Attorney General Gurbir Grewal has filed a complaint that alleges Academy Bus LLC and other defendants defrauded NJ Transit out of more than $15 million by under-reporting the number of scheduled bus trips the company missed and charging fees for hours and miles for bus trips that never took place.
The lawsuit filed Nov. 16 in State Superior Court in Essex County alleges that Academy 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.
The attorney general’s 54-page complaint further alleges that Academy’s fraud “caused the riding public to suffer because Academy missed tens of thousands of bus trips on busy Hudson and South Hudson service areas. Riders were delayed if not stranded.”
“Most of us know how frustrating it can be to wait for a bus that doesn’t show up on time or never appears at all,” Grewal said. “Our complaint against Academy Bus alleges that one reason for those late and missing buses has been a pervasive, multi-year fraud by Academy that not only cost riders their time but also cost NJ Transit many millions of dollars. With this lawsuit, we are seeking justice for the riding public as well as New Jersey taxpayers.”
The partnership
NJ Transit contracted with Academy to provide bus services throughout the Hudson County service area, including heavily used lines serving New York City.
Academy operates seven NJT bus routes in the Hudson and South Hudson service areas that primarily cover the Hudson County waterfront, serving riders in Bayonne and Jersey City, including the heavily used Route 119 line for commuters traveling to and from New York City.
The seven NJT routes Academy handles involve approximately 175,000 bus trips each year.
Academy bills NJT approximately $12 million annually for its services, while NJT retains all bus fares that Academy collects along the routes.
Under its contract with NJT, Academy is required to report the number of bus trips that were missed for each bus route on a monthly basis. NJT would deduct $150 for each reported missed bus trip, and $300 for any unreported missed trip later discovered. Academy also charges NJT contractually-agreed upon fees for miles and hours driven along bus routes it handles for the agency. Academy can not charge fees for hours and miles driven for missed bus trips.
Alleged fraud
The complaint alleges that Academy overcharged NJT in two ways.
First, Academy allegedly under-reported the number of bus trips it had missed for each month to NJT fraudulently avoiding millions of dollars of missed trip deductions from the monthly invoices.
Second, Academy allegedly fraudulently billed NJT for miles and hours driven for buses that had not actually run.
According to the complaint, in 2016 Academy allegedly failed to report more than 12,000 missed trips, averaging more than 1,000 unreported missed trips each month, and defrauding New Jersey Transit out of more than $3.6 million. In the three-month period from September through November 2016, Academy failed to report to New Jersey Transit more than 3,500 missed bus trips, an average of more than 40 bus trips a day.
The attorney general’s complaint details how Academy’s internal records tracked two sets of numbers: the real number of missed bus trips, which Academy labeled “RN,” and an adjusted set of false numbers.
This adjusted set was always significantly lower than the figure Academy allegedly reported to NJT.
The complaint quotes from text messages among Academy employees where they communicated about how much they would reduce the real numbers before sending them to NJT.
In one instance, according to text messages quoted in the complaint, employee Edward Rosario proposed reducing the real number of missed trips for September 2018 from more than 1,800 to 700.
Employee Antonio Luna responded: “Bro bro. It’s 1,800 missed, really – we are gambling this huh?”
Academy eventually reported 804.5 missed trips to NJT for that month, allegedly defrauding NJT.
According to the complaint, the gap between the “real number” of missed trips and the number actually reported to NJT shrunk during periods when Academy knew NJT was actively monitoring Academy’s performance.
The complaint also alleges that Academy may have missed so many trips because it was shifting drivers from the NJT routes it covered to its more profitable charter bus routes.
According to the complaint, one witness who worked as a dispatcher for Academy reported telling Academy’s President and CEO Francis Tedesco that diverting drivers would cause missed trips on NJT routes. Tedesco allegedly responded: “I don’t care about NJ Transit. I want my drivers right now at this very moment for charter.”
The complaint names the following as defendants: Academy and its affiliated corporate entities Academy Lines, LLC; Academy Express, LLC; Number 22 Hillside, LLC; No. 22 Hillside Corporation Vice President and Chief Operating Officer for all the corporate defendants Thomas F.X. Scullin; Controller of each of the companies Frank DiPalma; former assistant manager at Number 22 Hillside, LLC and/or No. 22 Hillside Corporation and current part-time dispatcher Antonio Luna; and general manager at Number 22 Hillside, LLC and/or No. 22 Hillside Corporation Edward Rosario.
Seeking jury trial
With this complaint, Grewal has intervened in a qui tam action filed against Academy by a former Academy Terminal Manager Hector Peralta, who worked at Academy and 22 Hillside for 14 years.
The New Jersey False Claims Act allows private parties, or realtors, such as Peralta, to file lawsuits on behalf of New Jersey for violations of the False Claims Act, and to share in any recovery.
The False Claims Act provides that the Attorney General may also intervene in such an action.
The complaint alleges two counts under New Jersey’s False Claims Act and one count of Unjust Enrichment.
The state seeks a jury trial and treble damages, maximum civil penalties, attorneys’ fees, and costs, and repayment of any unlawfully obtained payments from NJT.
Academy Bus spokesperson Ben Martin issued a statement on behalf of the company in response to the allegations.
“The Company response to the complaint filed by the Attorney General’s office will be submitted in due course to the proper regulatory and legal authorities,” Martin said. “The Company will detail its good faith efforts to perform the service in issue and to properly tally and submit ‘missed trip’ information to New Jersey Transit. Prior to this filing, the Company took corrective actions to improve its performance and the Company will continue to work diligently to accomplish that objective. The Company values its relationship with NJTC and regrets that this matter has been moved to litigation.”
For updates on this and other stories check www.hudsonreporter.com and follow us on Twitter @hudson_reporter. Marilyn Baer can be reached at Marilynb@hudsonreporter.com.
