually has an Instagram account with a picture wearing a necklace with a catalytic converter on it. So big money here, big arrests, a big case by the Department of.
Justice around the country.
They arrested twenty one different people connected to the alleged network and the allegations are basically like interstate stolen property and money laundering.
And so they took Tyler Curtis into custody.
They took Tyler Curtis into custody.
Actually he had pulled out right when they came with their raid, and then he came back maybe to see what was going on. They arrested everybody without incident, and then Tyler Curtis was Actually he couldn't even get out on bail for a good five months after they had him in, and the Connas to this moment have not gotten out on bail. They're actually still in jail, winning trial.
Tyler Curtis was in custody but made bail and is now out awaiting trial. What does he have to say about his case?
Well, he's pleaded not guilty, and I spoke to him briefly. He seemed eager to talk about what had happened. I think he does have a defense that he could put on here.
But then when he came back.
He said that he'd consulted with his lawyer and he had to wait till the case was resolved before we could actually talk.
What do Tyler Curtis's lawyers say about their client.
His lawyer declined to speak on his behalf.
And what about the Khana brothers, what do they say about the charges against them.
The Kanna brothers both have pleaded not guilty in California to the federal charges against them. Love and Kanna's attorney emphasize that he is innocent until proven guilty, of course, that applies to both of them, and that he has the support of the community. It's worth making sure everyone understands that everyone involved here is not guilty until proven otherwise.
I'm curious. You have so many details about what was going on inside the investigation and what they knew. How do you know all this stuff?
Well, some of what I know comes from the indictments, so the indictments are pretty detailed. But then in looking for court documents around the case, I sort of happened upon the reality that a number of search warrant affidavits and seizure affidavits which are filed with federal judges, were available through the Federal Court Document system which called PACER. They were not sealed, and typically in cases like this
they would be sealed. And then I also spent time on the ground in Tulsa just interviewing people and talking to people about what Tyler Curtis's business was like and even the Tulsa PD like what they sort of went through in trying to figure.
It out when we come back where all that dust ends up. So after the police had moved in and rounded up all these people, then the question became, where did all that dust that contained these precious metals go, that generated all that cash that was able to pay for these converters all the way down the line, and that's where the next step of your story went up.
From DG, there's another organization and that organization is in the court tak position is called a refiner in Burlington, New Jersey, and it's actually a company called Doa that's based in Japan, and they were buying the dust that was being sold by DG, and their expertise is taking that dust, shipping it to Japan where they have facilities that smelt and then refine that dust back into pgm's platinum group metals, which they then sell to the market.
So they're ultimately where all the science lives. That's where they really can take the inside of a catalytic converter and turn it back into the thing that's valuable. And again that is an important business because the recycling business depends on smelters and refiners being able to get the metals out. Now, in this case, DOA was buying from DG. I mean they were buying also some catalytic converters too, but they were buying all this dust.
And if you think about the dust, the.
Dust is so far from the catalytic converter that was on the car in terms of what you could do, like you literally could not possibly trace this dust back to where it came from.
It's dust. And that company is not indicted in this case.
And we should also say that company is not accused of any wrongdoing. Its name was redacted in the indictments and prosecutors refer to it only as an unindicted co conspirator.
Now, I went down to the company to see what was going on there.
I talked to and assistant purchasing manager there.
He didn't really want to talk about the business, and he didn't really want to talk about stolen catalytic converters, and he said we would talk more later, and then he sent me to the press liaison, who then never responded to any of my requests. But people in the recycling business, refiners, everybody has this problem, which is that if you get a box of dust that's catalytic converter dust.
There's a pretty good chance that's somewhere in there fractionally there's a stolen converter that is part of that dust, But how could you possibly figure out where it came from, which one it was. And so that's where the challenge of sort of trying to pull apart the illegal business that's infiltrated illegal business, trying to pull it back out becomes incredibly challenging the further up the chain you go.
So Tyler Curtis and DG Mike claim, well, we didn't do anything wrong, we were just buying a legal product on the market. Does that argument actually hold any weight?
Well, I think there are people in the industry who say they're just being made an example of because this is such a huge problem and they were dealing with it the way everyone else was dealing with it. They were buying a ton of converters. Yes, But also I had one person tell me if you look at the number of stolen catalytic converters, which is anywhere from the low end, like sixty five thousand a year to up to one hundred and fifty thousand a year in the United States, and you kind of.
Run the math on.
Even if they had a majority of those that were running through let's say DG Auto, it's still not most of their business, like most of their business was still legal. And so the question becomes, how many illegal converters infiltrating your business turns you into a criminal? And I think the law is not really set up to try and
confront that. And the industry is also struggling with that because people in the legitimate catalytic converter recycling industry, they also want this problem dealt with.
They don't want to feel like criminals. You know.
Some of them said, I don't even tell people what I do anymore because people think that I'm connected with this thing that got stolen off.
Their car in their driveway and they hate me.
And so the legal recyclers are also looking for a way to kind of get this out of the supply chain stream, but it's extremely difficult to do. It's a very strange criminal circumstance.
So after this dust goes to the refiner and is turned back into metals, what happens to those metals?
They make more catalytic converters.
That's the primary use of the metals going back into brand new catalytic converters, which was one of the things that really just stuck with me in the story that if your catalytic converter gets stolen from your driveway, you get a new one. There's some chance the actual PGMs in your catalytic converter came from a stolen catalytic converter. They go back on the market in a totally legitimate market and no one knows where they came from.
Kevin, what is the answer here? You said that legitimate catalytic converter recyclers want the shady side of the business to be shut down. But is there an answer to fixing this problem.
There's not a great answer.
First of all, the answers are often state by state, so states come up with things like people can get their catalytic converters etched with a serial number so it is actually traceable to your car.
If it gets.
Stolen, you can bolt it on better. There's kind of a cover that you can put over it.
But then in terms of the.
Law, you know, they always kind of fall back on changing catalytic converter theft from a misdemeanor to a felony, or making sure that you have to have a certain kind of paperwork. If you possess a catalytic converter, you have to be able to say what car did it come from? And you have to have a license to
possess catalytic converters. But that requires all the way up the chain people keeping track of the paperwork in a business that when you're dealing with junk yards muffler shops, it is kind of tough to do, especially if the laws are different for every state. Because some of the dealers work across many states, and one told me something that I do in one state I can get arrested for in another state.
I guess if you look way way down the road, electric cars don't need catalytic converters.
That's the answer.
As long as electric cars continue their rise, maybe that'll solve the problem, although in the meantime the problem arguably gets worse because the higher admission standards you have, the higher concentration of PGMs you have in.
The catalytic converters.
So as the United States and other countries institute these emission standards higher and high and hire, the catalytic converters become worth more, so you might have a short term problem and a long term solution.
Evan right left, Thanks so much for coming on the show.
Thank you really enjoyed it.
Thanks for listening to us here at The Big Take. It's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen, and we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot net. The supervising producer of the Big Take is Vicky Virgalina. Our senior producer is Catherine Fink. Our producers are Michael Falero and Moberrow ruffelm Sely is our engineer,
with additional production support from Abrea Ruffin. Our original music was composed by Leo Sidrin. I'm west Kasova. We'll be back tomorrow with another Big Take.