U.S. says military cargo was improperly weighed by three units of YRC, resulting in higher freight costs.
The Justice Department says three units of the trucking company YRC Worldwide, systematically overcharged the military for shipments between September 2005 and October 2013.
YRC Freight Inc., Roadway Express Inc. and Yellow Transportation Inc. “engaged in a fraudulent scheme to use inflated cargo weights to deliberately overcharge the United States Department of Defense for freight services,” the government said in a complaint filed last week in U.S. District Court in Buffalo. (Hannum v. YRC Freight, Inc. W.D.N.Y. No. 08-0811(A).
DOJ also said the companies “made false statements to the government that hid their misconduct.”
“Specifically, the United States’ lawsuit alleges that the defendants reweighed thousands of shipments and suppressed the results whenever they indicated that a shipment was actually lighter than its original estimated weight,” said DOJ. “Thus, instead of charging the Department of Defense for shipments based on the correct weight, the defendants knowingly billed the government (and their other customers) based on weights that they knew to be inflated. The defendants also allegedly made false statements to induce the Department of Defense to use them as freight carriers and further knowingly made or used false statements to improperly avoid their obligations to correct inflated invoices and return overpayments.”
Jim Fry, YRC Worldwide’s general counsel, said, “These claims are totally without merit. We have made every effort over nearly a decade to address the government’s questions. We are confident that the evidence will demonstrate YRC Freight acted consistently with our contract and all applicable guidelines. We look forward to continuing to provide essential and valuable logistics services to the U.S. government and all our customers.”
Logistics Management Magazine ranks YRC Freight, which had more than $3 billion in revenue in 2017, as the fourth largest LTL carrier behind FedEx Freight, XPO Logistics, and Old Dominion Freight Line.
The DOJ said that in 2008, “the original lawsuit in this case was filed by James Hannum under the qui tam, or whistleblower, provisions of the False Claims Act.” Hannum has worked for Roadway, and then YRC, for more than 30 years at its facility in Buffalo, N.Y.
Under the False Claims Act, Justice said, “private citizens can bring suit on behalf of the United States for false claims and share in any recovery. The act permits the government to intervene in such lawsuits, as it has done here. Those who violate the act are subject to treble damages and civil penalties.”
DOJ noted, “The claims asserted in the United States’ complaint are allegations only and there has been no determination of liability.”
In its complaint, the government noted that Yellow purchased Roadway in 2003. The companies remained independent brands in the marketplace and officially merged in 2009 to become YRC Inc.
The government said that as part of the merger process, in 2005 “Roadway and Yellow tried to increase their revenue by checking the weight of each load of cargo that passed through their freight terminals. The defendants’ revenue depended in large part upon the weight of their shipments, with heavier shipments typically leading to more revenue.”
In the aggregate, the government said when YRC reweighed cargo, there were “more positive reweigh corrections than negative reweigh corrections, so reweighing and correcting more shipment weights helped increase their earnings.”
The government claims, “Not content with its revenue boost from additional reweighs, Roadway stopped making negative reweigh corrections in September 2005. This meant that although Roadway continued to correct weights when its reweigh results meant it could charge its customers more, the company stopped correcting weights when its reweigh revealed that the customer was entitled to a credit or discount because the shipment was actually lighter than the stated weight.”
The complaint adds that “in early 2006, Yellow likewise established a similarly skewed reweigh practice where it would not correct inaccurate weights if the error was in its favor. The companies merged into what is now YRC in 2009 and continued to systematically suppress negative reweigh corrections for their DOD shipments until at least October 2013.”
The government says “in 2005, Yellow conducted an informal survey of freight carriers in which it found that nearly all of its competitors believed that failing to make negative reweigh corrections ‘was a breach of faith with their customers and undermined the integrity of the [reweigh] program.’ The defendants also confirmed in 2007 that they were the only freight carriers to systematically quash negative reweigh corrections.
“In addition, the defendants deliberately concealed the evidence that they were cheating their customers, including DOD. As described in an internal email from 2009, when YRC employees attempted to make a negative reweigh correction, the company’s computer system would automatically reject the entry and hide the negative reweigh by falsely recording the problem as ‘Can Not [sic] Find Employee Number.’”
Government claims YRC Worldwide overcharged
