COLUMBIA, S.C. -- Since 2007, a major trucking company and an affiliate allegedly have bilked the U.S. government out of millions by making false claims about the weight of belongings of military personnel, according to a civil lawsuit filed by the U.S. attorney's office in Columbia, S.C.
Covan World-Wide Moving and its affiliate, Coleman-American Moving Services, are paid by the government based on the weight of items moved. Over the years, they "systematically falsified weight certificates, shipping records and invoices by increasing shipment weights," the lawsuit said.
The alleged "potentially vast and complex fraud" first was discovered at an Augusta, Ga., truck shipping depot that receives and ships items belonging to soldiers at Columbia's Fort Jackson, according to the lawsuit and related government filings in the case.
Lawyers for the company said last week the government's claims can't be supported.
"We believe the allegations are without merit, and we plan on vigorously defending them," said Columbia attorney Greg Harris, who is local counsel, working with trucking company lawyer Jim Wyrsch of Kansas City, Mo. The companies are privately held."We think, ultimately, we'll be successful," Harris said.
In initial pleadings before U.S. Judge Joe Anderson, company lawyers characterized the government's claims as "frankly outrageous." They said that while the government may have a few examples of overweight billings, there is not enough evidence to support a charge of deliberate and widespread fraud.
The lawsuit alleges the fraud is "companywide' and says the alleged fraud was "a corporate policy designed to fraudulently increase corporate profits at the expense of the United States."
"Defendants' false claims scheme has resulted in a substantial loss to the U.S. and its taxpayers," the lawsuit said. "Since just 2009, defendants and their affiliates are believed to have billed the federal government for $723 million worth of shipping and relocation services provided to the nation's uniformed service personnel."
The government's lawsuit did not estimate how much of that $723 million might have been false billings.
But the lawsuit asserts that of one group of shipments reweighed by the government, "nearly 80 percent" were billed in excess of their actual weight.
The government also has located a trucking company "corporate manager" who taught employees at the Augusta warehouse how to falsify weights, government filings allege.
Trucking management not only ordered employees to falsify weights, but trained them how to do it and how to cover up their actions, according to the lawsuit.
A parallel government investigation into the two trucking firms' activities in Pearl Harbor, Hawaii, discovered the companies "consistently overbilled the U.S. by approximately 9 percent to 10 percent of the actual weight of the shipment," the lawsuit says.
The suit is a whistleblower lawsuit, meaning trucking company employees first discovered the alleged fraud and brought evidence to the attention of the U.S. attorney's office. Such suits are also called by a Latin phrase, qui tam, meaning basically that someone has filed a suit on behalf of the government. Such suits, as this one was, normally are filed under court seal while the government investigates.
In this case, the U.S. attorney's office investigated, determined it could go forward and filed the lawsuit. After being filed and sealed in April 2012, it recently became public record.
In legal pleadings, the two whistleblowers were identified as Mario Humberto Figueroa and his son, Elmer Arnulfo Figueroa, who worked at the Augusta warehouse and allegedly were instructed by trucking company management to falsify weights, the lawsuit said.
Columbia attorney Dick Harpootlian, who with attorney Bert Louthian represents both Figueroas, said the two will be entitled to up to 25 percent of any jury verdict or settlement in the case.
Despite company lawyers' assertions of no wrongdoing, Harpootlian said, "There's plenty of evidence to allow the government to go forward."
In today's current era, where the federal government has contracted out so many services to private companies, whistleblower lawsuits are an invaluable tool, Harpootlian said.
"This allows citizens who know of wrongdoing to bring it to federal government's attention and recoup money lost as a result of illegal conduct," he said.
The scheme was carried out in several ways, according to the lawsuit. Some accurate weight certificates were replaced by false certificates and, in some cases, the accurate weight was "whited-out" and a new, false weight was inserted, the suit alleges.
Since 2001, with the U.S. deploying numerous armed forces around the world, the U.S. government has spent large amounts of money moving the belongings of U.S. service personnel and their families from base to base, both in-country and overseas.
"This constant relocation of U.S. service personnel comes at great cost to the U.S. and its taxpayers, who pay these relocation costs," the lawsuit says.
Under Department of Defense regulations, the private companies who ship the belongings bill the government "based upon the net weight of a shipment as determined by a certified scale and weigh master," the lawsuit says.
According to the lawsuit, trucking company movers go to a service person's home, "pack their furniture and personal belongings into large, wooden shipping crates and load the crates onto trucks." Then the crates are sealed.
When the trucks arrive at the shipping warehouse, the crates are removed, weighed and labeled with a weight certificate, the lawsuit said.
"The higher the net weight of a shipment, the more money is charged to the government for the shipment," the lawsuit says.
Then, the crate is shipped to its destination, and the trucking companies send the government a bill, along with a certification that the weight is accurate.
The lawsuit said government agents now are auditing records at the Augusta warehouse and already have uncovered 437 examples of possibly falsified weight certificates.
The lawsuit doesn't name a dollar amount it seeks but says it seeks damages and civil penalties. Each separate violation carries a civil penalty of up to $11,000, plus damages. If those 437 examples do indeed violate the law, that would be at least $4 million.
Columbia attorney Harris said his trucking company clients have a good reputation to defend. For years, he said, they and affiliated companies have been national leaders in transporting millions of shipments for private, corporate and public interests.
U.S. Attorney Bill Nettles said the suit is part of increased attention his office is devoting to false claims cases. He has doubled the number of lawyers to four from two and given the unit increased resources, including an investigator, he said.
"Pursuing whistleblower allegations is one of my top priorities," Nettles said. "Our aim is to take the profit out of defrauding the government."
The next likely step in the case is for Anderson to rule on whether the government's case should go forward or be dismissed.