Task Force on the Trail of Post-Quake Price Gougers

The man in the big office with the cushy chair could not believe the words coming from the woman sitting across from him with the clipboard.

Was she really accusing him of being a price gouger? Was he actually going to be hauled into a hearing in City Hall? Stammering as he learned the unfortunate answers, the prosperous chimney repair man offered a spirited defense and acknowledged that perhaps mistakes were made in the post-quake rush.

“I want price gougers to be nailed as much as you do,” he said. “I think it’s crummy to take advantage of people in a disaster.”

The city’s anti-gouging task force landed on the chimney fixer’s doorstep after receiving five telephone complaints against him. They were among about 900 calls that have flooded an earthquake fraud hot line in the last week and a half. In response, authorities are setting administrative hearings for alleged price gougers and using undercover investigators to trap unlicensed contractors.

Fern Collins, an investigator with the Los Angeles County Department of Consumer Affairs, nodded politely to the chimney man. But despite his pleas of innocence, she set up an appointment for him with the Los Angeles city attorney’s office.

Already, dozens of business owners have received such notices and four contractors have been arrested for operating without a license. The same multi-agency task force is targeting fraudulent charities, shady insurance adjusters and others whom authorities expect to move into the disaster area.

The city’s price-gouging law forbids merchants and contractors to raise their prices on certain essential goods more than 10% above pre-disaster levels. Violators can be fined $1,000 and jailed for up to six months.

In the closed-door hearings on the 16th floor of City Hall, merchants have offered cash register receipts, advertisements and elaborate explanations to defend their pricing policies. Some of the cases have been immediately dropped by prosecutors, but the more blatant examples are still being reviewed.

The chimney man said his company used untrained estimators during the post-quake chaos and acknowledged that they might have made some mistakes. He said the company was offering refunds to compensate for any price discrepancies.

A doughnut shop owner, meanwhile, used testimonial letters praising his baked goods in an attempt to appease investigators. Another defense being raised is one rarely heard during normal times--owners arguing that their prices have always been higher than competitors’.

The post-quake chaos, during which many cash registers were out of operation, is blamed for some overbilling.

“I have hundreds of signatures from my customers saying I didn’t price gouge,” said Dilip Patel, who attended a hearing Thursday and successfully defended his North Hollywood mini-market. “A cashier may have made one mistake during the rush but I am not a price gouger.”

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Reports of exorbitant prices--a gallon of orange juice for $15, a gallon of water for $10 and a gallon of gas for $1.60--have flooded the hot line. Convenience stores have been the biggest culprits, officials say, but supermarkets, movers, gas stations, hardware stores and restaurants have also drawn complaints.

Authorities are also on the lookout for unlicensed contractors. Undercover operations organized by the Contractors State License Board have netted four illegal workers at two homes. Other stings are planned in the coming days.

An aide to Councilwoman Laura Chick lent her damaged home in Woodland Hills to one sting and the district attorney’s office filed felony charges this week against two unlicensed workers who offered to fix a crumbling wall.

“I think people who take advantage of vulnerable folks, victims of disasters, are the very lowest,” Chick said at a news conference Thursday. “I don’t think they have the kind of scruples and principles that most of us share in our society.”

Pablo Salazar Rodriquez, 35, of North Hollywood and Ignacio De Los Santos, 31, of San Fernando were charged with felony unlicensed contracting during a state of emergency.

Authorities said Rodriquez offered to repair the wall for $14,100, while Santos estimated $17,460. Both the bids were about right for the job, but officials said the work performed by those without licenses is often shoddy.

Two other men were arrested in Burbank after they made a deal with an undercover investigator to repair a chimney. They offered bids much lower than the estimated $2,500 cost.

The contractors board conducted similar stings after the 1992 Los Angeles riots and last fall’s Southern California wildfires, resulting in seven arrests.

The city approved its price-gouging restrictions in 1992 after officials found that they had few legal tools to fight skyrocketing prices after the riots. There was little debate at the time, but some business owners now say privately that they ought to be able to charge whatever they want.

“This ordinance is not on the books every day,” said Deputy City Atty. Ruth Kwan, who heads the task force. “It’s only there during a state of emergency. . . . Supply and demand is what makes this country so successful. But there are situations when you are balancing the health, safety and welfare of the people with the free setting of prices.”

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Since the earthquake, other governmental bodies have passed similar measures. Los Angeles and Ventura counties have prepared emergency price-gouging laws of their own and Assemblyman Tom Umberg (D-Garden Grove) said he intends to introduce legislation that would impose a statewide price-gouging prohibition during disasters.

The Los Angeles task force is focusing on businesses that have been the subject of multiple complaints to the hot line, which is answered by volunteers in the county Hall of Administration. The accused owners are first given appointments to defend themselves at the city attorney’s office. The city then decides whether to proceed with the case.

So far, no charges have been filed. However, the Southland Corp., using undercover shoppers of its own, has said it will terminate the franchises of eight 7-Eleven Store operators for raising prices excessively.

Other groups are getting involved.

Valley Organized in Community Efforts (VOICE), a grass-roots religious group made up of Protestant, Catholic and Jewish congregations, is planning a store-to-store campaign in Pacoima on Saturday to pressure owners into signing a covenant denouncing price gouging.

“In the days following the earthquake, some of my parishioners told me of being charged $3 for a gallon of water and $10 for a bag of charcoal,” said the Rev. Tom Rush of Mary Immaculate Church in Pacoima. “I have also heard some stores doubled the price of batteries, baby formula and (diapers).”

Times staff writer Tina Daunt and correspondent Miguel Bustillo contributed to this story.