This story appears in the May 18 print edition of Transport Topics.
The trustee for TransVantage Solutions Inc., a bankrupt freight bill payment firm, is suing more than 500 truckers and other transport companies in a bid to recoup hundreds of millions of dollars by claiming payments made over several years were improper.
The wide-ranging court cases, filed in U.S. Bankruptcy Court in Trenton, New Jersey, include bids to recover more than $133 million from just three companies. Four FedEx Corp. units are being sued for $65.7 million, while $37.7 million is sought from UPS Inc. subsidiaries, with another $30.4 million from a single company, Roadtex Transportation Management, a less-than-truckload operator.
Other targets are Pitt Ohio for more than $5.3 million and $5.4 million from Landstar Global Logistics.
The bankruptcy trustee, Alfred Giuliano, filed the actions asserting that the money was wrongly paid to the carriers because payments by TransVantage “were made using funds . . . intended to be used to pay for the other shipper service obligations.”
The suits say that TransVantage, whose owner, Shirley Sooy, was charged with wire fraud and other federal crimes last year, was operating a Ponzi scheme.
Her company collected money from shippers to pay carriers’ freight bills and “hopelessly commingled” all carriers’ payments in a single account, making it impossible to trace and determine whether each carrier received the right amount, the trustee’s suits said.
When TransVantage filed for bankruptcy in May 2013, the company had no funds to pay about $40 million owed to carriers. The federal complaint said the funds were diverted to pay for Sooy’s personal expenses, including a $135,000 Maserati sports car.
“It’s a tangled web, to say the least,” Tom Connery, president of New England Motor Freight, told Transport Topics. The trustee is seeking $835,192.53 from the Elizabeth, New Jersey, fleet. New England Motor Freight’s parent, Shevell Group, ranks No. 58 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada.
“We just received the suit. Our attorneys are reviewing it as we speak,” Connery said. “We certainly think we understand what was going on.”
The suits, which began just less than a month ago, could be challenged in the next week because defendants are required to file a response within 30 days of receiving the suit, attorney Alex Barnes told TT.
“The defendants are all in the same boat — which will sink or sail based on whether the trustee can establish TransVantage as a Ponzi scheme,” said Barnes, attorney for multiple defendant carriers. “I anticipate that more than one of the defendants will test this proposition by filing motions to dismiss the complaint.”
He continued: “Even if the trustee is able to prevail in establishing a Ponzi scheme, it would seem that the defendant carriers would have the affirmative defense that they took the transfers in good faith and for reasonably equivalent value.”
In addition to suits against LTL fleets, brokers also are targets, including $253,000 from Blue Grace Logistics, which arranges LTL freight.
Pitt Ohio, which ranks No. 60, didn’t return calls requesting a response. Roadtex also didn’t have an immediate comment.
TT contacted several dozen other carriers for comment. Among them were the five largest Top 100 carriers: UPS, FedEx, J.B. Hunt Transport Services Inc., Con-way Inc. and YRC Worldwide Inc.
The suit includes some of the largest truckload carriers, including No. 6 Swift Transportation, No. 14 Werner Enterprises, No. 20 C.R. England Inc. and No. 24 CRST International.
Other than the amount being sought from No. 10 Landstar, most truckload operators’ exposure is smaller, such as $169,274 for Werner and $91,333 for C.R. England. However, the trustee is seeking more than $6.4 million from Schneider.
UPS spokeswoman Susan Rosenberg said the company intends to “vigorously defend” the case. FedEx spokesman Brian Anderson said the company was aware of the case but would have no comment.
Brooke Willey of CRST said the company has no comment “other than that we disagree with the claims being made in the bankruptcy case and are preparing to vigorously defend our position.”
None of the attorneys for the bankruptcy trustee returned calls. Neither did Sooy’s attorney.
Her criminal case has been continued multiple times since it was filed a year ago. Court papers show that Judge James Clark granted the latest continuance until May 19 while attorneys discuss a plea agreement.
The trustee also sued some TransVantage customers, seeking to recover money from them as well. Among them were Terumo Cardiovascular Products, and Tingue, Brown, which makes machines to operate commercial laundries.
The suits outline the way the process was supposed to work.
“A customer would advance funds to TransVantage Solutions, which funds were required to be held in trust and used only for the payment of the particular customer’s freight bills,” the complaint said.
A handful of defendants have settled, including such communities as Branchburg, New Jersey, where TransVantage was based.