Trucking company owner pleads guilty to $40M Ponzi scheme

Trucking news and briefs for Wednesday, March 29, 2023:

Trucking company owner pleads guilty to $40M Ponzi scheme

Franklin Ray, the owner of trucking company CSA Business Solutions LLC and another Michigan-based trucking company, pleaded guilty Tuesday to four counts of wire fraud and one count of aggravated identity theft in connection with various fraud schemes related to the operation of his companies.

Ray, who was previously convicted of wire fraud and bank fraud in the Eastern District of Michigan and was released from prison in 2010, pled guilty before United States District Judge Analisa Torres, according to Damian Williams, the United States Attorney for the Southern District of New York.

“As he admitted in court today, between June 2020 and April 2022, Franklin Ray engaged in four separate fraudulent schemes by lying about the business operations of his purported trucking companies, including two separate PPP frauds and a $40 million Ponzi scheme,” Williams said. “Ray continued his crime spree even after he was arrested by federal authorities in March 2022, brazenly defrauding investors in his fake trucking company of nearly $2 million while he was on bail following his arrest.”

According to a Department of Justice press release, beginning in at least June 2021, Ray began to offer investors an opportunity to invest in his trucking and logistics company, CSA Business Solutions LLC. Specifically, he and the investors entered into contracts in which his company would allegedly procure and operate a truck for each $20,000 contributed by the investor. 

He reportedly told investors that the trucks would perform delivery services for a multinational e-commerce company and/or a multinational shipping company, and that the investors would be entitled to 77% of the net income of the trucks. 

[Related: Mexico-based double broker sentenced to prison]

In reality, his company operated few trucks and had minimal revenues from trucking activities. Instead, investors in the scheme received payments from new investments into the scheme or from other sources. After the investors purchased the rights to trucks, Ray sent them falsified spreadsheets at regular intervals, purporting to show the performance of their trucks during the relevant period. 

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According to DOJ, Ray ultimately induced approximately 275 investors to invest at least $40 million and fraudulently claimed to have purchased more than 2,000 trucks with the investments.

He also pled guilty to carrying out fraudulent schemes to obtain more than $1.9 million in government-guaranteed loans designed to provide relief to small businesses during the COVID-19 pandemic on behalf of CSA Business Solutions LLC and another Michigan-based trucking company. In connection with the SBA loan fraud schemes, Ray submitted false information and forged documents to the Small Business Administration and commercial lenders and claimed that these businesses engaged in significant trucking business, but they had minimal revenues and trucking activity.

Finally, Ray pled guilty to fraudulently inducing a New York City-based real estate company to pay $175,000 in startup costs for a joint venture between the real estate company and CSA Business Solutions. 

Ray was arrested in early March 2022, and a CSA Business Solutions bank account was seized at that time. After his arrest, up until his Indictment in April 2022, he continued to operate the truck investment scheme, hiding the fact of his arrest and the seizure of the bank account, and lied to investors about why he did not make expected payments after his arrest. In the post-arrest period alone, Ray defrauded investors into paying at least $1.9 million into his scheme, the DOJ said.

The counts of wire fraud while released under conditions of bail and wire fraud affecting a financial institution each carry a maximum sentence of 30 years in prison. The remaining count of wire fraud carries a maximum sentence of 20 years in prison. Aggravated identity theft carries an additional mandatory two-year sentence, which must be imposed consecutively to any other sentence. 

Ray also agreed to forfeit $42,128,912, including the funds on deposit at several bank accounts used in connection with the fraudulent schemes, including the primary CSA Business Solutions bank account. He also agreed to pay restitution to the victims.

[Related: Fight double-brokering fraud: Attorney dishes on prevention, ways to elevate enforcement]

Mississippi OKs autonomous vehicles

Mississippi Gov. Tate Reeves this week signed HB 1003, establishing a legal framework for autonomous vehicles to test and deploy in the state.

H.B. 1003 defines “fully autonomous vehicle” as a motor vehicle equipped with an automated driving system designed to function without a human driver (SAE Level 4 or Level 5). 

"The Autonomous Vehicle Industry Association (AVIA) applauds Governor Tate Reeves for signing HB 1003 and officially opening Mississippi to the safety, mobility and economic benefits of autonomous vehicles (AVs)," said AVIA Executive Director Jeff Farrah. "Mississippi now joins 22 other states that have unlocked the technology, safety, and supply chain benefits of autonomous vehicles."

The Mississippi legislation comes after the closing of a comment period March 20 that the Federal Motor Carrier Safety Administration itself opened around questions related to the integration of such Level 4 or 5 autonomous vehicles into the regulatory mix. The Owner-Operator Independent Driver Association, responding to the notion of safety benefits voiced by the likes of AVIA's Farrah and others through the years, pushed back on autonomous safety assumptions, referencing FMCSA's initial Advance Notice of Proposed Rulemaking around AVs. Since that 2019 notice requesting comment, "we have yet to see any assurances that AVs can operate as safe as human drivers on our nation’s roads," said OOIDA President and CEO Todd Spencer. "Many of the questions initially proposed remain hypothetical in nature and OOIDA still questions why the Agency has chosen to focus on regulations that may or may not be necessary,  depending how the technology performs."

Spencer went on to question whether the agency might be putting the cart before the horse when it comes to a regulatory framework for AVs, nonetheless underscoring that "decisions made today will have a significant impact on the deployment of AV technologies, [Advanced Driving System]-equipped" trucks, and, ultimately, "on the livelihood of professional truck drivers and the economy at large."

[Related: Flailing toward an 'automated future'? Over the Road reality, more in final episode