THE CITY of Philadelphia yesterday cut its ties with the auto-body shop of reputed mob associate Ronald Galati after the Daily News reported on his lucrative city contract and his alleged involvement in a triple-murder plot tied to an ongoing insurance-fraud probe.

Galati's American Collision & Automotive Center has raked in more than $1.2 million in taxpayer money since 2011, according to Mayor Nutter's spokesman, Mark McDonald.

McDonald said the city paid the company $283,000 in fiscal year 2011, $645,000 in fiscal year 2012 and $275,000 in fiscal year 2013. The payments for fiscal year 2014, which began in July, are not yet available.

McDonald initially praised the company, telling the Daily News: "They've been on time, they've done quality work, and they've worked within the estimate. In short, they've done a good job."

But city officials apparently switched gears. McDonald told WHYY's NewsWorks that the city had decided to stop sending police cars and other city vehicles to Galati's shop in South Philly for repair and maintenance.

"The city government is not looking to create controversy," McDonald said. He didn't respond to requests for comment from the People Paper.

Galati, 63, who has been tied to mobsters Louis "Bent Finger Lou" Monacello and George Borgesi in the ongoing racketeering retrial, was sentenced to three years in prison in 1995 for running what federal prosecutors called a "shop of fraud" on 12th Street near Washington Avenue. He was arrested Friday and held without bail on charges of attempted murder, solicitation of murder, and retaliation and intimidation of a witness or victim.

Court documents reveal that city police and state organized-crime authorities have been investigating Galati for a year and a half for crimes related to insurance fraud. The documents say that a surveillance camera focused on American Collision, on 20th Street near McKean, captured Galati meeting in October with two men he allegedly hired to kill a body-shop operator who he believed had testified against him, and the operator's son.

"They gotta go," one of the alleged hit men quoted Galati as saying.

The documents confirm that the man Galati allegedly targeted is, in fact, a cooperating witness who testified this year before the grand jury in the insurance-fraud case. The Daily News is withholding his name because he has not been charged with a crime and to avoid endangering him.

Galati, who lives on Garnet Street in South Philadelphia, also is accused of conspiring to have his daughter's boyfriend murdered. The boyfriend, Andrew Tuono, was shot three times outside his Atlantic City home Nov. 30, but survived. The alleged hit men are now cooperating against Galati, court documents say.

McDonald said American Collision bid and won the contract in 2011 to repair and maintain police cars and other city vehicles. The contract was signed by Galati's son, who also works there. Sources say the father runs the company.

"There is no requirement in a service, supply or equipment contract to disclose prior criminal conduct," McDonald said.

A police source said of the elder Galati: "He actually did help a lot of people out, but he's got a dark side that's tied to the underworld old-school approach to the Mafia style of making money."

Galati's arrest is particularly worrisome for South Philly wiseguys who are concerned that he could flip and provide the feds with a trove of information going back to the Joey Merlino-John Stanfa mob war in the early 1990s.

Yesterday, Galati abruptly switched attorneys, from longtime mob lawyer Joseph Santaguida to Anthony Voci, a former city prosecutor. But Voci dismissed speculation that Galati is considering cooperating with law enforcement.

"If the guy starts to talk, there's going to be some problems," said a source familiar with the investigation. "Anyone who has done something illegal with Ron Galati in the last 20 years is not going to have a very Merry Christmas."

- Staff writers Morgan Zalot and Julie Shaw contributed to this report.