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March 10, 2022 9:48 AM, EST

Yellow Reaches Settlement With DOJ

YellowYellow Corp.

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Yellow Corp. has reached a settlement with the Department of Justice over allegations dating back to 2005 that the company overcharged the federal government while shipping items for the Department of Defense.

Yellow denied the government’s core allegations and admitted no wrongdoing under the conditions of the $6.8 million settlement, announced March 7 by Yellow and DOJ.

“We are pleased to have come to a resolution,” Yellow CEO Darren Hawkins said in a statement provided to Transport Topics. “Now we can fully focus on the important work ahead, with the nation’s current supply chain constraints and the critical role Yellow plays delivering freight, there is no time for distraction.”

Darren Hawkins

Hawkins

“We remain confident that we complied with the then-existing rules and our contractual obligations,” said Leah Dawson, Yellow’s executive vice president and general counsel. “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.”

The lawsuit was filed by DOJ on Dec. 12, 2018. In it, the agency alleged that Yellow — which was then doing business under its prior name, YRC Freight Inc. — from a period between September 2005 and October 2013 overcharged DOD for thousands of shipments that were lighter and thus cheaper than the weights that the carrier charged the Pentagon. The lawsuit claimed that the difference in charges totaled millions of dollars.

The allegations first surfaced in November 2008 in a lawsuit filed by James Hannum, who worked for YRC subsidiary Roadway Express Inc. in its Buffalo, N.Y., office as a weight and inspections supervisor.

On Feb. 12, 2019, two months after the DOJ lawsuit was filed, YRC asked a federal judge at the U.S. District Court in Buffalo, N.Y., to dismiss the civil lawsuit. For the past three years, the sides have been discussing a settlement.

Amid these negotiations, the company continued doing business with the Pentagon. Yellow said its volume of military-related business is higher today than when the 2018 lawsuit was filed.

In 2020, the company received a $700 million CARES Act federal loan as part of the $2.2 trillion COVID-19 federal stimulus program to shore up what the government considered essential businesses. At the time of the loan application, DOD said Yellow was considered an essential business because of its relationship providing freight services for the military.

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As part of the agreement, the U.S. government gained a 30% ownership stake in the company and broad federal oversight as part of the deal. Both loans mature on Sept. 30, 2024, and company officials have said on several occasions they are fully complying with the terms of the loans.

During the past several years, Yellow has been in the midst of a restructuring plan which includes adding hundreds of new tractor-trailers and moving its mainline LTL carrier and its regional carriers onto one technology platform.

During the fourth quarter of 2021, Yellow reported a 12.7% year-over-year increase in revenue to $1.3 billion, but the company had a $44.7 million net loss in income. Company officials said much of the reason for the loss was a $250 million pension transfer to fund a group annuity for 3,700 current and past employees.

Yellow ranks No. 8 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

Senior Reporter Eric Miller contributed to this story.

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