The fate of a trucking company that owner-operators say lured them into lease-purchase agreements and then deducted so many chargebacks that they ended up driving for free is in the hands of a federal judge in Kansas City, MO.
U.S. District Judge Fernando J. Gaitan Jr. is now considering evidence and testimony presented by OOIDA attorneys and members in a three-day trial that concluded Wednesday, Sept. 1. The Owner-Operator Independent Drivers Association filed the class action lawsuit against Ledar Transport Inc. of Kansas City, MO, in March of 2000.
In November of 2000 Judge Gaitan ruled that Ledar's equipment leases were in violation of the federal Truth-in-Leasing regulations and barred the company from performing any transportation requiring DOT authorization until it executed new lease agreements approved by the court. He also ruled at that time that owner-operators could leave Ledar and sign on with other carriers, which many of them did.
In the trial this week, OOIDA's legal team called 14 witnesses, including six owner-operators and one accountant who is also a Certified Fraud Examiner and was certified for the Ledar case as an expert in forensic accounting. The owner-operators testified that Ledar had shorted them miles, failed to return security deposits, charged them for maintenance and repairs that should have been paid for out of their maintenance escrow accounts and then took the money from those reserve funds and kept it as income.
Owner-operators who testified were Daniel Day of Ursa, IL, David Horn of Texas, Kenneth Reinsch of Texas City, TX, Jason Buckallew of Independence, MO, Billy Eiland of East St. Louis, IL, and Dean Adams of Delhi, IA.
During a break Tuesday, Reinsch's wife said that she and her husband wouldn't have been able to pursue any action against Ledar without the help of OOIDA.
"Thank goodness for OOIDA," she said "we would have just had to let it go without their help.
"It's about the principal of the thing. We'd like to get our money back, but it's more important to make sure that they don't do this to any more drivers"
What Ledar had done to Reinsch, according to his testimony, was to short him on miles driven, fail to reimburse him for lumper fees and fail to reimburse his maintenance escrow funds, among other things, including failing to provide him with any documentation about what happened to the maintenance escrow.
During Reinsch's testimony, OOIDA's legal team offered into evidence conflicting settlement sheets regarding Reinsch's work for Ledar. Ledar's attorney, Russell Powell objected and became indignant when OOIDA's attorney Randall Herrick-Stare offered the documents as evidence.
"Your clients' files are different from what the witness received," OOIDA's attorney told the defense attorney, explaining that he had found the discrepancy during preparations for trial.
"And you are just handing me these documents now?" the defense attorney asked.
"Yes," the OOIDA attorney simply replied, staring at the defense attorney until he returned to his seat in the courtroom.
Similar double documents were presented by the OOIDA legal team for several different owner-operators.
Such business practices, called questionable by the OOIDA team,were at the heart of the association's case, which also included testimony and evidence about how Carl Higgs and his wife Norma and their son Scott Higgs had set up Ledar and other corporations to intentionally shuffle money, some of which came from personal accounts of Carl and Norma Higgs.
OOIDA's expert witness, Joseph Roos, testified about how he had used "forensic accounting" techniques to recreate the financial transactions of Ledar Transport, Hawthorn Leasing and another firm owned by Norma Higgs. He testified that the transactions "did not appear to be on the level."
In particular, Roos said that the facts that Norma Higgs' company was set up with no capital and that none of the companies followed corporate standards in their business structure and operations made them suspect.
Roos said that his review of documents showed that owner-operators had been double charged for maintenance and that the companies had been inconsistent in the ways they handled funds. He also said the firms treated maintenance reserve funds and security deposits as if they were income, rather than liabilities as they should have been considered.
When asked how he had come to some of his conclusions, Roos said that he had used the companies' financial statements and sworn depositions of Carl Higgs, Norma Higgs and Scott Higgs. Regardless which scenario was used on which owner-operator's paperwork, the outcome was always the same - "it was to the economic benefit of Ledar."
All three members of the Higgs family flatly denied the allegations when they testified.
In many ways the case can be summed up by the numbers:
- less than one percent of the owner-operators who signed on with Ledar have successfully completed their lease-purchase agreements and come out of the deal with a truck.
- more than 60 percent of owner-operators who signed on with Ledar left within the first 60 days - in fact, 260 of 600 Roos reviewed left within the first 30 days.
- fees charged by Ledar when owner-operators received cash advances amounted to more than 1,000 percent interest when tabulated on an annual basis.
In many other ways, the case against Ledar comes down to more human terms.
"I just want the title to my truck," owner-operator Adams said Tuesday outside the federal courthouse in Kansas City. "I just want what I paid for."
Judge Gaitan asked the attorneys for both sides to submit post-trial briefs, which he will review before making his decision in the civil case.