Cambridge's largest towing company may lose a lucrative contract with the city because of recent indictments against its owners for alleged involvement in an insurance fraud conspiracy.

City Manager Robert Healy has called for a hearing this morning at City Hall to decide whether there is "reasonable cause" to terminate a contract between the city and Pat's Tow Service, which last year was responsible for nearly 4700 police-ordered tows--more than one third of all those in Cambridge.

The contract, which divides tows among three companies, is due to expire in July.

The principal owners of the tow service, Walter Tauro and Richard J. Bonnell, are among 23 persons and one company arraigned in Middlesex Superior Court on November 7 for allegedly making fraudulent claims amounting to approximately $500,000 from the National Grange Insurance Co. in New Hampshire. A trial date has been set for July.

Healy said he has asked the tow company's owners to prove at today's hearing that there was "no involvement of the tow company in this activity." He said that their contract explicitly states that the City Manager may terminate the agreement upon discovering criminal conduct of their towing operations or any "reasonably related" activity.

Although Pat's Tow Service was not associated with the court charges, prosecutors have alleged that two other businesses run by Tauro and owned by his family were used in the alleged conspiracy.

Prosecutors claim that Pat's Auto Body and Middlesex Auto Leasing, both in Somerville, were responsible for fake bills presented to National Grange by insured individuals.

Prosecutors further allege that the conspiracy included the president and an employee of the Commonwealth Adjustment Bureau, who pleaded guilty two weeks ago to defrauding National Grange. Both have agreed to testify.

Tauro and Bonnell refused to respond to these allegations, and their attorney, Jeffrey N. Moxon of the Boston law firm McGrath and Kane, could not be reached for comment.

Healy said that if he does not determine any direct involvement of Pat's Towing Service, there will be no legal reason to terminate their contract with Cambridge.

"We have to be careful that any termination of the contract is in accordance with the terms of the contract," Healy said. He added that in the approximately 10-year history of the contract, there have been no "substantially large" complaints against Pat's.

Although Healy said he will not base his decision today on activities unrelated to towing, he said that testimony emerging from the trial in July could potentially reverse any decision he makes.

Cambridge City Councilor Alice K. Wolf said she supported Healy's actions. "I assume if there's any shred of a reason, [the termination] will happen," said Wolf.

Councilor William H. Walsh suggested suspending the contract until the July trial. "The integrity of contracts with the city has to be preserved," he said.

A spokesman for the Cambridge Police Department who asked that her name not be used, said the police need Pat's Towing Service's because of its central location and large number of trucks.

"It would hurt us," she said. The police department "couldn't just run with the other two companies. And we don't know if there's another firm in Cambridge."