On December 14, the U.S. Department of Justice announced that it had filed a civil action on December 12 against three subsidiaries of YRC Worldwide — YRC Freight Inc. (YRC), Roadway Express Inc. (Roadway), and Yellow Transportation Inc. — alleging that these companies violated the False Claims Act by systematically overcharging the government for freight carrier services and making false statements to the government that hid their misconduct.
The Department alleged that, for more than seven years, from September 2005 to at least October 2013, the defendant companies defrauded the U.S. Department of Defense “by millions of dollars for shipments that were actually lighter, and thus cheaper, than the weights for which the defendants charged the government. It also alleged that the defendant companies “knowingly made or used false statements concealing their overcharging practices to the Department of Defense.” According to the Department’s release, the companies
reweighed thousands of shipments and suppressed the results whenever they indicated that a shipment was actually lighter than its original estimated weight. 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.
While the complaint did not specify the amount of damages the government was seeking, it stated that
[a]ccording to the records the Defendants kept for their billings to DOD between June 2010 and October 2012, the Defendants submitted to DOD approximately 725 false claims per month. Based on an extrapolation of those false claims per month to the September 2005 to October 2013 period at issue, the Defendants submitted to DOD approximately 70,000 false claims predicated on weights that they knew were too heavy.
This case by the Department is an intervention in a private FCA action that a qui tam relator, who allegedly worked for YRC and Roadway for more than 40 years, had filed in 2008 under the FCA’s qui tam provisions. Under the FCA, as stated in the complaint, the government’s remedies include treble damages for damages that the government sustains, as well as a civil penalty not less than $5,500 and not more than $11,000, for each violation of the FCA.
In response, on December 14 YRC Worldwide issued a release in which it deemed the government’s claims “totally without merit” and noted that its business with the Defense Department “currently represents less than one percent of YRC Freight’s annual revenue.”
Note: According to a senior Justice Department official, the FCA, including its qui tam provisions, is “one of the government’s most effective civil tools in protecting vital government programs from fraud schemes.” In one sense, this case is a typical example of a systematic-overcharging FCA case, and is not the first case that the Department brought in 2018 against shippers for inflating the weight of shipments.
It is noteworthy, however, that the Department chose to intervene in a qui tam private action that the relator brought ten years ago. Earlier this year, the Department’s Acting Associate Attorney General stated that because frivolous qui tam cases can “lead to bad case law, which can undermine enforcement of the False Claims Act generally,” the Department had instructed its attorneys “to consider whether moving to dismiss an action would be an appropriate exercise of the Department’s prosecutorial discretion under the False Claims Act.” The fact that the Department intervened here, despite the relative age of the allegations, provides some indication of the Department’s confidence in its proof of the allegations.