Menlo and Estes to Pay $13 Million to Resolve False Claims Act Overbilling Allegations

Menlo Logistics and its subcontractor Estes have agreed to pay the government $13 million to settle a False Claims Act lawsuit. The companies had allegedly overcharged the government in a Defense Department contract for freight transportation under the Defense Transportation Coordination Initiative. 

According to the lawsuit, Menlo and its subcontractor had, among other things, billed the government for air shipping when freight had actually been transported by truck.

Richard Ricks & Marcelo Cuellar Reported as Whistleblowers - $2.86M Bounty

The alleged overbilling was brought to light by whistleblowers Richard Ricks (58) and Marcelo Cuellar (30) and it goes back as far as 2007. Besides charging inappropriate air freight rates, the defendants had allegedly created other fraudulent surcharges, such as oversize rates. The whistleblowers became aware of the alleged scheme while Cuellar was working at Estes’ defense distribution depot in Tracy, California, and Ricks was CEO of Menlo subcontractor EXP Logistics Solutions.  Cuellar was fired by Estes two years after the investigation began.

As a result of the settlement, Menlo Logistics will pay the United States government $10 million, and Estes Forwarding Worldwide/Estes Express Lines will pay $3 million. The whistleblowers’ fundamental role in the recovery will be recognized with a shared $2.86 million award as provided by the False Claims Act.  Ricks, and Cuellar had filed the whistleblower lawsuit jointly in the Eastern District of California in 2013.

A member of their legal team commented, "Without the courageous help of these two whistleblowers, the Government might never have learned of the inflated charges for shipments... This was truly a partnership under the False Claims Act, which was designed to help the Government uncover and prosecute fraud."

Menlo/XPO CEO Gordon Devens & Estes’ Scott Fisher Weigh In

On the other side of the fence, Gordon Devens, a spokesperson for  XPO, the company that now owns Menlo, commented, "We are pleased with this settlement, which avoids the cost and distraction of litigation and provides clarity for our stakeholders,” and emphasized the fact that the events mentioned in the lawsuit had taken place before XPO’s acquisition of Menlo.

Scott Fisher, the CEO of Estes Forwarding Worldwide denied the allegations and commented, “Today's settlement fully resolves the matter, and we look forward to continuing to provide our high-quality services to all of our customers, including the United States Government."

As both companies tried to save face in light of the settlement, the Department of Justice viewed the outcome of the process as very positive. “This settlement demonstrates our commitment to protecting the integrity of federal contracts and ensuring the government only pays for the actual services rendered as required under the contract,” remarked Acting U.S. Attorney. Phillip A. Talbert.

Since their implementation, U.S. whistleblower statutes have been instrumental in uncovering fraudulent behavior in connection with government contracts. Whistleblower awards like the one received by Ricks and Cuellar recognize their effort and diligence in bringing corporate wrongdoing to light and restoring stolen money to the taxpayers.

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