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US Government Sues YRC, 2 Others for Overcharging DoD on Shipment Weights

US Government Sues YRC, 2 Others for Overcharging DoD on Shipment Weights

For more than 7 years, less-than-truckload carrier YRC Freight and two related carriers inflated the weight of shipments tendered by the Pentagon, billed the shipper using improper rates, and falsified statements in a bid to conceal their actions, the Justice Department said today in bringing suit against the companies.

The DOJ alleged the three carriers, YRC Freight, Yellow Transportation, and Roadway Express, billed the Pentagon based on shipment weights that were higher than the actual weight of the goods that moved. The practice was systemic, and the three carriers "knowingly made or used false statements" to hide their practices, according to the suit. The amount of the alleged overcharges were in the "millions of dollars," said the agency, without disclosing specifics.

Yellow was the name that was used for decades before it was re-branded into YRC. Roadway was an LTL carrier acquired in 2003 by then-Yellow.

According to the lawsuit, the carriers reweighed thousands of shipments but suppressed the results whenever they showed a shipment was lighter than its original estimated weight. The suit said the carriers "knowingly billed the government (and their other customers) based on weights that they knew to be inflated." 

The carriers allegedly made false statements to induce the Pentagon to use their services, and knowingly falsified statements to "improperly avoid their obligations to correct inflated invoices and (to) return overpayments," DOJ alleged. 

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In a statement, Jim Fry, general counsel of Overland Park, Kan.-based YRC Worldwide, Inc. (NASDAQ: YRCW) YRC Freight's parent, called the government's claims "totally without merit," Fry said the company has "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."

For YRC, facing a potentially contentious battle with the Teamsters union over a new collective bargaining agreement and struggling to gain traction in the marketplace while its rivals perform relatively well, the last thing it needs is a lawsuit from the federal government with millions of dollars at stake. Near the close of trading today on the NASDAQ, YRC shares were trading at $3.16 a share, a 52-week low.

The suit is the latest chapter in a long running dispute over pricing practices for government shipments tendered to YRC and the other companies in a period prior to 2013. DoD traffic accounts for about 1 percent of YRC's annual revenue, according to the company.

The original lawsuit was filed by James Hannum under the "whistleblower" provisions of the False Claims Act. Under the act, private citizens can bring suit on behalf of the US government for false claims, and can share in any recovery. The government can intervene in such lawsuits, as it has done here. Those who violate the act are subject to treble damages and civil penalties.  

James P. Kennedy Jr., U.S. Attorney for the Western District of New York, said in a statement announcing the suit that YRC did not "legally fulfill its agreed upon obligations to the Defense Department, choosing instead to line its pockets with taxpayer's dollars."

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