Hundreds of motorists have unwittingly bought stolen cars following the theft of a large consignment of blank DVLA vehicle registration forms.
The latest "missing documents" crisis to hit the Government has so far allowed car thieves to make at least £4 million from innocent members of the public.
Gangs are using the stolen V5C "registered keeper" forms to present unsuspecting victims with official, watermarked reassurance that they are buying legitimate cars, not stolen ones.
Only later does the victim discover the vehicle is stolen and, with their new cars confiscated by police, they are left without compensation.
The stolen log books have already been used to sell 520 stolen cars and senior police admit they are facing a "huge problem", with more victims expected to emerge. The DVLA (the Driver and Vehicle Licensing Agency), which is part of the Department for Transport, does not know how the documents were stolen or even how many were taken.
They were part of a batch of 2.2 million blank V5C certificates that should have been shredded because of a minor printing error. The agency has now had to issue a warning covering all 2.2 million documents.
Theresa Villiers, the shadow transport secretary, said: "This is another very worrying data foul-up by the Government. The last thing long-suffering motorists need at the moment is the thought that they might be the victims of car crime fraud."
The loss of the documents comes after two computer discs containing the personal details of 25 million people disappeared in November and a Ministry of Defence laptop containing 600,000 people's details went missing in January.
In June, two separate sets of intelligence documents were left on trains. It also follows the revelation last week that thousands of blank passports were stolen from a van in Oldham, Greater Manchester.
An internal DVLA report seen by The Sunday Telegraph reveals that in December 2005 some of the 2.2 million forms were transported by an independent haulier from the Paragon Group, a printing firm, to the DVLA's Swansea headquarters.
In February 2006 the DVLA sent these forms back to the printers because of the printing error. Paragon then stored them.
On November 1 2006, two lorries delivered what was thought to be the full complement of 2.2 million forms from Paragon to PHS Datashred, a commercial document disposal company in Durham.
The certificates were thought to have been shredded, but weeks later they started to resurface in the first of the so-called "car-cloning" scams.
Initially the DVLA thought the problem was confined to a small number of certificates in an individual reel of 23,000 documents. They issued a warning, confined to just this batch, but, as more stolen documents resurfaced, the scale of the problem grew, necessitating broader warnings.
Finally, DVLA officials issued a warning about all 2.2 million documents.
A document released last month told buyers to contact police if presented with a V5C with a serial number in the ranges BG8229501 to BG9999030 or BI2305501 to BI2800000.
The three-paragraph press release, however, made no mention of the fact that some of these forms should have been shredded, but were somehow stolen by criminals.
Detective Inspector Mark Hooper, from the Vehicle Crime Intelligence Service, said that 830 stolen log books have so far resurfaced in completed transactions or pre-sale checks.
Of these, 520 had been used in stolen car sales totalling £4 million. Some certificates had even been used to offload stolen cars in Cyprus.
"This is a huge problem and it will go on and on, until the documents run out," he said. "We are dealing with criminal fraternities operating on a national basis, and stealing good cars to order."
The criminals, meanwhile, have found a convincing way to alter letters on the forms, changing Gs to Cs or Bs to Ps to make their certificates look as if they fall outside the suspect range.
The cloning scam involves the gangs stealing cars and then finding "dummy" vehicles of the same model and colour.
The stolen car is given number plates to match the dummy, and the criminals can even grind a new vin (vehicle identification number) under the bonnet to make a match.
When the victim buys the stolen car, he sees what looks like a genuine V5C registration certificate which, like everything else, matches the details of the legitimate, dummy vehicle.
Even experienced car dealers have been fooled, as Andrew Smith, 45, of Exeter, discovered when he lost £11,250 buying a Nissan Navara in March.
He said: "We were as careful as we could have been but when we tried to get the tax disc updated and discovered our car had been stolen in February."
Mr Smith said the thieves had altered the BG on the serial number of the stolen V5C to PC.
When he demanded compensation, a DVLA official emailed him: "I have not been able to verify that the certificate was from a batch that had been stolen because I have not had sight of it. Whilst the Agency is sympathetic, the DVLA cannot be held responsible for the dishonest acts of third parties."
Mr Smith said: "The DVLA or their associates gave the crooks the tools to do this job. They say they have publicised the issue, but no-one we have spoken to was aware of this problem."
Philip Swift, a former Metropolitan Police officer who has investigated the problem.
He said: "It is extremely disappointing to see so little activity and assistance from the DVLA, when stolen vehicles are being sold with DVLA paperwork."
A DVLA spokesman said procedures had now been tightened up to stop further thefts.
He insisted "the vast majority" of the 2.2 million documents were safely destroyed. He explained that the lorries were weighed when they arrived at the PHS shredding plant, and seemed to have 29,640kg of documents ready for destruction.
He admitted: "We know something went wrong, but we can't say how many were pilfered."
VAT Reduced! 
