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https://www.reuters.com/article/us-...ight-units-alleges-overcharging-idUSKBN1OD21C
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U.S. Sues Freight Carrier YRC Over Military Shipments
Lawsuit alleges trucking company overcharged by ‘millions of dollars’ over several years
YRC Worldwide’s shares tumbled more than 28.4% in trading Friday. Earlier in the day, the Department of Defense announced its lawsuit against the trucking company. Photo: Paul Page for The Wall Street Journal
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By
Erica E. Phillips
Dec. 14, 2018 4:48 p.m. ET
The Justice Department is suing a major U.S. freight carrier, alleging that trucking units of YRC Worldwide Inc. overcharged the Pentagon millions of dollars for shipping over several years.
The department said in the lawsuit filed earlier this week that YRC Freight Inc., Roadway Express Inc. and Yellow Transportation Inc. made false statements to the government and defrauded the Department of Defense by inflating weight measurements on bills.
For more than seven years, from 2005 to at least 2013, workers for the companies reweighed thousands of shipments and didn’t disclose the results when those weights came in under the original estimate, the lawsuit alleges.
“When a federal agency, such as the Department of Defense, enters into a service contract with a private corporation or company, the expectation is that the agreement will be administered in good faith,” U.S. Attorney James P. Kennedy Jr. said in a statement.
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YRC General Counsel Jim Fry said in a statement the government’s allegations were “completely without merit,” adding the company has cooperated with all federal inquiries. “We are confident that the evidence will demonstrate that YRC Freight acted consistently with our contract and all applicable guidelines,” Mr. Fry said.
YRC Worldwide’s shares tumbled more than 28.4% in trading Friday, to $3.17 a share.
A spokesman for YRC, Mike Kelley, said the investigation has been going for nearly a decade and the Defense Department has remained a customer throughout the probe. In an email, he said YRC was in compliance with the rules and terms of its contract that were in effect before July 2013, when the federal government changed the rules “to clarify how weighing of freight and potential credits should be handled.” Mr. Kelley said YRC updated its practices.
YRC is the fifth-largest trucking company in the U.S. based on 2017 revenue, according to research firm SJ Consulting Group Inc. YRC has said its U.S. government business represents less than 1% of annual revenue.
YRC is among many private-freight carriers that provide military transportation and other hauling services to the U.S. government. Assistant U.S. Attorney Kathleen Lynch said the complaint focused on military transport, including the hauling of “supplies, equipment, furniture and so forth” between bases and other locations in the U.S.
It isn’t uncommon to find billing errors of 3% to 5% with freight carriers, said Harold Friedman of Data2Logistics, a Fort Myers, Fla.-based company that arranges for payments between shipping companies and their customers. But improved technology in payment systems should reduce those errors, Mr. Friedman said. “It’s amazing to me that carriers can’t bill more accurately in today’s automated environment.”
A whistleblower who worked for Roadway and YRC for more than 30 years filed the original complaint in federal court in Buffalo, N.Y. in 2008. Those allegations spurred the government’s investigation, which led to this week’s filing. The lawsuit included internal communications from the companies detailing what prosecutors called “dishonest reweigh practices [that] caused them to submit false claims to DOD.”
The charges were investigated by the Justice and Defense departments, including the U.S. Army’s Criminal Investigation Division Command. Ms. Lynch said one of the challenges investigators faced was that YRC allegedly concealed the true weight of the loads they were carrying. “They discarded negative weight corrections,” which made it difficult to estimate the full value of the misstated bills, she said.
Write to Erica E. Phillips at [email protected]
and
U.S. Sues Freight Carrier YRC Over Military Shipments
Lawsuit alleges trucking company overcharged by ‘millions of dollars’ over several years
YRC Worldwide’s shares tumbled more than 28.4% in trading Friday. Earlier in the day, the Department of Defense announced its lawsuit against the trucking company. Photo: Paul Page for The Wall Street Journal
0 Comments
By
Erica E. Phillips
Dec. 14, 2018 4:48 p.m. ET
The Justice Department is suing a major U.S. freight carrier, alleging that trucking units of YRC Worldwide Inc. overcharged the Pentagon millions of dollars for shipping over several years.
The department said in the lawsuit filed earlier this week that YRC Freight Inc., Roadway Express Inc. and Yellow Transportation Inc. made false statements to the government and defrauded the Department of Defense by inflating weight measurements on bills.
For more than seven years, from 2005 to at least 2013, workers for the companies reweighed thousands of shipments and didn’t disclose the results when those weights came in under the original estimate, the lawsuit alleges.
“When a federal agency, such as the Department of Defense, enters into a service contract with a private corporation or company, the expectation is that the agreement will be administered in good faith,” U.S. Attorney James P. Kennedy Jr. said in a statement.
Newsletter Sign-up
YRC General Counsel Jim Fry said in a statement the government’s allegations were “completely without merit,” adding the company has cooperated with all federal inquiries. “We are confident that the evidence will demonstrate that YRC Freight acted consistently with our contract and all applicable guidelines,” Mr. Fry said.
YRC Worldwide’s shares tumbled more than 28.4% in trading Friday, to $3.17 a share.
A spokesman for YRC, Mike Kelley, said the investigation has been going for nearly a decade and the Defense Department has remained a customer throughout the probe. In an email, he said YRC was in compliance with the rules and terms of its contract that were in effect before July 2013, when the federal government changed the rules “to clarify how weighing of freight and potential credits should be handled.” Mr. Kelley said YRC updated its practices.
YRC is the fifth-largest trucking company in the U.S. based on 2017 revenue, according to research firm SJ Consulting Group Inc. YRC has said its U.S. government business represents less than 1% of annual revenue.
YRC is among many private-freight carriers that provide military transportation and other hauling services to the U.S. government. Assistant U.S. Attorney Kathleen Lynch said the complaint focused on military transport, including the hauling of “supplies, equipment, furniture and so forth” between bases and other locations in the U.S.
It isn’t uncommon to find billing errors of 3% to 5% with freight carriers, said Harold Friedman of Data2Logistics, a Fort Myers, Fla.-based company that arranges for payments between shipping companies and their customers. But improved technology in payment systems should reduce those errors, Mr. Friedman said. “It’s amazing to me that carriers can’t bill more accurately in today’s automated environment.”
A whistleblower who worked for Roadway and YRC for more than 30 years filed the original complaint in federal court in Buffalo, N.Y. in 2008. Those allegations spurred the government’s investigation, which led to this week’s filing. The lawsuit included internal communications from the companies detailing what prosecutors called “dishonest reweigh practices [that] caused them to submit false claims to DOD.”
The charges were investigated by the Justice and Defense departments, including the U.S. Army’s Criminal Investigation Division Command. Ms. Lynch said one of the challenges investigators faced was that YRC allegedly concealed the true weight of the loads they were carrying. “They discarded negative weight corrections,” which made it difficult to estimate the full value of the misstated bills, she said.
Write to Erica E. Phillips at [email protected]
