On Monday, June 20, I had the opportunity to interview a couple of gentlemen whose company I can’t name due to an ongoing investigation. Their company fell victim to an identity theft scam. You’re thinking “I’ve heard this a thousand times before, so what is different about this one?” However, it wasn’t a social security number that was stolen, it was the company’s Motor Carrier number and U.S. Department of Transportation Carrier number.
Double brokering is when the freight you have submitted to a brokerage or load board is “supposedly” covered, only for it to be resubmitted to another load board with a small cut taken out of the rate. It’s rather common to see this happen. While not technically illegal, it’s a pain trying to book a good-paying load, only to be told it’s covered already. yet there it is, still on the load board.
How does the double brokering shell game get played?
Last year, Clarissa Hawes, FreightWaves’ Senior Editor, wrote an article focusing on the effects of double brokering in Southern California. Over $100 million annually in fraudulent brokering and fuel advances were discovered as part of this scam. An investigation in July 2021 showed over 600 companies were double brokerages. It was traced down to just three brokerage houses using employees’ information and fake truck and trailer information to get the bills of lading (BOLS), then shuffle them, rebroker and reap the profits.
Chariot Logistics had this great blog explaining how a double broker works its shell game. A shell trucking company will book a load with a shipper or a brokerage with the claim that it will move the load with a company truck and driver. Simultaneously, the shell brokerage company will rebroker the shipment out as its own to another trucking company.
The actual trucking company will then make the pickup and delivery and, thinking it hauled the load for the shell brokerage, will then send the bill of lading and invoice the shell brokerage for payment. The shell trucking company then takes the signed BOL and invoices the broker for payment. The broker then issues payment to the shell trucking company; the shell brokerage in turn never pays the actual hauling carrier.
Then both shell companies disappear. After about 60 days of the actual trucking company that hauled the load not being paid and having no contact with the now defunct shell brokerage, the shipper (whose name appears on the BOL) is contacted for payment. The shipper that contracted out the original broker reaches out to see what has happened and then the double broker scheme is discovered. Legally, the real trucking company that hauled the load has the right to be paid and the shipper or broker must repay the already paid freight invoice.
Keep your DOT numbers close to your chest
Back The Truck Up received a rather unusual email claiming that a “malevolent motor carrier” had used a real company’s MC and DOT numbers in a “double brokering” scam. So being the open-minded journalist I am, I asked if I could interview them for an article on BackTheTruckUp.com, while offering some anonymity safeguards. After an informative exchange, I think I can share what we discussed and what you can do to prevent this from happening to your business.
“People are using our email address and going to brokers and 3PLs that we are set up with and confirming the MC DOT number, which is ours, saying that they have a driver. They recycle some truck, trailer, and driver information of ours to these larger players, getting the loads and then going ahead and brokering themselves. Sometimes, it appears they are in fact actually paying the carrier that does ultimately provide service on the load.”
– Owner of victim carrier
Using a load board I cannot name (but oh Good Lord I want to – but the legal beagles WILL NOT let me), the bad actors were allowed to book a load under the victims’ IDs, then broker that load off to another carrier that completed the delivery. I’ve heard of money laundering, but freight laundering? That is a new one for me.
The victim carrier owns a dry van fleet with a good business reputation. Now, due to the criminal activities plaguing the company, that reputation is in danger. First impressions are everything, and when looking for business partners, a damaged reputation can cause you to be passed over.
So now the men who run this victim carrier are receiving calls and emails from parties wanting payment for services they know nothing about. And it’s not just one instance, it is several. This, according to the carrier, has been going on since February. So the victim carrier has been doing hard work, getting evidence pulled together in order to have the U.S. government step in and help put a stop to this.
Looks like we now have a federal investigation on our hands
Thankfully, according to the victims, the U.S. Postal Service Inspector General’s office has taken the case.
“Yes, we were finally able to get somebody to kind of listen to us towards the end of the week … And it turns out the Inspector General of the United States” Postal Service, which is kinda surprising to me, is the one with the boots on the ground dealing with these situations.”
– Owner of victim carrier
The Postal Service’s financial crimes unit handles embezzlement and money laundering. I have a feeling when this investigation is complete, there will be quite a laundry list of crimes.
Lessons to learn from this business identity theft
So what can carriers reading this article do to protect themselves? Personally, if you don’t have someone doing audits with the load boards to see if and when your data was used to book freight, you might want to start. I have this odd feeling as rates stay low, we might see bad actors try this maneuver more often to book the cheap freight in bulk.
Also, try to get your brokers to know you by name. That way they may detect if someone is calling “on your behalf,” and they might actually question any unusual behavior. Another thing in this age of two-factor authentication, why not have that safeguard when booking freight? I have to use it to log into everything I own, so why not use it on a multi-million dollar freight database?
I will keep you updated on the outcome of this case, and any developments that arise from it.
