America's fifth-largest trucking company 'defrauded' the Department of Defense, DOJ suit alleges
- The Department of Justice said on Dec. 14 that it is suing subsidaries of YRC Worldwide for allegedly overcharging the Department of Defense.
- This follows a nine-year-long investigation on YRC's charging practices.
- YRC has denied the charges.
The Department of Justice said on Dec. 14 that it is suing subsidiaries of YRC Worldwide, the fifth-largest trucking company in the US.The subsidiaries, including YRC Freight, Roadway, and Yellow, allegedly overcharged the Department of Defense "by millions of dollars" for more than seven years, the DOJ said.
Following the announcement, YRC's shares sank to a 52-week low, dropping 20% on Friday.
According to the DOJ, YRC did this by estimating the weight of a shipment for the DoD, weighing the shipment, and then supressing the results if the shipment was lighter than estimated. Then, YRC allegedly charged the inflated rate for the shipment. This all occured prior to 2013, YRC said.
Nine years ago, the government began investigating YRC's charging practices after a whistleblower James Hannum, who previously worked at YRC, filed a case. The DOJ says YRC "made false statements to the government" during the investigation.
YRC has countered that these allegations are false."These claims are totally without merit," said Jim Fry, YRC Worldwide General Counsel, in a statement yesterday. "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 US government and all our customers."
Defense contracts represent less than 1% of YRC Freight's annual revenue, the company added.
US Attorney James P. Kennedy Jr. for the Western District of New York said in a statement (emphasis added):
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. In this case, YRC did not legally fulfill its agreed upon obligations to the Defense Department, choosing instead to line its pockets with tax payer's dollars. Such actions are fraudulent and illegal. This case should serve as a warning to any organization that enters into a contract with the federal government - if you try to rip us off, be prepared to pay a heavy price.
And indeed, it's not the first time the DOJ has brought charges against a defense contractor in the shipping industry this year.
Inchcape Shipping Services, previously a Navy contractor, paid the DOJ $20 million in May after it allegedly overbilled the federal government. Inchcape, which is owned by a United Emirates investment firm, had federal contracts worth more than $240 million to service ports in Africa, the Middle East, and the Americas.
"Fraud is an abuse of the system that siphons resources away from the American warfighter," said Jeremy Gauthier, Special Agent in Charge of the Naval Criminal Investigative Service's Washington D.C. field office, following the Inchcape settlement. "NCIS will continue to work with our law enforcement partners to hold responsible those who would put personal gain above corporate integrity."