James Hannum, who worked for Yellow Transportation, filed a lawsuit under the qui tam provisions of the False Claims Act in 2008 alleging that the company engaged in overbilling. 14 years later, Hannum will receive a $1.3 million whistleblower award plus interest as part of a settlement with the U.S. government.
According to a U.S. Department of Justice press release, Yellow Transportation Inc., along with YRC Freight Inc. (YRC) and Roadway Express Inc. (“collectively the YRC defendants”), will pay $6.85 million to resolve the allegations “that they knowingly presented false claims to the U.S. Department of Defense (DOD) by systematically overcharging for freight carrier services and making false statements to hide their misconduct.”
From September 2005 to October 2013, the YRC defendants contracted with DOD to ship military freight across the country.” Per their contracts, the defendants “were paid based in part upon a shipment’s weight.” According to the press release, the government alleged that the YRC defendants “billed for delivery charges based on higher weights when, after reweighing the shipments, they knew that the actual weights were lower.”
The government alleged that the YRC defendants engaged in this fraudulent behavior for over seven years: “reweighing many shipments before final delivery, and when the reweighs showed that a shipment weight was more than the original weight, the YRC defendants charged DOD for these higher weights.” When a reweigh showed a lower weight than the original weight, the YRC defendants “allegedly concealed from DOD the lower weights and instead charged DOD for the original, inflated weights.” The YRC defendants also allegedly engaged in covering up the behavior in the form of making “false statements assuring DOD that they would comply with the rules requiring them to correct discrepancies uncovered during any reweigh process.”
According to an article from The Buffalo News, Hannum first tried to raise concerns about the alleged overbilling internally, but his lawyer Daniel C. Oliverio said it “really got nowhere.” According to the article, “[t]he U.S. Attorney’s Office intervened in the court case in 2018 against the wishes of Oliverio, who asked the office to ‘let us handle it,’ on behalf of Hannum, he said.”
The qui tam provisions of the False Claims Act enables private citizens to file lawsuits on behalf of the government if they know of an individual or company defrauding the government. Qui tam whistleblowers are eligible to receive between 15 and 30% of the government’s recovery, if one occurs. The government also has the option to intervene in qui tam lawsuits.
At the time that the U.S. government intervened, Hannum worked as service planner or supervisor; before that, he was a “weight and inspections supervisor.” He still works at the company today. “For all those years, while still working, this case was hanging over his head,” Oliverio told The Buffalo News.
According to Oliverio, Hannum requested that the government “do something, but to no avail…This was very disappointing, and it’s unbelievable it took this long. I just hope this never happens again.” Oliverio also said that the $1.3 million reward plus interest Hannum will receive is “on the very low side.”
The Buffalo News reports that in 2019, “[t]he companies sought to dismiss the case…saying in court papers that the government agencies were responsible for verifying the correct amount of transportation charges before paying.” In response to the recent settlement, Yellow’s executive vice president and general counsel Leah Dawson said in a statement: “We remain confident that we complied with the then-existing rules and our contractual obligations. While we believe we had strong defenses, we decided, in the best interests of all parties, to resolve this matter for a small fraction of the amount originally demanded.”
“We expect companies to do business with the government honestly and fairly,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, said in the press release. “This settlement demonstrates the department’s continuing commitment to hold accountable those who defraud the government and, by extension, the American taxpayers.”
The False Claims Act in 2021
The DOJ released data from FY 2021 about the False Claims Act and whistleblower lawsuits. In FY 2021, whistleblowers helped the DOJ recover $1.6 billion in settlements; however, “the DOJ only paid out $237 million to whistleblowers, the lowest single-year total since FY 2008,” WNN reports. Whistleblower attorney Stephen M. Kohn said that the FY 2021 totals “reflect a troubling trend in recent years…The DOJ has begun to treat whistleblowers like second-class citizens. It routinely throws out strong whistleblower cases without just cause. While the SEC and CFTC are making great strides forward with their whistleblower programs, the Justice Department is in reverse.” Read the full article about the False Claims Act in FY 2021 here.