Moving Firm Fined, Temporarily Closed

Starving Students Inc., the largest intrastate mover in California, was ordered Thursday to suspend its operations for 30 days, fined $100,000 and placed on two years probation after state officials determined that the company repeatedly overbilled customers and damaged belongings.

In a separate action, the firm agreed to pay as much as $800,000 to Starving Students’ customers, who Los Angeles City Atty. James K. Hahn contended were deceived by false advertising and overcharged.

The settlement of a consumer-protection lawsuit brought by Hahn’s office requires the Los Angeles-based firm to pay an additional $150,000 fine and place notices of restitution in the front sections of newspapers across the state. Hahn also accused Starving Students of failing to quickly honor damage claims and other unfair business practices.

Officials of the company denied any wrongdoing. They settled Hahn’s lawsuit with the state, they said, only to avoid an expensive court battle.

“We didn’t do anything intentionally,” said Ethan Margolith, Starving Students chief executive officer. “This is an example of the government of California jumping all over business.”

Margolith started Starving Students two decades ago and parlayed it into enough money to finance an undergraduate education at UCLA and a law degree from Loyola Law School. His first vehicle was an abandoned truck that he recovered from a mudslide. Margolith painted “Starving Students” on the side, and his business was born.

Hahn’s lawsuit contended that the firm--which has 300 employees and offices in San Francisco, Sacramento, San Jose, Berkeley, Pasadena, Long Beach and Riverside and in San Bernardino and Orange counties--bilked at least 40,000 people of about $20 each by attaching an illegal surcharge to their bills.

The customers had been lured, Hahn said, by 30 various Yellow Pages advertisements that falsely touted “rates so low, the state makes it illegal to charge less” and “the lowest legal rates--not one cent more.”

“In reality,” Hahn said. “the rates charged by Starving Students were more than the minimum rate set by the Public Utilities Commission.”

A permanent injunction issued Thursday prohibits the company from further engaging in any illegal or improper practices.

Margolith discounted Hahn’s portrayal of his firm, contending that the fuel surcharge was legal during the Gulf War and was inadvertently continued after the war was over. As far as the advertisement that bragged of rock-bottom prices, he said: “We inadvertently failed to remove that one little line in the ad.”

Hahn acknowledged that the PUC allowed a surcharge on movers’ customers during the war, but said Starving Students charged as much as 7% more than the state allowed and continued the surcharge long after it should have been discontinued.

In the action by the state, the commission accused Starving Students of 142 violations of consumer protection laws. Citing complaints from eight counties, the PUC said it documented more than 200 cases of illegal billing or mishandling of loss and damage complaints.

PUC investigators said that during a two-year period, they also found that the California Highway Patrol issued 97 violations to the company for unsafe vehicles. Under an agreement reached with the regulatory agency, the company has promised to start a new program of vehicle maintenance and repair.