The Government's Appalling Campaign Against Small Bus Companies
"They took a man's livelihood and threw it in the dirt."
Jeff and Judy Rodgers, who met in high school and have three grown children together, started a charter bus company called Southeastern Tours 20 years ago in their hometown of Greenville, North Carolina. Jeff had been working as a bus driver for Greyhound and dreamed of running his own company. In 1994, in partnership with Judy's mother, the couple took out a loan, built a garage, and launched their business. They struggled for a few years, but gradually built a loyal clientele. As recently as eight months ago, the company was thriving with seven buses and gross annual revenues of about a million dollars, including a contract with Amtrak worth $48,000 a month to transport passengers between train stations in North Carolina.
Today Southeastern Tours is on the verge of bankruptcy. In December, Amtrak canceled its contract with the company, transferring its business to a different carrier. Unable to make their monthly payments, the Rodgers returned six of their seven buses. They may lose their home of 22 years, which served as collateral on a business loan. "I don't have anything to fall back on," says Jeff. "This company was my livelihood. It's how I pay for my food and everything."
What led to the rapid downfall of Southeastern Tours? On October 14, 2013, the Federal Motor Carrier Safety Administration (FMCSA), a federal agency, ordered the company to cease operations on the grounds that it was a hazard to public safety. Southeastern Tours had never been involved in a serious accident, but during a three-day audit in August, FMCSA inspectors found, among other things, that its drivers filled out their logs incorrectly, that the Rodgers failed to provide their employees with educational materials, and that they allowed a former driver to get back behind the wheel before waiting for the results of his alcohol and drug tests. (They came back negative.)
When their troubles with the FMCSA began in early August, the Rodgers committed themselves to doing whatever it took to get back in the government's good graces. They hired a consulting firm that was personally recommended by an FMCSA investigator; they installed new devices on their buses for wirelessly submitting drivers' logs as a way to eliminate bookkeeping errors; and they retained a respected maintenance company to conduct regular vehicle inspections. But after a tumultuous six months of dealings with the FMCSA, the Rodgers are still forbidden to run their buses and they're beginning to make plans to dissolve the company.
The case of Southeastern Tours is typical of the FMCSA's new tough-on-crime approach to regulating the bus industry. The 2012 federal highway bill gave the agency new powers to force bus companies to halt their operations without a standard review. In 2013, the FMCSA launched a new safety initiative called "Operation Quick Strike" that forced 52 companies off the road last year, including Southeastern Tours. The agency routinely touts its heightened vigilance in the press, depicting itself as the valiant protector of the riding public.
As is often the case when the government cracks down on an industry, small carriers lacking political connections and the right attorneys have received the brunt of the punishment, while the large corporate bus companies benefit from seeing their more nimble rivals driven out. By emphasizing that its efforts are a matter of saving lives, the government has gotten away with denying owners like Jeff and Judy Rodgers their constitutional right to due process.
The government's power is almost unchecked in this arena. The rules that govern how bus companies run their operations are complex enough that FMCSA inspectors looking to take out even well-managed outfits like Southeastern Tours can almost always dig up enough violations to accomplish their goals. Once companies are forced out of service and starved of their operating revenues, they have to apply to regain their operating authority twice: once with their local FMCSA field office and then again with the agency's headquarters in Washington, D.C. Both process can take several months because FMCSA field offices and headquarters often don't communicate with each other, and companies aren't allowed to begin one application process before the other is complete. To successfully navigate this process, companies need help from experienced lawyers and consultants.
"The FMCSA has become much more interested in the publicity that goes with enforcement than with trying to improve the situation," says Paul Sullivan, a retired Massachusetts State Police lieutenant and former president of the Commercial Vehicle Safety Alliance, the organization that determines official safety standards for commercial vehicles. "The agency is stretching the intent of the regulation to make critical examples," says Sullivan, who now works as an independent consultant for bus companies that have gotten into trouble with the FMCSA.
In an emailed statement, FMCSA Director of Communications Marissa Padilla wrote: "We make no apologies for highlighting the results of our investigations to send a strong message to the motor carrier industry that unsafe operations will not be tolerated."
In some instances, FMCSA agents have been guilty of misrepresenting facts to build a case against a company. In November in The Daily Beast, I wrote about the government's shutdown of Lucky Star, a Boston-based carrier with an impeccable safety record. The forced closure of that company was based almost entirely on violations that turned out to be unfounded. Fearful of reprisal and wary of getting mired in an interminable appeals process, the owners didn't publicly dispute the FMCSA's flawed assessment of their company. Ultimately, Lucky Star hired a team of ex-government officials to plead their case behind closed doors, spending upwards of a million dollars to get back on the road after being grounded for seven months.
The consulting fees aside, most bus companies can't afford to stay afloat for an extended period of time without earning any revenues. "It's OK to scrutinize compliance," says Dru Carey, a New York City-based criminal defense attorney, who represents numerous small and medium-sized bus companies. "But if you're going to take away someone's right to run a business in this country," she says, "you better have some due process."
Carey, who represents several companies that have had their operating authority taken away by the FMCSA, says it can take several months for the agency to consider objections to its actions and that it's a struggle to get FMCSA administrators to answer their phones or return her emails. "It's sad they need to hire a litigator to conduct business," says Carey, who began representing bus companies about two years ago. "My clients aren't criminals."
Jeff and Judy Rodgers' nightmare began in early August 2013, when FMCSA Inspector Mark Halter conducted a three-day investigation of the company's records and maintenance program. When he first showed up on August 6—and before he had a chance to examine the company's books or buses—Halter told Rodgers that he would likely end up forcing his company to halt its service. "I'm going to warn you right now that we have done five audits like this and we've put four out of business," Halter announced, according to Rodgers. (The FMCSA declined my request to speak with Halter.)
At the end of his three-day audit, Halter gave the company a conditional rating of "unsatisfactory." One of Southeastern's more serious violations was that its drivers' logbooks didn't accurately reflect their hours of service, which Jeff Rodgers attributes to clerical errors. Halter also found that the company failed to conduct drug and alcohol tests on a driver named Albert Dixon after his bus was hit by another car on the road. (Dixon was not at fault in the accident.)
Rodgers asked Halter if he could recommend a consultant who could help him write a corrective action plan to reverse his negative rating. Halter directed him to a local outfit called Mayberry Safety Solutions, and Rodgers called the company that very day. "We wanted desperately to answer their questions and get everything done in a timely manner," says Rodgers.
With help from Mayberry, Rodgers submitted plans for a new safety management program a few weeks later. The FMCSA didn't accept the plan on the grounds that it was missing certain details. So the agency issued an order on October 14 forcing Southeastern to halt its service altogether.
With their buses sitting idle in the garage, the Rodgers quickly revised and resubmitted their corrective action plan. After a productive meeting at the FMCSA field office in Raleigh on October 16, Southeastern's rating was upgraded to "conditional," meaning the Rodgers had permission from the regional office to operate. But because of a change in the FMCSA's internal procedures that took effect in 2012, the Rodgers still had to apply to get the company's operating authority back from FMCSA headquarters in D.C. before they could start running buses—a process that can take between two to five months.
During this period, Jeff Rodgers was panicked that he might lose his prized contract with Amtrak. He hired another charter company called Mary's Tours to run the Amtrak buses, but in early November, Mary's Tours told him that it didn't have any buses available to keep servicing the contract. So he reached out to an old friend named Caroline Rouse, the owner of a company called LaGrange, who was in the process of retiring and unwinding her company. Rodgers had been in the process of purchasing some of Rouse's old buses, so as a favor she agreed to put them into service under LaGrange's operating authority to work the Amtrak contract.
In early November, the FMCSA conducted a sting operation on the Amtrak routes, and determined that it was actually Southeastern, not LaGrange, that was running the buses. The agency fined Southeastern $25,000 and revoked its conditional rating.
Rodgers, who was desperate to save his business, admits he made a mistake by turning to a company that didn't have entirely distinct operations from his own. The following month, Amtrak canceled its contract with Southeastern Tours.
With their bills piling up and no revenue coming in, the Rodgers became ensnared in a bureaucratic appeals process. In early January, they submitted another version of their corrective action plan and at the same time petitioned the agency to review the case. The FMCSA rejected the petition on a technicality: Southeastern Tours wasn't allowed to ask for a factual review at the same time that a corrective action plan was pending. In February, the company's corrective action plan was denied, so the Rodgers submitted another petition for review. Southeastern Tours may not survive to see a resolution.
The company would likely be operating today if the Rodgers had hired a more experienced lawyer and taken a more adversarial approach. Georgia-based Transouth Motorcoach, which was shut down by the FMCSA in July, got its operating authority back by wisely avoiding the FMCSA's appeals process and going directly to the courts.
Transouth's attorney, J. Hatcher Graham, first considered suing FMCSA chief Anne Ferro for defamation because of remarks she made to the press about his client's firm. Instead, he filed a temporary restraining order and permanent injunction against the FMCSA and several of its top officers in U.S. District Court, maintaining that his client's alleged violations were a combination of "misrepresentations of the actual facts" and "minor administrative errors" that didn't pertain to passenger safety. Soon after Graham filed the lawsuit, the FMCSA backed off and allowed the company to start operating again.
In an email, the FMCSA's Marissa Padilla disputed Graham's characterization of the violations, writing that the company "has been subject to two investigations in two years because of its poor safety record," and listing the company's alleged offenses. Transouth was cited by the FMCSA for, among other things, failing to correct mechanical defects in its buses, failing to provide a driver with written materials on drug and alcohol tests, and failing to ask a driver's previous employer for information about his record before hiring him. (A list of Transouth's violations is here.)
The FMCSA also charged Transouth with being over-vigilant in some cases. The company racked up violations for testing a driver for drugs and alcohol after a traffic incident when the tests weren't required, and unnecessarily requesting that a driver take a drug test. "No good deed goes unpunished," says Graham. Another violation had to do with an allegation that a driver operated a bus with a flat tire, which Graham says isn't true.
"The inspectors are catching bus companies because their paperwork isn't as good as it should be, or maybe they missed some things here and there," says Graham. "But instead of helping them fix their paperwork, they're taking them off the road," said Graham. "And they don't go after the big bus companies."
Attorney Dru Carey concurs that the FMCSA's enforcement actions disproportionately target small, minority-owned carriers. She started the Asian Motorcoach Owners Association to represent members of the Chinatown bus industry, a subset of the industry that's been decimated by the FMCSA. (Back in July, I wrote about the case of Fung Wah, the iconic Chinatown bus company, which was forced off the roads in March 2013 because of regulatory incompetence on the part of Massachusetts state inspectors and the FMCSA.)
Jeff Rodgers, who stills shows up for work everyday to an empty garage, says his company's days are probably numbered. "We spent 20 years running people across the country safety, and then they came and took a man's livelihood and threw it in the dirt."
Watch Reason TV on the history of bus travel and the government's sordid role in regulating the industry: