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FEMA contractor Lipsey Logistics CEO arrested for cocaine distribution that includes kids

 Joe Lipsey III, CEO of Lipsey Water and Lipsey Logistics photo: courtesy of Twitter
Joe Lipsey III, CEO of Lipsey Water and Lipsey Logistics photo: courtesy of Twitter

Joseph Lipsey III, CEO of Chattanooga-based transportation companies Lipsey Logistics and Lipsey Trucking, was arrested on Tuesday in Aspen, CO, for distribution of cocaine to a minor, three counts of serving alcohol to a minor, possession of drug paraphernalia, and providing nicotine to minors. Lipsey’s wife Shira and son, Joseph Lipsey IV, were arrested Monday on similar counts.

Under Colorado law, if convicted of the distribution charge, the Lipsey parents would each face a mandatory sentence of between eight and 32 years in prison.

The Lipseys were each released on $100,000 cash-only bonds. In January, Joseph Lipsey IV was charged with two counts of vehicular assault after a Tesla SUV he was alleged to have been driving careened off the road, injuring himself and four other teens in the car.

The Lipseys saw an opportunity in freight brokerage when the second Bush administration began privatizing and outsourcing disaster relief, where previously the federal government had leaned on the military. A small water company in the family’s portfolio helped the Lipseys secure an award to provide bottled water for hurricane relief.

 Joe Lipsey courtesy of linkedIn
Joe Lipsey courtesy of linkedIn

In 2003, Lipsey had engaged UPS for Federal Emergency Management Agency (FEMA) logistics and transportation support for disaster relief, but almost immediately Hurricane Isabel hit the global logistics conglomerate realized that the task of providing disaster relief logistics was more realistic with an asset-based truckload provider than through independent brokerage capacity. UPS handed over the business to US Xpress, which managed relief logistics on behalf of Lipsey.

Joe Lipsey soon realized that there was a lot of money to be made in using brokerage capacity and by the 2005 hurricane season, the Lipseys had launched their own brokerage to move water and ice on a cost-plus basis for the government.

Lipsey Logistics has been investigated on numerous occasions for failure to comply with federal rules around deadlines, botched paperwork, and according to a government investigation, in billing more than $800,000 in unsupported Federal payments.

 mug shot of Joe Lipsey, son, and wife
mug shot of Joe Lipsey, son, and wife

On September 5, 2017, Lipsey Water was awarded a $143 million FEMA contract to provide bottled water. As of October 2017, Bloomberg reported that Lipsey won at least $215 million in FEMA relief services since Hurricane Harvey.

“Lipsey Logistics’ sister company, Lipsey Water, has numerous State and Federal emergency contracts providing Disaster Relief Services to communities affected by disasters, both natural and manmade. While working with thousands of carriers for FEMA relief, Lipsey quickly realized the need for a reliable logistics organization to manage the delivery of water, ice, and durable goods. Thus, Lipsey Logistics Worldwide was formed,” the company said on its website.

If the cocaine charges stick, Lipsey’s government contracts could be under threat. FreightWaves estimates that Lipsey was able to build a nearly $200 million per year transportation and logistics operation on the back of FEMA and state government contracts. Not all of Lipsey’s logistics business is from FEMA. The firm, benefitting from being located in Chattanooga, has hired brokerage and trucking staff from truckload giants US Xpress (NYSE: USX), Covenant Transport (NASDAQ:CVTI), and Coyote Logistics (NYSE:UPS). Major clients that Lipsey have provided 3PL services include Home Depot (NYSE:HD), Niagara Waters, and Proctor & Gamble (NYSE:PG).

Reporting by the Aspen Times based on police accounts depicted the Lipsey’s’ Aspen home as a sordid drug den. According to a police affidavit, during a February 19 search of the Lipsey home, officers and deputies found charred tin foil, a crystalline powder-caked spoon, baggies of white powder that tested positive for cocaine, unprescribed Xanax pills, and codeine syrup.

Needless to say, the prospect of multiple felony drug convictions, especially ones involving kids, puts Lipsey Logistics’ federal contracts under threat.

John Paul Hampstead

John Paul conducts research on multimodal freight markets and holds a Ph.D. in English literature from the University of Michigan. Prior to building a research team at FreightWaves, JP spent two years on the editorial side covering trucking markets, freight brokerage, and M&A.