III. FACTUAL ALLEGATIONS

CSD staff began its investigation of Starving Students in May 2000. Staff reviewed documents and consumer complaints covering a three-year period, 1999 to 2001. Staff reviewed 233 complaints received by CSD and 81 complaints received by the Better Business Bureau. Staff obtained the Starving Students Claim Register, which identified 2,584 loss and damage claims from 1999 to 2001. Staff interviewed and obtained declarations from 58 consumers primarily from the Claim Register, documenting the consumers' experiences with Starving Students. Staff obtained and reviewed business records from Starving Students, including tax statements, revenue reports, claim files, and shipping documents. Staff's findings are described in its investigative reports.

The investigative report of CSD's Financial Examiner alleges that Starving Students knowingly and willfully made false statements of gross operating revenue in order to underpay the Commission's regulatory fees. The License Section of the Commission's Railroad Safety and Carrier Division, Carriers Branch determines the amount of regulatory fees owed based on the quarterly financial reports filed by carriers. Staff compared the gross operating revenue amounts from the Starving Students' quarterly reports to the gross operating revenue stated in Starving Students' annual financial reports, which are also filed with the Commission. Staff obtained Starving Students' Consolidated Financial Statements and Federal and California Income Tax Returns for Starving Students, Inc. prepared by an independent CPA firm, Gursey, Schneider & Co. LLP, for Starving Students. The California Income Tax Returns Schedule R-1 for 1998, 1999 and 2000 show discrepancies between the amount of intrastate revenue reported on the tax returns and the amount of intrastate revenue reported in Starving Students' quarterly revenue reports to the Commission. Staff's report alleges that Starving Students failed to include all of the revenue accounts relating to intrastate transportation of household goods in its quarterly reports. Staff alleges that the amount under-reported was as follows: for 1998, the amount of gross operating revenues under-reported was $3,952,201; for 1999, the amount of gross operating revenues under-reported was $6,719,576; and for 2000, the amount of gross operating revenues under-reported was $6,202,956.

Staff's report alleges that the License Section suspended Starving Students from October 1, 1999 through November 2, 1999, and from December 8 to December 9, 1999, for failure to have evidence of public liability and property damage insurance in effect and on file with the Commission. Staff's report also alleges that from August 31, 2000 through September 12, 2000, Starving Students was suspended for failure to have a Workers Compensation Insurance Certificate in effect and on file with the Commission. Staff's report includes Notices of Impending Suspension sent to Starving Students notifying it of the suspensions for each period of time, which include the following directive: "You are hereby directed not to operate unless and until your Commission operating authority is reinstated." Staff presents evidence that Starving Students completed moves during these periods; at least 25 moves from October 1 through November 2, 1999; at least 2 moves on December 8 and December 9, 1999; and at least 13 moves from August 31 through September 12, 2000.

CSD staff's review of the complaints received by CSD and the Better Business Bureau and the consumer declarations in this case demonstrate that Starving Students failed to acknowledge consumers' claims or failed to process their claims in a timely manner. Consumers report that Starving Students' customer representatives were not helpful, did not respond to their complaints, did not investigate the consumers' allegations, and often took many months to process and/or acknowledge their claims. Consumers also report that Starving Students denied their claims solely because the consumer failed to note the lost or damaged goods on the freight bill at the time of delivery.

Staff's evidence also demonstrates a pattern or practice by Starving Students of offering substantially less to settle consumer complaints than the amount claimed by the consumer. The Claim Register obtained from Starving Students and staff's investigative report demonstrate that in 1999 Starving Students received 1000 property claims for a total of $1,185,831.07, denied 326 of these claims, and offered $192,669.17 (17% of the total claims); for 2000, Starving Students received 1112 property claims for a total of $2,079,017.97, denied 259 of these claims, and offered $279,107.32 (13%); and for 2001 (to July 2001), Starving Students received 475 property claims for a total of $751,845.91, denied 128 of these claims, and offered $65,114.89 (9%). Staff obtained declarations from these individuals, which revealed the frustration consumers suffered because Starving Students offered unreasonably low amounts or nothing at all, and refused to negotiate or consider proof of loss or damage, such as inspections or photographs, from the consumer.

CSD staff report that many consumers allege that their belongings were stolen while in the possession of Starving Students or its agents and employees. Of the 58 victims' declarations obtained by staff, 28 state that their property was stolen by Starving Students' employees. The evidence and declarations obtained by staff demonstrate that Starving Students' management often hired workers whom it knew to have felony convictions for theft, burglary, etc. CSD staff also allege that Starving Students failed to maintain adequate supervision over its storage facilities, resulting in theft of personal belongings from Starving Students' warehouses.

The consumer declarations demonstrate that Starving Students' movers exhibited unprofessional conduct, often appearing untrained and not in uniform. Consumers allege that the Starving Students workers' lack of training resulted in items being damaged and lost. Consumers report that Starving Students' workers' sometimes appeared rude, intoxicated, and actively solicited tips. Consumers report being intimidated by hostile Starving Students' employees, and feeling that the only way to avoid having items lost or stolen was to give the movers a tip immediately, sometimes before the workers had begun to move the consumers' goods.

CSD staff also allege that Starving Students provided verbal estimates over the telephone without a visual inspection of the goods; failed to provide the consumer with the "Important Information For Persons Moving Household Goods" booklet; failed to provide consumers a "Not to Exceed Price" on their freight bill; failed to dispatch a vehicle of adequate size for the move; and failed to observe quoted rates and charges when charging customers a price higher than the verbal estimate.

Starving Students "Agreement for Services" contains three valuation options for lost or damaged goods: $.60 per pound per article (free to the consumer), Actual Cash Value of the total amount declared, which includes depreciation (at additional expense to the consumer), and Full Cash Value, which includes replacement value (also at additional expense). Consumers allege that they paid for Actual Cash Value or Full Cash Value valuation options, but that Starving Students did not honor the chosen (and paid for) option but instead limited the consumer to $.60 per pound per article. Consumers also allege that they were not given the opportunity to review the "Agreement for Services" and thus did not review and initial the valuation option.

Staff alleges that Starving Students failed to provide scheduled moving services in breach of the Agreement for Moving Services contract with the consumer. Staff alleges that Starving Students consistently overbooked scheduled moves, and thus failed to appear at the time scheduled by the consumer and agreed to by Starving Students. Consumers expressed frustration at having to wait hours or days for Starving Students movers to arrive, or having to cancel and make other arrangements, causing the consumer to incur unexpected expenses and loss of time. From evidence obtained by staff, Starving Students booked many more moves than it had the capacity to complete. Staff alleges that for 2000, in the East Bay, West Bay, San Diego, and Southern California regions, Starving Students booked 37,435 moves and completed 25,041 (67%). For 2001, in the East Bay, West Bay, San Diego, and Southern California regions, Starving Students booked 25,450 moves and completed 18,673 (73%).