A struggling SoCal company accused of illegally selling service members’ cars is reaching a settlement with food

In the spring of 2024, a Marine Corps legal aid attorney called a Southern California towing company with a warning.

The company could not sell the car of an active member without obtaining a court order, the lawyer is said to have reminded the manager and owner of the company.

“We do this all the time,” said the lawyer to the owner.

That phone was used as evidence in a federal case accuses S&K Towing Inc. illegally selling or dumping 148 vehicles belonging to service members at Camp Pendleton, a major military base that is home to approximately 42,000 military personnel, over a five-year period beginning in August 2020. Some of the vehicles were towed while the military was deployed overseas.

On Tuesday, federal prosecutors announced a settlement with the San Clemente-based company.

According to the settlement, the company agreed to pay up to $160,000 to military personnel whose vehicles were towed by the company in violation of the Servicemembers Civil Relief Act, a federal law that provides financial and legal protection to active duty military members and their families.

A spokesperson for the company did not immediately respond to a request for comment. But in its response to the federal lawsuit, the company defended itself in court records, denying some of the allegations. The company said its contract with Camp Pendleton did not comply with federal law.

“This defendant will agree that it is better to comply.” [state laws] when it comes to enforcing its rights on vehicles when the registered owner is properly notified and fails to return his vehicle,” court records read.

Prosecutors said the company plans to close but agreed that if it decides to re-enter the business it will use policies and procedures that will comply with federal law.

“Members of the US Armed Forces have a constitutional right to be protected while serving our nation overseas,” First Assistant US Atty. Bill Essayli said in a statement. “This settlement will provide compensation to affected service members and serves as a reminder to all businesses to comply with federal laws that protect our military.”

“For too long, towing companies have sold or disposed of employees’ vehicles in violation of federal law,” Assistant Atty. Gen. Harmeet Dhillon of the Department of Justice’s Human Rights Division said in a statement. “This settlement sends a strong message that all towing companies must respect workers’ rights and take the necessary steps to comply with the SCRA.”

The decision comes three months after prosecutors filed a petition in court, accusing the company of illegally selling, selling or disposing of SCRA members’ vehicles.

Prosecutors allege in court documents that the violations appear to have started as early as the company’s contract with the Naval Police Department at Camp Pendleton. The contract ran from August 2020 to April 2025, court records show.

The contract required that it comply with state and federal laws. Therefore, prosecutors say, the company should have confirmed what the owners of the fleet said before enforcing its obligations by selling or disposing of the towed vehicles. The company also did not obtain a court order before selling or selling the vehicles, the lawsuit said.

The company said in court records that it hired a third-party company that is responsible for verifying the registered owner and informed them that the vehicle has been impounded and will be impounded if the owner does not take action.

Federal prosecutors say that since 2011, they have recovered more than $489 million from more than 152,000 service members whose rights were violated under the SCRA.