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Legal filings, evidence, witnesses paint a disturbing picture in fraud case against Coleman Moving Company

Josh Moon

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In the late-2000s, Scot Dannen, the general manager of a Coleman Worldwide Moving facility in Colorado Springs, Co., was approached by one of the company’s truck drivers and asked an odd question. 

The driver wanted to know where Dannen’s “weight crate” was located, according to testimony Dannen provided under oath in a deposition. 

Dannen was confused. He had no idea what a “weight crate” was. When he asked the driver to explain, he “looked at me like I was from outer Mars.” 

The driver then explained that a “weight crate” was a heavy crate — usually filled with something like bricks — that drivers would place on their trucks prior to a final weighing. That crate would “bump” the weight up hundreds, if not thousands, of pounds, allowing for Coleman Worldwide to bill more and for the drivers to earn more. 

Dannen would learn over the next couple of years, from various drivers, that it was one of many common practices used by drivers and the company to falsify weights, and it was one piece of what the federal government deemed a nationwide “weight bumping” scam that netted Coleman Worldwide millions of dollars in fraudulent gains over the course of several years. 

The “weight bumping” scam, and the resulting whistleblower lawsuits, federal lawsuits and criminal charges, has been a hot topic of late in Alabama, where Coleman Worldwide is headquartered and where Jeff Coleman, the company’s top executive, is running for Congress. 

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It is a district with a heavy military presence, and as such, Coleman’s opponents in the race have made the company’s legal trouble, which were settled in 2015, without much fanfare or press attention, a centerpiece of the race. 

Coleman has not handled the renewed media attention of the case very well. Beginning with a Republican Women’s meeting in Coffee County last week, he began insisting that his company did nothing wrong but was instead the victim of overzealous prosecution by the Obama administration. 

“That was meritless, our people did nothing wrong,” Coleman said, almost shouting into a microphone at the meeting of mostly elderly attendees. “It was a meritless, frivolous case that had no merit whatsoever. We were hit by the United States government and an Obama U.S. attorney and it was wrong. And we’ve got to do everything we can to protect this country against that sort of activity.” 

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It was a curious response, given that Coleman Worldwide agreed to a settlement of $5 million and one of its top managers went to prison for his role in falsifying the weights. Clearly, the company did something wrong and there was some merit to the government’s case. 

Coleman was provided an opportunity by APR to answer specific questions about the case. A list of detailed questions was sent to his campaign, at Coleman’s direction, and he was told that APR was open to interview with him or it would accept answers to those questions. Coleman asked if this story, which was scheduled to run on Tuesday, could be held for a day in order for him to have time to fully answer the questions. No answers were ever provided.

What makes Coleman’s defense, and the defense his campaign is using of late — that there was no wrongdoing and it was just Obama going after an innocent company — essentially challenges the public, the media and his political opponents to delve into the facts and read more about this grave injustice. 

The problem is, what they will all find is a mountain of evidence, most of which was collected by the government and backed up with emails, documents, witness statements and under-oath testimony, that shows Coleman Worldwide did a lot wrong. 

APR spent the past several days combing through the many legal filings associated with the multiple whistleblower complaints against Coleman Worldwide. In addition, APR received related documents and transcripts from sources close to the legal proceedings. All of them showed a pattern of systemic fraud that spanned the country and was reported numerous times to company officials, including Jeff Coleman and other Coleman family members.

37-Coleman Complaint

46-Coleman USA Response to Motion to Dismiss

224-Coleman Memo in Opp to MSJ

62-Coleman Transcript of Hearing

Coleman Covan World Wide Moving, Inc, Coleman American Moving Services, Inc and other related entities Settle False Claims Act Cases for $5,000,00000 USAO-SC Department of Justice


How it Worked

To understand the allegations and evidence against Coleman Worldwide, it helps to first have a bit of knowledge about just what the company does, in terms of its contract work for the U.S. military and Department of Defense.

Every year, the military will move thousands of active servicemembers all around the country, transferring them from base to base for a variety of reasons. Those service members, many of whom are married with families, have to pack up belongings and take them along. 

That’s where moving companies, like Coleman Worldwide, come in. Coleman agrees to make those shipments for the government-set reimbursement rates set by the federal government. It bills the government per pound, and it determines those pounds through a series of weight checks. 

To simplify things, the weight checks basically work like this: The empty Coleman truck or container, without the servicemembers’ household goods, is weighed. Then the same truck or container is weighed after the goods are packed for the move. The difference between the first weight, or “tare weight,” and the second weight is the number of pounds for which Coleman Worldwide bills the Department of Defense. 

Once that weight is determined, it is written on a weight certificate. Using the weight certificate, the business office at Coleman Worldwide creates an invoice for which it bills the DoD. Additionally, a locator card is created for use by the warehouse where the servicemembers’ belongings are stored while waiting on shipment. The locator card also contains the original weight recorded. 

The Alleged Fraud

The government and various witnesses allege that Coleman Worldwide used a variety of schemes to inflate the weights for which they billed the DoD. At the facility, weight certificates would be removed and replaced, or the original weights would be “whited-out” and rewritten on the forms or the tare weights would be altered. 

Outside of the facilities, truck drivers would inflate weights through methods of their own. They could either pack on extra weight, falsify the original tare weight, add people to the truck, add fuel or add bogus, heavy crates, among other methods. 

Among the findings documented in various court filings: 

  • A forensic accountant and investigator, working with the U.S. attorney’s office in South Carolina was able to identify more than 2,500 instances of false claims submitted by Coleman Worldwide in a three-year span. 
  • Two employees at Coleman Worldwide’s Augusta, Ga., facility reported that managers there routinely falsified weight tickets, allowing the company to over-bill the government for moving U.S. military service members’ household goods. 

Coleman Exhibit Z–Re-weigh

Coleman Exhibit Y–Missing Furniture

Coleman Exhibit P–Elmer and Mario

Coleman Exhibit G–Bumping weights

Coleman Exhibit F–False Tickets

  • The testimony of those two employees was supported by an audit of the Augusta facility that was carried out by the federal government. That audit discovered more than 400 instances of weight tickets failing to match their original weight cards, indicating that they had been falsified later.
  • At a facility in Hawaii, military officials became suspicious of Coleman Worldwide shipping weights after complaints from service members. A re-weigh of every Coleman Worldwide shipment — more than 600 in all — found that over 80 percent had incorrect weights on their weight tags, all of them higher, allowing the company to over-bill the U.S. government. 
  • In a separate whistleblower lawsuit that was later folded into the original complaint, a truck driver from North Carolina testified that he was trained how to manipulate truck weights, including leaving the back wheels just off the scales, hiding workers in the truck, filling up with fuel when going to get the load weight and adding “weight crates.” 
  • In Colorado, Dannen said the mis-weighs were a common and ongoing problem — so much so that his workers began checking suspicious weights constantly. In one instance, a shipment arrived that was more than 6,500 pounds short. He alerted company officials, who told him to make the delivery and let it go.
  • Independent truck driver/owner Chad Holsteen, a former Army Ranger, testified that he experienced “bumped weights” at Coleman Worldwide facilities all across the U.S., specifically naming San Diego, Killeen and El Paso, Tx., Fayetteville, N.C., Augusta, and Woodbridge, Va. Because he had to pay workers to load the shipments, he routinely had to pay out of his own pocket to cover the mis-weighs. Holsteen reported these issues to company executives, including vice-president Andy Coleman, who provided Holsteen with fuel cards and other payments to “placate” him.

The Outcome

A federal judge in South Carolina eventually determined that he would allow only the evidence from the original whistleblower complaint related to the Augusta facility. That was a major blow to prosecutors hoping to present to a jury a case outlining a national pattern of fraud and seek a larger verdict — somewhere in the nine-figure range — against Coleman Worldwide. 

As it was, the government agreed to settle the case for a mere $5 million and sought prosecution of just one Coleman Worldwide employee, despite an abundance of evidence and testimony that implicated dozens more in the fraud. 

“Fraud on the government is high priority in this office,” U.S. Attorney Bill Nettles said after the settlement. “Monies paid to Covan (which is a subsidiary of Coleman Worldwide) for inflated weights could have been used for the benefit of our servicemembers.”

The original whistleblowers, Mario and Elmer Figueroa, a father and son who worked at the Augusta facility, received $1.25 million of that money for coming forward. During a deposition in the case, the elder Figueroa said he and his son feared losing their legal immigration status in the U.S. if they participated in the fraud. 

More Evidence

The depositions of Coleman Worldwide employees during the case were particularly unfavorable to the company. Numerous employees cited specific examples of fraud that they witnessed firsthand, providing the government with specific details that allowed investigators to also collect documents and other evidence. For example, a billing clerk at the Augusta location backed up the Figueroas’ claims, and helped investigators locate additional evidence. 

Part of that evidence, according to a filing in the case, were the locator cards used by the Augusta facility. Those cards were filed at the facility and didn’t accompany the servicemembers’ shipments. So, unlike the weight certificates, they were never altered. When investigators recovered the locator cards and then matched them to weight certificates for the shipments sent by the facility, they discovered the weights on more than 400 of them didn’t match.

In another odd twist, as investigators were combing through evidence, they discovered that a manager at the Coleman Worldwide facility in Fayetteville, N.C., had quietly attempted to repay the Department of Defense for six shipments. After a number of court hearings, the company admitted that it had conducted an audit of its recent shipments — 24 in all — and the court ordered the results turned over to the government. 

That company-conducted audit, according to a court filing, found that 10 of the 24 shipments had been weight-bumped, including four shipments that were off by more than 1,300 pounds and one that was off by more than 2,700 pounds.

Some managers and other high-level employees for Coleman Worldwide refused to answer questions during their depositions, choosing instead to invoke their Fifth Amendment rights against self-incrimination. In a brief filed in the case, the government accused other managers and top-level executives of lying and of having very fortunate “lapses in memory.” 

The government also accused Coleman Worldwide officials and attorneys of refusing to follow the rules of discovery and dumping massive amounts of documents on prosecutors, in some instances several years after they requested. 

Executive Knowledge

However, those prosecutors did manage to dig out a number of emails that show corporate executives, including Jeff Coleman, were alerted multiple times of instances of shipping weights being inflated or outright fraud occurring. But there were no emails indicating that corporate executives, including Coleman, had directed the fraud. 

Instead, prosecutors alleged that executives passively encouraged the fraud by establishing a pay-by-weight system that rewarded employees at every level for “bumping weights” and had almost no checks to ensure fraud didn’t occur. In fact, some employees testified in depositions that the practice was so common that they were trained by managers on how to increase weights improperly. 

One of those managers, Ronald Niemi, who worked at Coleman Worldwide’s Augusta facility, was convicted of fraud in 2015 and sentenced to 5 months in prison. He also had to repay more than $22,000 for 40 false weight certificates he altered. 

Despite the numerous witnesses and documents outlining alleged fraud occurring at Coleman Worldwide facilities across the country, Niemi was the only employee charged criminally and the U.S. government dropped the case against Coleman Worldwide following the $5 million settlement.  

Josh Moon is an investigative reporter and featured columnist at the Alabama Political Reporter with years of political reporting experience in Alabama. You can email him at [email protected] or follow him on Twitter.

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Corruption

Opinion | Alabama’s public corruption problem might just be hopeless

“Mike Hubbard committed crimes with the solitary intention of illegally enriching himself.”

Josh Moon

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Mike Hubbard looks toward his family after receiving sentencing on Friday, July 8, 2016, in Opelika, Ala. Todd Van Emst/Opelika-Auburn News/Pool Todd Van Emst/Opelika-Auburn News/Pool

Mike Hubbard stole more than $2 million. Let’s start right there, so we don’t get things twisted, because there’s a tendency in this state, when the criminal is wearing a suit and tie, to believe that the crime wasn’t really a crime and that it was something more complicated and sophisticated than a guy stealing money from you for himself. 

This wasn’t an accident. It wasn’t a wrong place, wrong time deal. He didn’t forget to carry the one and, oops, $2 million landed in his account. 

No. Mike Hubbard committed crimes with the solitary intention of illegally enriching himself. 

Hubbard used his intelligence and charm and ruthlessness to rise to a position of power that allowed him to influence the budget process, and then he used that position and his intelligence to benefit himself at the expense of state businesses, taxpayers and the state itself. 

If Hubbard had his way, one of his clients would have been granted an illegal monopoly, improperly squeezing out other deserving state businesses and possibly costing Alabama citizens their jobs and livelihoods. 

In other instances, Hubbard concocted a means by which wealthy business owners in the state could “gift” their “friend” hundreds of thousands of dollars. Money that we all know would have been returned to the friends many times over in the form of friendly legislation and government contracts — which is the very reason such “gifts” were deemed illegal by a Legislature led by Hubbard. 

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These things were wrong. They were deplorable. And they were, quite blatantly, illegal. 

And yet, for the past four-plus years, this state’s judges and lawmakers — actually, let me be accurate: this state’s Republican judges and Republican lawmakers — have bent over backward to bend, alter and change the laws that convicted Hubbard — the laws that Hubbard helped write — in order to reduce or eliminate the sentence handed down to their friend. 

Finally, last week, the day before Thanksgiving — the day historically set aside for information dumps of embarrassing news you’re hoping will get lost in a four-day holiday weekend — Lee County Judge Jacob Walker, leaning on the suspect legal work of the Alabama Supreme Court — the most activist court in all of America — cut nearly half of Hubbard’s sentence. 

Instead of four years, Hubbard will now serve just 28 months. 

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That is a travesty. 

Not because 28 months instead of four years necessarily sends a message of leniency to future thieves. But because the sordid and embarrassing manner in which the sentence was reduced has been a case study in systemic public corruption and ruling class privilege. 

It has made clear that there is one set of laws and rules for the working stiffs and poor and a whole other set for the wealthy and powerful.  

When the ethics laws of this state were adopted several years ago, Republicans, including Hubbard, hailed them as true game-changers for Alabama politics. They talked loudly and often about how necessary these ethics laws were to remove the stench of corruption and pay-to-play favoritism from our state government. They promised that these laws would help level the playing field and restore the faith of Alabama citizens in their government. 

All of that was BS. 

Within months, the primary architect of those laws was secretly plotting to circumvent them in the interest of personal gain, his private emails showed us. Not only that, he and top ALGOP officials and donors were conspiring together to subvert those laws and enrich themselves. 

What they were doing was not in the interest of “economic development” or business growth in the state or even innocent mistakes. It was willful, purposeful schemes meant to get around the laws and use their public offices to benefit themselves. 

In one email Hubbard actually writes: “those ethics laws … what were we thinking?” 

Despite this clear intent and despite a solid verdict from a thoughtful Lee County jury, for the last four years, Republican lawmakers have attempted time and again to change the ethics laws — to weaken them and insert loopholes into them. They have succeeded twice. 

At the same time, the Alabama Court of Criminal Appeals and the Alabama Supreme Court — all elected Republicans — spent an unbelievable and unheard-of amount of time to pick apart the Hubbard verdict and cast doubt on the laws that convicted him. 

In both courts, the opinions mentioned the “unintentional consequences” of the laws, implying that lawmakers in the state could unwittingly find themselves as accidental lawbreakers as they innocently conducted the business of the state. 

Oddly, not one lawmaker from either party has committed such a violation or even almost committed one. 

And no one believes that Hubbard committed such an unwitting violation of the laws. 

Because he didn’t. 

Hubbard knew full well what the law was. He knew full well that what he was doing was illegal — his closest associates testified as much in open court. He worked tirelessly to concoct ways to subvert those laws and enrich himself, and there is a mountain of evidence that proves it. 

And yet, our criminal justice system and our state Legislature spent the last four years trying to get him out of it. 

That’s a level of corruption that is so staggering and consuming that I honestly don’t know if there’s any hope to combat it.

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Corruption

Judge reduces former Alabama Speaker Mike Hubbard’s prison sentence

The trial court judge ordered his 48-month sentence reduced to 28 months.

Eddie Burkhalter

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Former Alabama House Speaker Mike Hubbard was booked into jail to begin serving his four-year sentence for ethics violations in September. (VIA LEE COUNTY DETENTION CENTER)

Lee County Circuit Court Judge Jacob Walker on Wednesday reduced former Alabama House Speaker Mike Hubbard’s prison sentence from four years to just more than two. 

Walker in his order filed Wednesday noted that Hubbard was sentenced to fours years on Aug. 9, 2016, after being convicted of 12 felony ethics charges for misusing his office for personal gain, but that on Aug. 27, 2018, the Alabama Court of Criminal Appeals reversed convictions on one counts. The Alabama Supreme Court later struck down another five counts.

Hubbard’s attorneys on Sept. 18 filed a motion to revise his sentence, to which the state objected, according to court records, arguing that “Hubbard’s refusal to admit any guilt or express any remorse makes him wholly unfit to receive any leniency.”   

Walker in his order cited state code and wrote that the power of the courts to grant probation “is a matter of grace and lies entirely within the sound discretion of the trial court.” 

“Furthermore, the Court must consider the nature of the Defendant’s crimes. Acts of public corruption harm not just those directly involved, but harm society as a whole,” Walker wrote.

Walker ruled that because six of Hubbard’s original felony counts were later reversed, his sentence should be changed to reflect that, and ordered his 48-month sentence reduced to 28 months. 

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Alabama Attorney General Steve Marshall on Wednesday said Walker’s decision to reduce Hubbard’s sentence was the wrong message to send.

“Mr. Hubbard was convicted of the intentional violation of Alabama’s ethics laws, the same laws he championed in the legislature only later to brazenly disregard for his personal enrichment,” Marshall said in a statement. “Even as he sits in state prison as a six-time felon, Mike Hubbard continues to deny any guilt or offer any remorse for his actions in violation of the law.  Reducing his original four-year sentence sends precisely the wrong message to would-be violators of Alabama’s ethics laws.”

Hubbard was booked into the Lee County Jail on Sept. 11, more than four years after his conviction. On Nov. 5 he was taken into custody by the Department of Corrections.

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State Rep: Lee County DA’s past cases should be reviewed by AG, DOJ

Rep. Jeremy Gray, D-Opelika, wants the AG’s office or DOJ to examine all of the DA’s previous cases for similar issues.

Josh Moon

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Lee County District Attorney Brandon Hughes

A state representative from Lee County is calling on the Alabama attorney general’s office and the Department of Justice to open an investigation into past cases handled by indicted Lee County District Attorney Brandon Hughes. 

Rep. Jeremy Gray, D-Opelika, said that in light of the details regarding Hughes’ indictment and arrest, he wants the AG’s office or DOJ to examine all of Hughes’s previous cases for similar issues. Gray also wants the public to be allowed to come forward if they were ever extorted or mistreated by Hughes. 

“In light of the very serious and disturbing charges facing Lee County District Attorney Brandon Hughes, and the brazen nature of his alleged crimes in which he used the power of his office to extort vulnerable citizens — including by threatening them with bogus charges — I call on the Alabama Attorney General’s Office and the US Department of Justice to open an inquiry into possible other instances in which Hughes misused the power of his office against the people of Lee County,” Gray said in a statement. “That investigation should include a thorough review of all convictions and indictments procured by Hughes and should allow the people of Lee County an opportunity to report any additional instances of Hughes misusing his office.”

Hughes was charged on Monday with seven felony ethics counts, including allegedly using a DA’s subpoena to steal a pickup truck and using another subpoena to allegedly coerce a private business into aiding his defense. Hughes was also accused of hiring private attorneys with public money to benefit himself and his wife, and accused of hiring his three children to work in his office. 

He was arrested Monday afternoon on felony perjury charges for lying to a grand jury about his alleged crimes.

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Lee County DA arrested on second perjury charge

The arrest was based on a complaint filed by Attorney General Steve Marshall’s office, charging him with first-degree perjury.

Eddie Burkhalter

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Lee County District Attorney Brandon Hughes

Lee County District Attorney Brandon Hughes — who was arrested Sunday on seven counts of ethics violations, theft and perjury — was arrested again on Monday for an additional perjury charge, according to the Alabama attorney general’s office. 

Hughes on Monday was booked in Montgomery County jail based on a complaint filed by Attorney General Steve Marshall’s office, charging him with an additional count of first-degree perjury for allegedly giving false testimony to the Alabama Ethics Commission. 

Hughes was previously indicted on five counts of violating the state ethics act for using his office for personal gain, including paying private attorneys with public funds to settle a matter that benefited himself and his wife, according to Marshall’s office. He was also charged with illegally hiring his three children to work for his office. 

The grand jury also indicted Hughes on a charge of illegally using his office for personal benefit by issuing a district attorney’s subpoena to a private business to gather evidence for his defense to potential criminal charges, according to the statement. 

Hughes was also charged with conspiracy for allegedly agreeing with others to steal a 1985 Ford Ranger pickup truck from a Chambers County business by using a Lee County search warrant to force the business to release possession of the truck, according to the statement. 

The five violations of the state ethics law charged in the indictment are Class B felonies, punishable by two to 20 years in prison and a fine of up to $30,000. The charges of conspiracy to commit first-degree theft and first-degree perjury are Class C felonies, each punishable by one year and one day to 10 years in prison and a fine of up to $15,000.

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