FMCSA's confusing excuse for not enforcing its own rules

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Updated Jul 8, 2024

As freight fraud reaches epidemic levels racking up untold millions in financial losses and stolen cargo, while independents try to make a living in a spot market that feels a lot like the Wild West, the Federal Motor Carrier Safety Administration has yet to communicate coherently on its own enforcement duties.

As we've recently reported, the FMCSA plans to overhaul its registration system in response to the uptick in fraudulent activity in freight markets, sometimes by registered entities, but until those efforts bear fruit later this year and next, what's FMCSA doing to rein in bad actors today? 

The agency's own statements about and rationale for its ability to assess civil penalties for so-called "commercial" violations has led to plenty of confusion among carriers, brokers and other freight market participants.  

FMCSA has repeatedly told Overdrive and others around trucking that an Administrative Law Judge's ruling in a case from 2019 blocks the agency's authority to fine bad actors for commercial violations. 

But that case, often referred to as the "Riojas decision," doesn't actually say that. In the Riojas case, a family was found guilty of "reincarnating" fraudulent carriers and not disclosing the common ownership of several FMCSA-regulated entities. United States Department of Transportation Administrative Law Judge J.E. Sullivan ruled that FMCSA lacked subject matter jurisdiction to asses fines on two counts, but not on other counts related to falsifying applications for motor carrier authority.

Judge Sullivan did not dismiss the non-disclosure violation, and in fact ultimately approved what's known as "Summary Judgement," leading the way for FMCSA to indeed assess civil penalties. FMCSA did, in fact, fine the family some $125,000 in civil penalties.

Yet despite this, FMCSA top brass has continued to cite the five-year-old case as reason for not pursuing civil penalties for various "commercial" regulations, such as nearly all of the broker regulations on the books. Over those last five years, particularly the last few, freight fraud and double brokering have just ballooned.

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[Related: The criminal element lurking in FMCSA's registration system]

Is the agency willfully shirking responsibility for enforcing 'commercial' regs?

When it comes to crime and so-called "commercial" violations, the repeated invocation of Judge Sullivan's decision isn't the only example of FMCSA seemingly taking the easy way out. Recall Overdrive's recent reporting on the agency's OP-1 form, the application for motor carrier/broker authority. The form warns applicants that they risk perjury charges for willful omissions or misstatements on the form. That same form says a P.O. box can't be used as a principal place of business address, and that the address must match the entity's MCS-150 form.

Meanwhile, it's easy to find examples of double brokers and other fraudulent operations using a P.O. box or another fake address as a principal place of business. Even though the OP-1 form forces applicants to admit they know they're guilty of perjury if they knowingly put down a bad address, FMCSA doesn't pursue perjury charges. 

As FMCSA said in that prior report, its legal team doesn't believe "perjury," specifically, would apply to false information required on the form. The cases of false information that FMCSA has referred to the DOT's Office of Inspector General for investigation "are usually considered under a federal statute that prohibits 'false statements,'" the agency said. Recently, a federal jury convicted Tony Kirik, a Rochester, New York fleet owner, of making false statements to the FMCSA, and he now could face five years in prison and a $250,000 fine.

[Related: Fleet owner convicted of lying to FMCSA]

The scheme in Kirik's case involved reincarnation, multiple carrier authority applications designed to cover up association with a central business in legal hot water over violations, quite similar to the Riojas decision.   

In comments on FMCSA's docket seeking feedback on its overhaul of the registration system, attorneys Hank Seaton and Mark Andrews took FMCSA to task over its characterization of Riojas as a prohibition on "commercial" regulations enforcement. As they wrote:

Citing decisions issued by an Administrative Law Judge (ALJ) in an enforcement case ... Agency officials have stated in listening sessions that this case bars FMCSA from assessing civil penalties for violation of its “commercial regulations” without first obtaining court approval. With due respect, this view seriously understates the Agency’s powers. 

Seaton and Andrews laid out the details of that case further, noting that "in actuality, there were two ALJ decisions in Riojas, neither of which ever took effect because the case ultimately was settled."

The judge did find, Seaton and Andrews write, that "court proceedings were required to enforce civil penalties relating to evasion of regulation, to reports and recordkeeping, and to cargo securement" after a "laborious effort to parse out limits of certain FMCSA civil penalty powers based on a convoluted discussion of legislative history and a series of statutory recodifications."

But the same judge then "required no court proceedings for FMCSA enforcement of penalties for operating with an Unsatisfactory safety rating, for fraud in the licensing application process, and for violating the 'reincarnation' rules against obtaining a new MC number to continue operating a carrier shut down for safety violations," Seaton and Andrews noted. 

Furthermore, the judge drew no line between "commercial" violations and "safety" violations, and another case in a higher court, Dandino, Inc. v. U.S. Department of Transportation, contradicts the Administrative Law Judge's ruling. 

That's all a bunch of legal talk meant to suggest that there's no good or clear reason FMCSA does not hit bad actors with civil penalties, such as the $10,000 fines mentioned on the OP-1 form for perjury. 

Industry watchers certainly seem to wish FMCSA would do more to deter bad actors, and a recent bill would cut past the judicial dispute by explicitly authorizing FMCSA to issue fines

[Related: New bill would let FMCSA fine double brokers $10,000, crack down on shady actors]

Confusion around the Riojas decision is the reason the Transportation Intermediaries Association "is pushing for the Norton/Ezell Legislation to make sure any conflicting and unclear positions of the FMCSA are addressed," said TIA Government Affairs Vice President Chris Burroughs. He noted the association hopes that legislation can restore "the authority of the Agency to address fraudulent activities."  

Asked point blank about why FMCSA does not enforce the rules on the books, if there is indeed no court ruling stopping them from doing so, FMCSA seemed to admit the Riojas decision wasn't really a legal hurdle in many cases.

"The Riojas decision is a decision about the forum in which FMCSA must bring an action for civil penalties," an FMCSA spokesperson speaking on background said. "The Riojas decision holds that, in order to seek civil penalties for certain violations, FMCSA must bring the enforcement action in Federal court. Civil penalty cases for other violations under different statutory authority may still be adjudicated administratively."

Bringing an enforcement action in federal court certainly sounds more difficult than handling it within the ranks of the DOT itself. Yet that characterization of Riojas doesn't comport with how others within FMCSA continue to talk about the case. 

Ken Riddle, FMCSA's registration office director, characterized it differently in correspondence with a participant in the agency's recent May 29 listening session. 

The Riojas decision, he noted, "limited FMCSA enforcement by removing FMCSA's authority to assess civil penalties; we can no longer enforce fines for commercial violations. FMCSA cannot appeal this decision."  

Riddle explained further that, in his view, the agency can also only take action on applications for authority, and not on authorities that have already been granted. 

[Related: Are double brokering entities committing perjury? FMCSA weighs in]