New Jersey has settled a lawsuit with Academy Bus that will see it pay a record amount due to it defrauding NJ Transit (NJT).
Acting Attorney General Andrew J. Bruck announced on Feb. 11 that Academy Bus, LLC and several related entities and individuals will pay a total of $20.5 million to resolve the State’s lawsuit accusing the defendants of overcharging NJT by underreporting missed bus trips and by overbilling for hours and miles driven.
The agreement represents the state’s largest-ever False Claims Act settlement outside the healthcare sector.
“This settlement sends a clear message: defrauding the state doesn’t pay,” said Bruck in a statement following the settlement. “We are not only requiring the corporate defendants to pay more than the amount of their alleged fraud. We also are holding individual defendants financially responsible and requiring Academy Bus to adopt corrective measures designed to prevent similar misconduct in the future.”
The lawsuit dates back to November 2020 after a former Academy employee’s whistleblower lawsuit against the company, which advertises itself as the nation’s largest private transportation company. The attorney general’s office, led at that time Gurbir S. Grewal, filed a complaint alleging that the bus company engaged in an “extensive multi-year, multi-million-dollar fraud” by failing to report tens of thousands of missed bus trips between April 2012 and December 2018.
Hudson Service Area
Under its contract with NJ Transit, Academy was required to report the number of bus trips that were missed for each bus route on a monthly basis. An individual “trip” is when a bus travels from one end-point of a route to the other end-point of a route. NJT would then deduct an assessment for each missed trip.
Academy contracted seven bus routes in the Hudson and South Hudson service areas for the over six year period from the transit agency. The routes involved approximately 175,000 bus trips each year and Academy billed NJ Transit $12 million annually for its services.
Additionally, the bus company charged NJ Transit contractually-agreed-upon fees for miles and hours driven along bus routes it handled for the agency. Academy could not charge fees for hours and miles driven for buses that did not run.
The lawsuit alleged Academy overcharged in at least two ways—by underreporting to NJT the number of bus trips it had missed for each month to avoid millions of dollars of missed trip deductions from the monthly invoices and billing for miles and hours driven for buses that had not actually run.
Additionally, the state’s complaint claimed the bus company had two sets of books. One tracked the “real” number of missed bus trips (which Academy labeled “RN”) and an adjusted set of numbers that was always significantly lower, and which Academy submitted to NJ Transit. The gap between the “real number” of missed trips and the number actually submitted to NJ Transit shrunk during periods when Academy knew the agency was actively monitoring Academy’s performance.
In addition to the monetary payment, Academy is required under the settlement to implement specific steps designed to strengthen its internal accountability from drivers to executives and to provide greater transparency in any contracts with NJT.
Among other measures, Academy has agreed to retain an independent Integrity Oversight Monitor and create new policies, procedures and training efforts to ensure the accurate reporting of missed bus trips, hours logged and miles driven.
The specific’s of the settlement include:
- Submit with each invoice to NJ Transit a personal certification from a Senior Vice-President, Chief Financial Officer or such person’s designee that attests to the accuracy of the submission, as well as to the accuracy of the supporting Daily and Monthly Reports of Operation;
- Retain for a period of three years an independent Integrity Oversight Monitor—approved by NJ Transit and paid by Academy—to oversee the accuracy of its internal documentation of bus trip operations, as well as the accuracy of invoices and missed trip and miles and hours reporting;
- Implement new policies and procedures to ensure accurate reporting of missed trips and hours and miles driven. The new policies and procedures must include staff training on accurate reporting, the maintenance of adequate records and databases, and adequate document retention;
- Create bus operator training policies that ensure the proper use of all provided equipment, including proper use of Clever Devices and other telematics, as well as the proper reporting of equipment malfunctions; and
- Create procedures that Academy road supervisors must employ to ensure conformity to contracted bus service regulations, as well as driver adherence to specific bus routes and accident reporting.
Pursuant to the False Claims Act, a portion of the monetary settlement will be paid to Hector Peralta, a former Academy employee who filed a whistleblower complaint against the company.
In addition to Academy Bus, the settlement includes affiliated corporate defendants Academy Lines, LLC; Academy Express, LLC; and No. 22 Hillside, LLC, as well as individual defendants Antonio Luna, formerly an assistant manager at No. 22 Hillside, LLC; Eddie Rosario, a general manager at No. 22 Hillside, LLC; Thomas Scullin, Vice President and Chief Operating Officer for all of the corporate defendants and Frank DiPalma, the Controller of each of the corporate defendants.
The settlement includes payments of $150,000 from Scullin and $50,000 each from Rosario and Luna.
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