A federal judge in Utah recently ordered two brothers, who were previously sentenced for their roles in establishing at least 20 “chameleon carriers” over an 11-year period, to forfeit $1.3 million in funds they derived from an elaborate scheme to defraud the U.S. government.
U.S. District Court Judge David Nuffer granted the forfeiture order on Jan. 17.
Zach and Garrett Barber had already been sentenced in U.S. District Court in Salt Lake City on Jan. 7, 2019, after pleading guilty to wire fraud.
Zach Barber is serving a 37-month prison sentence and must serve three years of supervised release after completing his prison term. He has been ordered to forfeit nearly $404,000.
Garrett Barber is serving a sentence of 18 months of home confinement. He must then serve three years of supervised release. He has been ordered to forfeit nearly $920,500 in proceeds he gained from the wire fraud scheme, according to Judge Nuffer.
The brothers were indicted in September 2017 for violating an FMCSA imminent hazard order (IHO) they had received in 2012. Federal regulators said they had continued to operate and set up new companies for another five years after receiving the IHO.
How it started
Court documents alleged that Zach Barber registered a Utah-based trucking company, Factory Direct Foods, with the FMCSA in August 2006. Three years later, the federal agency conducted a compliance review of Factory Direct Foods that resulted in an unsatisfactory rating. The carrier was placed out of service until Barber could comply with the order and pay the fine.
Instead, Zach Barber ceased operations at Factory Direct Foods and started operating under the name of another previously opened trucking company, Reliable Transportation Services Inc.
In registering the other trucking company with the FMCSA, Zach Barber failed to disclose his relationship with Factory Direct Foods as required.
Joe Rajkovacz, head of government affairs for the Western States Trucking Association (WSTA), said it’s not uncommon for motor carriers to reincarnate to get around unsatisfactory safety ratings.
“It is the easiest thing in the world to create another motor carrier, but when you do so you have to list your previous affiliations over the last three years as an owner, officer or director of another trucking company,” Rajkovacz told FreightWaves.
To avoid detection, some of these so-called “chameleon carrier” owners who get an out-of-service order have their spouse or another relative register as the new motor carrier, get a new U.S. Department of Transportation number, not claim any affiliation with the previous company, and then create a different email or phone number, he said.
“However, they are usually caught when one of their trucks is involved in a serious crash or is placed out of service for a safety violation,” Rajkovacz said.
As Reliable racked up safety violations, Zach Barber devised a scheme to assign safety violations to other motor carriers by uploading fraudulent documentation to the FMCSA’s DataQs system, “falsely claiming that the vehicle involved in the safety or regulatory infraction” was not one of his trucks, according to court documents.
“DataQs allows you to request and track a review of federal and state data issued by FMCSA that you feel may be incomplete or incorrect,” according to the FMCSA website. “The system automatically forwards your Request for Data Review (RDR) to the appropriate office for resolution and collects updates and responses for current requests.”
Between November 2010 and February 2012, Barber submitted at least 26 challenges on behalf of Reliable, assigning safety violations to other carriers, including one that was no longer operating.
In March 2012, FMCSA conducted a compliance review and Reliable received an unsatisfactory safety rating “due to a multitude of violations in every rating factor category, as well as involvement in numerous vehicle crashes,” according to court filings.
The FMCSA safety inspector conducting the compliance review received complaints by Reliable drivers that the company was illegally transporting hazardous materials, but Zach Barber provided fraudulent bills of lading stating otherwise, court documents alleged.
Later that month, an IHO was issued against Reliable, requiring Barber and his company to cease all operations, and he was ordered to pay the FMCSA more than $220,000 in fines.
Instead of ceasing operations, Zach Barber hired his brother, Garrett Barber, to help him establish and run multiple trucking companies to evade the IHO, which had prohibited him from running a trucking company until the safety issues with Reliable Transportation were addressed.
According to his plea agreement, Garrett Barber was aware of the IHO and helped his brother evade FMCSA regulations “by booking loads and charging and receiving payment for the shipment of goods by the motor carrier under the name of one trucking company ‘the clean company’, while the actual carriage of goods was performed under the name of other trucking companies” he and his brother had full operational and financial control over.
Until their indictment in September 2017, the Barbers set up approximately 20 trucking companies, which listed others as owners, but the brothers handled the day-to-day operations and finances of the motor carriers.