III. Discussion

A. Does Respondent Have a Valid Existing Permit?

Respondents state that all intrastate moves occurring since October 10, 2003 are legal because they were done under respondents' existing authority of permit T-189207. Respondent Isaac Nagar testified he thought this permit was still active. Later, in their opening brief, respondents argue that the permit was improperly revoked because the Commission based the revocation on the terms of a Florida divorce judgment and did not provide respondent notice and an opportunity for hearing.

CPSD's evidence in Exhibits 1 and 5 show that permit T-189,207, issued on January 11, 2000 to Globe Van Lines, Inc., was suspended or revoked for all but 14 days of the period of the investigation in this OII/OSC. The 14 days of authority are October 10-19, 2003, and November 10, 11, and 12, 2003. CPSD's testimony also establishes that numerous cease and desist letters were mailed and hand-delivered to respondents beginning September 9, 2003.

The reasons for the suspensions and revocation of permit T-189,207 were failure to maintain proper liability and workers' compensation insurance and to pay regulatory fees. While staff was aware that under the terms of Isaac Nagar's October 17, 2001 divorce agreement his wife was given sole ownership of Globe Van Lines, Inc., the only time this was referenced in a suspension is when the company forfeited corporate powers with the California Secretary of State on January 7, 2004. The suspension history of permit T-189,207 is:

· October 20, 2003 - The permit was suspended due to failure to pay quarterly fees. (See Ex. 5, Att. 1, Doc. 5.)




· November 10, 2003 - The permit was reinstated (see id. at Doc. 6.)




· November 13, 2003 - Three days after reinstatement, the permit was suspended for failure to maintain workers' compensation insurance coverage. (See id. at Doc. 8.)




· December 04, 2003 - The permit was suspended, above and beyond the November 13, 2003 suspension, due to failure to maintain adequate public liability insurance. (See id. at Doc. 9.)




· January 7, 2004 - The permit was suspended, above and beyond the other outstanding suspensions, because (1) the California Secretary of State forfeited Globe Van Lines corporate powers and (2) the failure of Mr. Nagar, qualified examinee, to notify the Commission of his cessation of connection with Globe Van Lines. (See id. at Doc. 10 & 11.)




· February 11, 2004 - the permit was revoked for failure to maintain workers' compensation insurance. (See id. at Doc. 12-15.)

As set forth in § 5137 (b), a requirement of a household goods carrier under its permit is to maintain adequate insurance and pay the Commission's specified motor carrier fees. Failure to maintain adequate insurance or pay Commission fees are grounds for the Commission to suspend or revoke a carrier's permit under its administrative procedures; there is no automatic right to a hearing for a carrier that violates these statutory provisions. Respondents' permit T-189,207 was properly suspended and then revoked for failure to maintain adequate insurance and pay regulatory fees. Respondents were given proper notice of all administrative actions of the Commission and have taken no action to cure the deficiencies or present affirmative evidence in these hearings of insurance coverage for Globe Van Lines, Inc., current California registration for the corporation, or payment of regulatory fees.

Based on the evidence submitted, we find that the Commission properly suspended and then revoked permit T-189,207, and that Globe Van Lines, Inc. has not held any Commission authority to conduct intrastate moves in California since November 12, 2003. The record here reflects that CPSD did not bring any charges related to the fourteen days that Globe Van Lines, Inc. did hold operating authority during the period of investigation. Therefore, respondents did not have operating authority for any of the intrastate moves that are the subject of this OII/OSC.

B. Were respondents given proper notice in this proceeding?

In their testimony, respondents state they were not provided an opportunity to examine all evidence and given a hearing prior to the Director of CPSD denying their November 7 permit application. Respondents include a copy of CPSD's March 19, 2004 letter in Exhibit 10. The letter states in its conclusion:

Under the circumstances, the staff does not believe that you are fit to be licensed to serve the public as a household goods carrier and your application is denied. You have the option of contesting this staff action by filing a formal application in accordance with the Commission's Rules of Practice and Procedure. If you file such an application within 180 days and attach a copy of this letter, payment of another $500 filing fee will be waived. In your application, you will want to address the concerns of staff stated in this letter, demonstrate to the Commission you have taken corrective actions as directed above, and why you believe you should be issued a permit in light of current circumstances. Should you file a formal application, the staff will protest it and ask that the application be set for hearing. During a hearing you may present evidence on your behalf. It is possible that further investigation on our part may uncover additional topics of concern about your firm's fitness to serve the public, which would also be presented at a hearing.

Once again, you are placed on notice to immediately remove all unlawful advertisements and to cease all unlawful moving operations. Your continuing failure to comply with laws governing movers in California will subject your firm to penalties as provided in the Public Utilities Code. (Ex. 10, pages 2-3.)

We find that respondents were advised of their right to seek a review of staff's action through the formal application process and, therefore, notice and an opportunity to be heard was given. In the formal application process, discovery rights would allow respondents to obtain the documentation they sought. Respondents chose not to file a formal application.

Moreover, in issuing this OII/OSC, the Commission chose on its own motion to provide respondents additional notice and opportunity for hearing on their November 7 permit application.

C. Have Respondents Violated the Commission's Statutes,
Rules, and Regulations?

The burden of proof lies with CPSD to establish by a preponderance of evidence that respondents have violated applicable statutes, rules, and regulations. (See D.97-05-089, 72 CPUC 2d 621, 642 and D.05-04-008.) CPSD has met its burden of proof by establishing, through staff investigators, public witnesses, and documentary evidence, that respondents have repeatedly and seriously violated the Public Utilities Code, MAX 4, and GO 100-M.

The evidence shows that respondents advertised and operated without a license and insurance in a manner that inflicted serious financial and emotional harm on the public. One of the most egregious examples of respondents' behavior is found in the testimony of Johanna Hoffmann. Ms. Hoffmann was charged double the amount originally quoted for her move, and the movers refused to unload the truck until she paid the amount in full with cash. She then filed a claim in Small Claims court and testifies:

Globe Van Lines appeared, and a default judgment was issued against them. Thereafter, Isaac Nagar challenged the judgment stating he did not receive notice of the initial hearing. A second court date was scheduled and Isaac Nagar attended. While speaking to the judge, Isaac accused both my roommate and me of asking the movers to work for free. Additionally, he accused us of being sleazy women who did not work and screwed businesses out of their money. The judge did not make an immediate ruling and informed us all that a judgment would be mailed to us within 10 days. Thereafter, Isaac waited for my roommate and me to leave the courtroom and rode the elevator with us. In the elevator, Isaac yelled at us both and told us he would never pay us because he didn't owe us anything.

Subsequently, a judgment was made in our favor against Isaac personally and Globe Van Lines. No payment was made until a lien was put on Isaac's account. A payment in the full amount of the judgment was finally received in late 2003, almost one year after the initial incident. (Exhibit 2, Attachment 10(h), affirmed in testimony at hearing on December 20, 2004.)

Based on the testimony of CPSD investigators and witnesses, we find respondents guilty of the 604 violations of the Public Utilities Code alleged by CPSD, and, further, that respondents actions render them unfit under § 5135(e) and (f) to be granted a household goods permit. Section 5135 sets criteria for the Commission to consider when issuing a HHG permit. Section 5135(f) states:

The Commission shall issue a permit only to those applicants who it finds have demonstrated that they possess sufficient knowledge, ability, integrity and financial resources and responsibility to perform the service within the scope of the application.

Section 5135(e) states:

The Commission may refuse to issue a permit if it is shown that an applicant or an officer, director, partner or associate thereof has committed any act constituting dishonesty or fraud; committed any act which, committed by a permit holder would be grounds for a suspension or revocation of the permit; misrepresented any material fact on the application; or, committed a felony, or crime involving moral turpitude.

The evidence presented by customers of the business practices employed by respondents is particularly offensive because members of the public had their personal belongings held hostage, lost, and damaged, and when they attempted to seek redress from respondents were subject to intimidation, threats, and verbal abuse. Attached as Appendix A to this decision is a summary prepared by CPSD of the claims of 73 members of the public that CPSD testifies are owed full compensation for illegal overcharges.³ The deliberate manner in which respondents deceived the public is shown in their advertised photo (see Appendix B) of individual storage containers for customers. In contrast to respondents' advertisement, actual photos of respondents' storage facility were taken by CPSD and are also reproduced in Appendix B. The CPSD photos show that personal goods were not segregated by customer and were haphazardly stacked and strewn about; one customer testified her belongings were delivered from the facility with rat droppings.

The assertions of respondents that they did not violate the statutes cited by CPSD lack evidentiary and legal support. Mr. Yaniv Nagar's testimony in Exhibit 10 that all customer complaints were satisfactorily resolved is not supported by production of a claims log and is contradicted by the sworn declarations and testimony of customers. Mr. Isaac Nagar's testimony that his former permit remains active and in good standing is unsupported by documentary evidence. Respondents' assertion that its bait and switch tactics are legal because the final charges are less than 65% of the maximum rates does not properly apply the Max 4 tariff provisions or the statutory provisions of § 5133.⁴

Respondents also fail to provide evidence that they maintained proper liability and workmen's compensation insurance for their former permit T-189,207. They assert on brief that they transferred their insurance coverage to their new company and pending permit, T-189,898. CPSD took account of coverage under both permit numbers in the dates it charged violations (see Exhibit 2, Attachments 11 and 13). In their reply brief, respondents also submit a federal regulatory website page that they assert establishes that they hold current operating insurance. Evidence cannot be introduced by brief and, even if properly admitted, would not establish that respondents had provided evidence of insurance for intrastate moves.

Finally, respondents assert that § 5258 serves to release respondent Isaac Nagar from any disciplinary action here because he appeared and voluntarily testified at the hearing. Again, respondents misapply the law. Section 5258 affords protection from self-incrimination for any person who has invoked the privilege against self-incrimination and is ordered to testify in a Commission hearing. Respondent did not invoke this privilege nor was he ordered to testify at hearing.

The Commission's statutory authority and regulatory oversight and enforcement program is designed to ensure that members of the public do not suffer harm at the hands of household goods movers, who assume custody of their customers' essential personal possessions when performing moving services. The evidence here shows that members of the public were seriously harmed and the Commission should take all steps necessary to bring to an end any ongoing violations, provide restitution to victims of the wrongdoing, and deter respondents and other household goods movers from future violations.

D. What are Appropriate Sanctions for the Violations?

Based on the evidence presented, we should deny respondents' November 2003 permit application T-189,798 with prejudice, find that respondents should immediately cease and desist all operations as an intrastate household goods carrier and remove old Cal-T permit number T-189,207 from all advertisements and trucks. In addition, we should order respondents to make full restitution to all customers identified in this proceeding, pay a fine sufficient to deter them from future violations, and reimburse the Commission for the cost of CPSD's investigation.

As set forth in Appendix A, the amount of customer restitution is $61,590.52. Respondents shall reimburse the customers listed in Appendix A their full reimbursement within 15 days after the date this decision is mailed to the service list. Proof of payment shall be filed and served on the service list and shall be provided to the Commission's Executive Director and the Director of CPSD within five days of payment.

The 604 violations found here are subject to maximum fines of $639,500 under our statutory provisions, as detailed in Table 1.

To provide guidance in setting fines, the Commission distilled the principles that it has historically relied upon in assessing fines and restated them such that they may form the basis for future decisions assessing fines. (See Rulemaking to Establish Rules for Enforcement of the Standards of Conduct Governing Relationships between Energy Utilities and Their Affiliates, Decision 98-12-075, at Appendix B.) This decision states that the purpose of a fine is to effectively deter further violations by the perpetrator or others and that in determining whether to impose a fine and at what level, the Commission will consider (a) the severity of the offense; (b) the utility's conduct; (c) the financial resources of the utility; (d) the totality of the circumstances in furtherance of the public interest; and (e) the role of precedent.

Applying the guidelines set forth above, CPSD has shown that $50,000 is an appropriate amount to fine respondents, and we therefore adopt this amount. A higher fine could be supported based on the serious harm to the public from the egregious behavior of respondents and the fact that respondents made no effort to prevent, detect, or rectify the violations. However, a $50,000 fine is reasonable when consideration is given to the size of respondents' business and the recent level of fines the Commission has ordered to be paid by other household goods movers. (See $40,000 fine in D.05-04-009, $30,000 fine in D.05-04-008, and $50,000 fine in D.03-05-048.⁵)

Respondents shall pay this fine to the State of California's General Fund within 45 days after the date this decision is mailed to the service list. Proof of payment shall be filed and served on the service list and shall be provided to the Commission's Executive Director and the Director of CPSD within five days of payment.

In Exhibit 8 and 9, CPSD provides a cost breakdown of its investigative expenses. We find these costs reasonable and, pursuant to § 5313.5, direct respondents to reimburse these expenses. Respondents shall pay $13,292.50 to the Commission within 45 days after the date this decision is mailed to the service list. Proof of payment shall be filed and served on the service list and shall be provided to the Commission's Executive Director and the Director of CPSD within five days of payment.

We find here that respondents are unfit to hold operating authority as a household goods mover, but we recognize that respondents could rehabilitate themselves by making full restitution to customers, paying all fines and investigative costs, agreeing to carry all required insurance, and demonstrating that they would treat the public in a civil manner and operate within the law on charges and handling claims for loss and damages.

Therefore, we require respondents, or any entity in which respondents hold a financial or management interest, to apply for a license only through the formal application procedure. In any future application, respondents would need to reference this decision, and include a showing of rehabilitation and compliance with the terms of this order.