Mega-Broker Hit With $1.1 BILLION Lawsuit in Alleged Cheating Scandal
Minneapolis, MN – A group of produce growers recently filed a $1.1 billion lawsuit against C.H. Robinson alleging the mega-freight and logistics broker engaged in “deceptive business practices,” such as “freight topping,” and then cooked the books in order to conceal the “secret profits” made at the growers’ expense.
In a class action lawsuit filed last month in U.S. District Court for the District of Minnesota, more than a dozen plaintiffs (the Growers) claim their businesses were “duped” by Eden Prairie-based C.H. Robinson (CHR), and its subsidiary Robinson Fresh (RF).
RF specializes in “services of buying, selling, and marketing of fresh fruits, vegetables, and other perishable items to growers, grocery retailers, restaurants, foodservice distributors, and produce wholesalers.”
Specifically, the Growers claim RF’s “illegal profiteering scheme” violated the Perishable Agricultural Commodities Act (PACA) of 1930, which regulates the “marketing of perishable agricultural commodities in interstate and foreign commerce.”
The complaint states:
It is also unlawful under PACA for a commission merchant, dealer, or broker “to make, for a fraudulent purpose, any false or misleading statement in connection with any transaction involving any perishable agricultural commodity”; “to fail, without reasonable cause, to perform any specification or duty, express or implied, arising out of any undertaking in connection with any such transaction”; and “to fail or refuse truly and correctly to account and make full payment promptly” with respect to any transaction.
How Did CHR Allegedly Cheat?
The complaint asserts that from 2012 until 2019, RF entered into consignment agreements with the Growers promising to broker sales and transportation of the Growers’ produce.
As part of those agreements, RF agreed to report the “true sales price” for all of the Growers’ consigned produce and to take its sole profit, its sales commission, from the commissions generated by the sales of produce.
However, it is alleged that RF “knowingly” deceived the Growers by making “secret, self-dealing profits” on both the sale and transportation of the Growers’ produce, a practice called “freight topping.”
RF did not inform the Growers that it made additional revenue from the differentials on what it charged to final customers and what it passed on to the Growers.
NEW DEVELOPMENTS: C.H. ROBINSON PLANS COUNTERSUIT
The Growers also assert RF negotiated other undisclosed volume and prompt-pay incentives in the form of “rebates” from trucking companies, truckers, third-party vendors, and final customers which it collected and neither disclosed or passed on to the Growers.
Dual Accounting System Used To Conceal The Scheme
The lawsuit alleges CHR used two separate accounting systems in order to conceal its illegal activity.
According to the complaint, RF maintains consignment produce sales and expense records within standard produce accounting software known as “Famous.”
It’s this software that generates accounting records that are provided to the Growers.
However, the Growers contend RF maintained a system separate and apart from Famous to report freight revenues and expenses that RF actually received and incurred.
This system is known as the Navisphere accounting system, or its predecessor Compass.
Demanding $1.1 BILLION in Damages
The Growers are asking for damages of $1.1 billion and for the court to certify a class to join the suit to include:
All persons who entered into a consignment contract with “C.H. Robinson Company d/b/a Robinson Fresh” for growing, harvesting, cooling, packing, transporting, marketing, and selling of fresh grown fruits and vegetables.
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Further, the Growers contend damages could be even higher and seek an “accounting of all sales revenues, freight charges, freight discounts, seed rebates, pallet rental rebates and any other net revenues obtained by Defendants in addition to the agreed commissions received under the 2012 through 2019 Agreements.”
The complaint also asserts CHR has “for years deceived scores of federal, state, and local courts and government agencies, including the United States Department of Agriculture (USDA) and Securities and Exchange Commission (SEC).”
Transportation Nation Network (TNN) will continue to follow the case.