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How trucking companies that cheat drivers dodge penalties

In 2015, a California labor court judge ordered Fargo Trucking to pay its drivers $8.7 million – as much as $370,000 each – for cheating them out of fair wages.

It was the largest judgment ever imposed in an industry notorious for exploiting its workers and running afoul of state labor laws.

But instead of writing checks to their drivers, Fargo’s owners set in motion a plan to make their company vanish. They jettisoned their retail clients and stripped the company of its assets. Then, they moved it all under new company names, safe from the judgment of the courts.

Today, they are back in business under the name Express FTC – hauling goods in the same trucks, for the same clients, out of the same office building that once belonged to Fargo.

Drivers still have not been paid.

A year-long USA TODAY Network investigation found that port trucking companies like Fargo have successfully used legal loopholes, shell companies and bankruptcy protection to dodge the punishment labor court judges have handed down.

Containers are stacked and stored after being unloaded from ships in the Port of Long Beach.

Omar Ornelas, USA TODAY Network

It’s the latest revelation in an ongoing investigation into how port trucking companies that serve the nation’s top retailers take advantage of drivers, often forcing them to work around the clock while paying them pennies per hour.

The Network examined California labor commissioner and court cases filed by more than 1,100 port truck drivers and traced the outcomes for almost 60 companies found by the courts to have violated the law.

At least a dozen have so far avoided all or most of their labor judgments after shifting assets into new business names. Many delayed paying for two years or more, then filed for bankruptcy protection or pressured drivers to accept settlements that gave them a fraction of what the labor commissioner said they were owed.

The vast majority of the owners still operate today, moving goods out of California ports and on their way to major national retailers.

“The idea that companies are still around without paying the full boat is a point of outrage in and of itself,” said Jay Shin, directing attorney at the Wage Justice Center, a nonprofit that has provided legal help for drivers and contracted with the labor commissioner to collect judgments.

From 2012 to 2016, port truck drivers were awarded $37 million in back pay and penalties. It’s not clear how much has been paid out because state records don’t show most private settlements or pending negotiations. But the labor commissioner has been able to track only $3 million that has gone to drivers.

Executives at eight of the 12 companies that appear to have moved assets after workers filed labor claims declined to comment for this story or did not respond to interview requests. The other four said they had done nothing wrong but did not answer questions about their business moves.

In email exchanges with USA TODAY Network, Fargo CEO Philip Ting said most of his drivers are successful, and those who aren’t have the freedom to quit and pursue other jobs. He said he has paid his drivers fairly.

“We have put operators’ children through college, bought them homes,” Ting said. “We provided them the opportunity and somehow we become the villains in all this.”

But for almost two years, while his drivers sought payment through wage complaints, Ting chronicled the good life with posts on Facebook and Instagram. Courtside selfies at Lakers and Clippers games. Rolex and Audemars Piguet watches.

As his drivers waited to be repaid, Fargo Trucking CEO Philip Ting chronicled the good life on his social media pages, bragging about Dom Perignon champagne, Rolex watches and world travels, including a post from Rio during the Summer 2016 Olympics. USA TODAY Network screenshots of Philip Ting’s Facebook and Instagram posts

In early 2014, he was in the market for a private chef. On June 26, 2014, three days after the last driver sued him, Ting bought a $1.8 million East Village condo, property records show.

In spring 2015 – around the time Fargo lost its labor cases – Ting flew first class to Hawaii, then to Las Vegas for a bachelor party. That September, he traveled to Miami and New York. Then Taipei, Taiwan, and Japan in December. Last year, he posted from Paris, the Philippines, Rio, Colombia, and a mountaintop in Park City, Utah. Sometimes he traveled by private G4 jet.

“Some unwholesome lifestyle sh—,” he posted on Instagram alongside a picture of Dom Perignon champagne at an outdoor club. “Who lives like this?”

Meanwhile, drivers like Carlos Garcia are left waiting for a check that may never come.

The 56-year-old former Fargo driver has no savings. Much of his weekly income was eaten up by his truck expenses.

Fargo charged him $300 each week to lease a rig, plus hundreds in additional fees for insurance, maintenance, fuel, parking – even the company toilet paper and office supplies.

Carlos Garcia’s disappearing paycheck

This is an example of a typical week’s deductions, from his Fargo pay stub on Feb. 20, 2009. Garcia estimated the weekly diesel and maintenance costs, which he paid out of pocket.

Gross weekly earnings $896.80
Clean truck incentive $200
Insurance -$123
Lease -$292
Diesel -$300
Maintenance -$90
Remaining amount $291.80

SOURCE Carlos Garcia’s pay stub

Two years ago, the California labor commissioner awarded him more than $200,000 in back pay and penalties.

“I know we’re never seeing a dime of that,” said Garcia, who has gone into debt to pay his bills and now fears bankruptcy.

“Who cares if we starve, right?”

How it all began

Until Fargo Trucking was hit with the biggest labor judgment in the port trucking industry, it was an unremarkable company, a mid-sized operation in a crowded field that moves containers from the ports of Los Angeles and Long Beach to nearby warehouses.

Then, in 2008, California passed a law that banned aging big rigs from serving the ports, part of an effort to cut down on deadly diesel fumes. The industry faced the prospect of buying 16,000 new trucks.

As the USA TODAY Network first reported in June, dozens of trucking companies in southern California – where almost half of America’s imports come into the country – pushed the cost onto their independent truckers by forcing them into company-sponsored lease-to-own programs for new trucks.

Drivers found themselves working as much as 20 hours a day for pay that dropped to pennies per hour after expenses. Some drivers worked a full week only to owe their boss money on payday.

The setup kicked off labor complaints against more than 140 companies, including Fargo.

Fifty Fargo drivers, many who spoke little English, testified that the company pressured them to sign truck leases to keep their jobs. Many couldn’t understand the contracts because they were not translated.

Carlos Garcia, a former driver for Fargo Trucking, was awarded $206,000 a year ago, but still has not been paid. “I know we’re never seeing a dime of that”, he said.

Omar Ornelas, USA TODAY Network

Half of them testified that managers forced them at times to work past the federal safety limit for commercial truckers, sometimes by withholding paychecks until they got back on the road.

A dozen said the company overcharged them for truck insurance, as much as twice the going rate.

Fargo executives denied those claims at the hearings. But on July 16, 2015, more than two years after the first complaint was filed, a hearing officer for the California labor commissioner sent out a 360-page bulk ruling, ordering Fargo to pay $8.7 million.

The rulings say Fargo failed to pay overtime and improperly charged for truck expenses but do not address other allegations by the drivers.

In the months leading up to the judgment, Fargo Trucking appeared to have plenty of money, including at least 58 trucks registered in its name, according to the company’s IRS filings and port entry records. Approximate value: $7.5 million.

The company has moved containers for businesses all over the country, including UPS, the vacuum company Bissell and manufacturing giant 3M, according drivers’ manifests matched with shipping data from the trade research firm Panjiva.

In January, 2016, Fargo received a court order demanding payment on the labor commissioner judgments. Weeks passed, and then months.

No checks arrived.

Follow the trucks

When companies try to dodge civil court judgments, they do it by moving money out of the business and stashing it under new corporate names or with individuals who aren’t subject to the civil court ruling.

If lawyers can’t trace the money and show that the intent was to hide it, their clients can’t collect.

Three experts said Fargo’s moves in recent years show classic signs of owners trying to protect their assets.

The company appeared to create a tangle of entities around Fargo “so that there is nothing, no assets from which the drivers can collect,” said Erik Gordon, a clinical assistant professor at the University of Michigan’s Ross School of Business.

The trucks tell the story.

Using registrations, lease contracts, tax filings and millions of records of port gate move data, the USA TODAY Network found that at least 50 trucks once used by Fargo were transferred to other businesses run by people associated with the trucking company.

The transfers occurred between 2015 and 2016, the period leading up to and after drivers won their judgments from the labor commissioner.

California secretary of state records show that one of the companies, CKT Logistic, was created by 68-year-old June Ou, Fargo’s founder and Ting’s mother. CKT is the lienholder of at least one of the former Fargo trucks, according to registration documents provided by a driver.

The other company, Express FTC, was incorporated by Gershom Shing, Fargo’s former accountant. He registered the company on July 13, 2015, three days before the labor court judgments against Fargo were sent out in the mail.

More than 50 Fargo trucks now regularly appear as Express FTC in records that track the drivers and companies entering the gates at the ports of Los Angeles and Long Beach.

In various public documents, Express FTC lists several different addresses, including Shing’s home and an office space that traces back to port trucking consultant Kurt Oliver, Fargo’s former risk manager who spoke on behalf of the company in labor commissioner hearings.

But the real office, where Express FTC drivers pick up their checks and park their trucks, is at 2727 East Del Almo St. in Rancho Dominguez – the same building previously used by Fargo.

In August, drivers’ lawyers sued the company alleging conspiracy to commit fraud for hiding up to 90 trucks in CKT.

Shing is “a false president,” said Garcia, the former Fargo driver, echoing a sentiment from three current employees who requested anonymity for fear of retaliation. “He’s just an accountant. They’re hiding the business by doing that.”

Shing and Ting declined to answer questions about Express FTC or CKT Logistic. Oliver said he had never heard of either company.

Ou said in a brief phone interview she doesn’t know anything about the unpaid judgments to drivers. “I’m retired,” she said before hanging up.

Jan. 2013
Fargo Trucking drivers begin filing labor complaints against their employer to the California labor commissioner.

March 20, 2014
Fargo owner June Ou incorporates CKT Logistic.

July 13, 2015
Former Fargo accountant Gershom Shing incorporates Express FTC

July 16, 2015
California labor commission mails out a 360-page ruling, ordering Fargo to pay employees $8.7 million in backpay and penalties, as much as $370,000 each.

Jan. 2016
Fargo owners receive civil court order to pay the labor commissioner judgment. They had not appealed the ruling.

March 2016
One-time Fargo trucks start showing up at California ports as trucks hauling goods for Express FTC

August 2016
On IRS tax documents, Express FTC reports having 58 trucks once owned by Fargo

August 2017
Former Fargo drivers sue their old employer, alleging the company was moving assets to avoid paying their court judgment

Sept. 2017
Fargo CEO Philip Ting calls former Fargo truckers to a meeting and offered them $7,000 each to settle the case. Drivers, most owed more than $100,000, declined.

SOURCE USA TODAY NETWORK

Brett Murphy and Frank Pompa, USA TODAY NETWORK

Widespread practice

The USA TODAY Network found that one in five port trucking companies ordered to repay drivers moved assets or tried stalling enforcement in ways similar to Fargo.

In at least six of those cases, attorneys for the drivers have accused the companies of fraud in court documents and introduced evidence that owners transferred customers, trucks or cash to new businesses with ties to the original owner.

Facing $9.4 million in labor claims and lawsuits, QTS Inc. and its sister companies moved at least $600,000 — mostly in the form of rent payments — into the owners’ family trust, according to bank statements and emails that lawyers subpoenaed to detail the transactions.

Then QTS gave away its biggest client to a new company created by one of its employees, according to executives’ depositions and California secretary of state records. In a brief interview, former QTS executive Ki Yoon denied hiding assets and said the company had few left to move after paying its legal bills.

In 2015, a bankruptcy judge found that Seacon Logix “stripped away” almost all of its business, going from $12.8 million in annual income one year to $227,000 the next. The executives or their business associates owned a network of trucking operations that began delivering containers for Seacon’s former customers out of the same address.

When asked about the company’s operations, a former Seacon president, Jason Goh said, “I’d rather not talk about it. The company’s not even open anymore.”

The companies in each of those cases and many others filed for bankruptcy after everything was gone, arguing they no longer had enough assets to pay back drivers and stay in business.

“It seems the end goal,” said Briana Rivera, “is to circumvent payment altogether.” Rivera is a lawyer at Rivera & Shackelford, a San Diego firm representing some Fargo drivers in a separate civil suit.

Most companies, including QTS and Seacon, wind up settling with drivers for some amount, usually less than the labor judgment. But at least six companies have paid nothing to some drivers who won labor cases, the USA TODAY Network found.

From 2013 to 2014, 23 drivers filed labor complaints against Superior Dispatch, a small port trucking company based in Lynwood, California.

At the time, the company had at least 30 trucks moving goods for retailers, California port records show.

But as the drivers waited for their cases to be heard, Superior’s trucks and customers began to disappear. By the time drivers were awarded $2.4 million in back pay in Spring 2015, the company was well on its way to shutting down.

According to a lawsuit filed by the drivers, the company assets didn’t go far. Superior Dispatch owner Melinda Melgar gave them to her son, who operates his own hauling operation, Roadking Trucking, the suit alleged. Last year, at least seven former Superior Dispatch trucks appeared at the harbor hauling loads for Roadking at least once, port records show.

Superior Dispatch drivers still have not been paid.

“It’s classic fraudulent transfer if you transfer things to your relatives and you’re not given valuable consideration,” said attorney Stephen Glick, who represents the drivers.

Melgar did not respond to interview requests. Melgar’s son, Michael Noles, who still operates Roadking Trucking, did not respond to phone messages or letters seeking comment.

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Double Standard

Trucking companies can easily hide assets and avoid paying judgments, in part, because of how long it takes officials to process cases and a patchwork of enforcement strategies that often leaves drivers to fend for themselves.

The average time between complaint and judgment is almost 21 months, according to the USA TODAY Network’s analysis of California labor commissioner records. Some cases took more than three years.

Anthony Mischel, a retired hearing officer at the California labor commissioner’s office, said an overworked staff and poor enforcement “gives people a long time to go out of business or disappear.”

“They’ve never had adequate staffing for all their functions,” he said. “The longer it takes, the harder it is to collect.”

California Labor Commissioner Julie Su.

Courtesy of the California Department of Industrial Relations

California Labor Commissioner Julie Su said her office has been scrambling to keep up since an influx of port trucking cases started in 2011. Almost 900 port trucking cases fell on a single office, staffed by 43 people, in Long Beach, where lease-to-own programs took hold in port trucking nearly a decade ago.

Neither Su nor the California legislature added or shifted significant staff to the Long Beach office to handle the demand.

Three new attorney positions were added to process wage cases in general. But Su said that hasn’t been enough.

“We are playing whack-a-mole,” Su said. As her agency has handed down more judgments, port trucking companies have evolved, using “elaborate schemes to cheat drivers.”

As a result, she estimated, a third of the companies simply ignore the judgments they receive, while many of the rest wage long legal battles to fight them.

Another problem: After a company is ordered to repay its workers, labor commissioner attorneys rarely get involved in enforcing the judgments. In fact, they are prevented from doing so if the workers have hired their own private attorney or if drivers don’t formally request help from the state.

“I’m not gonna paint a rosy picture,” Su said. “I’m not going to sit and say we have done all that we need to do. We have more to do.”

A USA TODAY investigation finds America’s retail giants have spent a decade ignoring signs of labor abuse in their supply chains, sometimes fighting government efforts to crack down, even as thousands of truckers were driven into debt and poverty.

Scott Hall, USA TODAY NETWORK

In early September – more than two years after drivers won their cases against Fargo – CEO Philip Ting and his accountant Gershom Shing called about 20 of them to a meeting in a warehouse.

Ting gave the drivers a choice: accept $7,000 now or he would file for bankruptcy, an action that could erase any hope they had of collecting. Most of them are owed more than $100,000.

“He said, ‘We don’t have that money,’” recalled someone at the meeting, who agreed to speak on condition of anonymity because he fears retaliation. Two other employees independently described a nearly identical scene.

So far, drivers have not accepted Ting’s offer, or subsequent ones for more money.

“They go after at us at our weakest point,” one worker said, worried about losing his job, his truck and any possibility of getting paid back if the company goes under.

“Where does that leave us? No loads. No work for us.”

Every day, thousands of trucks enter the ports of Long Beach and Los Angeles, where nearly half of all imports come into the country on their way to retailers nationwide.

Omar Ornelas, USA TODAY Network

The truck shuffle at other companies

Companies deny hiding assets to get out of paying their drivers. But many drivers at these companies still haven’t been paid. Public records and court filings show that owners changed company names, while dispatching the same fleets of trucks to haul containers at the harbor.

Container Intermodal Transport

Facing $1 million in civil lawsuits from eight drivers, Container Intermodal Transport trucks started hauling goods for another company last spring, according to port records.

That company, 721 Transport, was formed in February 2016, seven months after the last lawsuits were filed. The registered agent was Container Intermodal’s former risk manager, Kurt Oliver, who listed his office space in Long Beach as the company’s location.

A month after Intermodal trucks began hauling under the name 721 Transport, the original company filed for bankruptcy, claiming it didn’t have enough assets to repay drivers and other creditors. The bankruptcy court dismissed the case two months later for failure to file documents on time.

Drivers won their lawsuits against the company last April, but still haven’t been paid. Container Intermodal’s owner, Sandra Sandoval, did not respond to multiple requests for comment. Oliver did not respond to questions sent by email.

Total Transportation Services Inc.

After being ordered to repay drivers more than $2.4 million, Total Transportation coordinated with union officials to come up with settlement offers that put some drivers back to work as full-fledged employees guaranteed a minimum wage.

But when company owners started a new company in Delaware and then merged Total Transportation with it in December 2015, drivers who hadn’t yet settled were left with few options.

Leocadio Lopez said he couldn’t afford to pay an attorney to litigate his case across the country in Delaware, where the merged company is headquartered. The former Total Transportation driver had been awarded $190,000 in a labor commissioner ruling but wound up with nothing.

“They humiliated me,” Lopez said.

Jonathan Rosenthal, a portfolio manager at the holding company that owns Total Transportation, said the company filed for bankruptcy as a last resort only after it couldn’t reach settlements with all the drivers.

“Some drivers and their counsel simply demanded more than the company could afford,” Rosenthal said in an email. He did not address why the company moved its business under a new name before filing for bankruptcy in Delaware.

Container Connection

Eleven drivers at Container Connection of Southern California, who were awarded a combined $2.2 million in civil court judgments, sued the company alleging fraudulent transfers after CEO James Horvitz changed the company’s name, concealed the assets and then effectively went out of business, according to a civil complaint filed in June.

Hundreds of trucks that formerly hauled for Container Connection, which last year listed Walmart, Lowe’s, Hanes, Maytag, and Sam’s Club as customers on its website, now appear at the harbor under a new name, Deco Logistics, according to port records.

State business records show Horvitz is the CEO of Deco, which operates from the same address Container Connection once did.

Responding to voicemails left with Horvitz, Container Connection attorney Ed Cottone said in an email that the company “has either already resolved or is actively seeking to resolve each and every case that is outstanding.” He’s denied the allegations in court records but did not answer why the company changed names.

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