Baltimore's underground economy took a hit Nov. 18 when Washington, D.C. Mayor Adrian Fenty announced plans to shutter 23 used-car dealerships that serve as illegal storage for vehicles destined to be sold outside the District of Columbia.

Entire lots had been emptied of used cars the day after the closures were announced by Mayor Fenty outside Citi Motors on Bladensburg Road, just a couple miles from the Washington-Maryland border. Officials with the Department of Consumer and Regulatory Affairs cited a number of other reasons for the closures, including lack of sales records, dangerous building conditions, and vehicles unsafe to drive.

According to prosecutors at the Baltimore City State's Attorney's Office, many cars in those Washington lots are purchased by wholesale brokers in Maryland and Pennsylvania and stored in D.C. to be sold via the internet, word of mouth, or on the streets by unlicensed car dealers, some of whom operate within Baltimore's shadow drug economy.

A City Paper expose earlier this year examined the regulatory gaps in oversight that have rendered the Baltimore used-car business fertile ground for illegal activity. State laws protecting the rights of large institutional lenders have led to loopholes for drug traffickers and money launderers to protect their illicit business activity by re-acquiring vehicles seized by the police. After that story was published in July, Baltimore City State's Attorney Patricia Jessamy indicated that she would be addressing those loopholes during the 2009 legislative session in Annapolis.

The regulatory action taken by Washington, D.C. authorities is relevant to Maryland's auto economy in an even broader sense, according to Rudolph Drayton, head of the asset-forfeiture section of the Baltimore City State's Attorney's Office. "It's easy to get a broker's license in Maryland and acquire cars at an auction, because you aren't required to have a car-sales lot," Drayton says. "So people utilize these licensed dealers in D.C. to store their cars and evade the long arm of the law. The D.C. car dealer slaps some paper tags on the car, and it can be taken to Maryland to be sold in a variety of ways."

Drayton could not estimate how many cars sold in Maryland originated from used-car lots in D.C., but based on the numbers of cars seized in Maryland due to drug activity, he says the overall sales could be quite large. "It's a great way for people involved in illegal activity to evade the law," he says.

A cursory search of Maryland court records shows a 2001 Cadillac DeVille purchased from a Bladensburg Road used-car dealer was seized by Baltimore police in January in a bust of a repeat drug offender.

Washington, D.C. authorities have taken note of the underground economy rooted in their city's used car lots. However, city officials there chose regulatory action as a first step, according to Michael Rupert, communications manager at the Department of Consumer and Regulatory Affairs, which closed down three dealerships earlier this month for failure to pay fines for not maintaining proper insurance on cars using dealer tags issued by the Division of Motor Vehicles. At the same time, D.C. officials announced a sweeping probe of 100 of the city's 200 licensed used-car dealers along the main commercial corridors on Georgia Avenue, Bladensburg Road, Benning Road, and Rhode Island Avenue.

The recent car-lot closures are "Phase One" of what officials believe is an entrenched market with possible ties to criminal activity. "We chose the business-license angle rather than the criminal-enterprise angle because, frankly, it's simpler," Rupert says of the 23 closures announced Nov. 18. "It's easy to open a used-car lot in D.C., so these lots have cropped up along commercial corridors and it is creating blight. The first step is to address that issue. Then we can take a closer look at what else is going on."

Rupert acknowledges that car auctions in Maryland, Pennsylvania, and even Georgia are likely involved with the flow of vehicles into and out of Washington. City officials have received anecdotal accounts of large shipments of cars leaving D.C. in tractor trailers, he says. But he notes that Washington, D.C.'s Metropolitan Police Department, which has a precinct on Bladensburg Road adjacent to several used car lots, has not reported overt illegal activity at those lots.

Nevertheless, Rupert says, "There's legitimate business to be done in this market, but that doesn't appear to be what's happening here."

Email Jeffrey Anderson