This menacing trend is costing brokers, carriers, shippers, and consumers a staggering $800 million or more.

In the transportation industry, a dangerous game is being played, with the “Brokerage Fraud Epidemic” at its center. This menacing trend is costing brokers, carriers, shippers, and consumers a staggering $800 million or more, warns Anne Reinke, the president and chief executive of the Transportation Intermediaries Association (TIA)​.

The Inadequacy of Enforcement Measures and the Rise of Impersonation Fraud​​

A lack of stringent enforcement has given fraudulent actors a playground, enabling them to use hundreds of different federal motor carrier numbers to impersonate carriers, leading to an influx of fraud, theft, and other damaging schemes.

“Are we ignoring a fraud epidemic in the supply chain?” Reinke posed this pressing question during her testimony before a Congressional subcommittee on Capitol Hill​​.

TIA’s Advocacy and the Ineffectiveness of the Federal MAP 21 Act​​

A lack of stringent enforcement has given fraudulent actors a playground.

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TIA’s advocacy efforts led to the codification of illegal brokering in the Federal MAP 21 Act of 2012, which also proposed a $10,000 penalty for violations and the establishment of a complaint database. However, the act’s effectiveness is being questioned.
Why hasn’t the Federal MAP 21 Act curbed the brokerage fraud epidemic? The answer lies in the FMCSA’s outdated physical audit system. It’s a system that requires inspectors to physically verify the trucks and their records—a process hindered, if not entirely halted, during the pandemic.

The Uninvestigated Complaints and Absence of Penalties​​

“Did you know there are over 80,000 complaints in the database that remain uninvestigated with zero penalties imposed?” Reinke asked, bringing to light the harsh reality of the situation.

Safety Ratings and the Disadvantage to Smaller Carriers​​

One of the significant issues is that as many as 85 percent of carriers lack a safety rating, according to TIA’s 2020 estimation. The absence of enforcement puts smaller carriers, such as those represented by the Owner-Operator Independent Drivers Association (OOIDA), at a stark disadvantage.

“Do new entrants in the transportation industry have a fair chance?” This query highlights the bias in the system where major players get rated while newcomers struggle to establish their safe ratings.

The Need for Broker-Carrier Transparency​​

TIA’s advocacy efforts led to the codification of illegal brokering in the Federal MAP 21 Act of 2012.

This problem is further amplified by an urgent call for increased transparency between brokers and the carriers they hire, as testified by Lewie Pugh, vice president of OOIDA, Lewie Pugh.

“Are brokers following federal law?” The lack of FMCSA enforcement has resulted in brokers sidestepping federal law, which mandates the sharing of transaction records with carriers. Sometimes, this law is circumvented through contract provisions that waive the right to access these records, Pugh highlighted.

The Role of Bills of Lading in Preventing Fraud​​

Being vigilant and examining every bill of lading is the first step in preventing common brokerage fraud schemes. The current system, however, doesn’t support this level of vigilance, creating a ripe environment for fraudulent activities.

The Promise of Greater Transparency​​

What could greater transparency mean for the trucking industry? According to Pugh, it could “support the economic stability of the trucking industry and help develop a more reliable supply chain.” This statement underscores the importance of broker-carrier transparency in tackling the brokerage fraud epidemic and building a more secure supply chain.

The Road Ahead: Combating the Brokerage Fraud Epidemic​​

“Did you know there are over 80,000 complaints in the database that remain uninvestigated with zero penalties imposed?”

Addressing the brokerage fraud epidemic requires a multi-pronged approach:

• There’s a pressing need for urgent action.
• Increased enforcement of existing laws is essential.
• Improved transparency can support fair operations.
• A fair system for all carriers—big or small—needs to be established.

The path to achieving this is fraught with challenges, but the rewards of a secure, reliable supply chain are worth the struggle.

The brokerage fraud epidemic is a looming crisis that demands our immediate attention and action. It’s time for stakeholders to band together, shine a light on these fraudulent activities, and work towards creating a more reliable, transparent, and secure supply chain.

Understanding the Pervasive Issue of Double-Brokering in the Trucking Industry

1. Double-Brokering is a Rampant Issue in the Trucking Industry: Double-brokering is a significant issue within the trucking industry. An individual or company acts as an unauthorized intermediary between the shipper and the carrier, often without the knowledge or consent of either party. These fraudulent brokers typically take a cut of the shipping fees, which reduces the carrier’s earnings. While double-brokering is illegal, it’s a difficult problem to tackle due to its covert nature. The individuals or companies involved often operate under multiple identities to evade detection and punishment. Joe Howard, a logistics worker, has been tracking a list of suspect companies involved in double-brokering. When he began his project two years ago, the list had only a handful of companies; now, it has grown to nearly 500​.
2. Origins of the Double-Brokering Ring: According to Howard, the double-brokering ring started with three large brokerages that are still operating: All State Association, located in San Fernando, California, and Broadway Brokerage and TriStar Brokerage, both headquartered in Glendale, California. These brokerages used an elaborate network of employees and fake carrier MC numbers to impersonate legitimate trucking operations and re-broker loads​.
3. Reaction from the Industry: These brokerages were eventually removed from the Oregon-based DAT load board following numerous complaints. This decision was a relief to many brokers who were relentlessly contacted by employees of these companies, often receiving up to 10 calls and multiple emails daily​.
4. DAT’s Stance on Double-Brokering: A spokesperson for DAT, Annabel Reeves, stated that the company takes fraudulent double-brokering very seriously. Violations of state and federal laws related to double-brokering, if confirmed, would prompt DAT to contact law enforcement or encourage the informants to do so​​.
5. Emergence of New Entities: Not long after the original entities were blocked from the DAT load board, two new brokerages emerged, allegedly run by former employees and managers of the original brokerages. These are Massive 3PL Corp., based in Edinburg, Texas, and Fargo Freight Inc., of La Crescenta, California​​.
6. Ongoing Complaints and Investigations: Complaints have continued against the original and new entities for unauthorized re-brokering and payment issues. Fargo Freight, in particular, has faced numerous complaints for unauthorized re-brokering of loads and non-payment to carriers. Interestingly, Howard noted that cities in Southern California, which could hold between five to 10 legitimate trucking companies, have over 400 MCs registered, suggesting widespread involvement in the double-brokering scheme​​.

For more information, you can refer to this FreightWaves article​​.

Explore More on Freight and Brokerage Topics

• Dive into the details of FMCSA’s proposed changes to Freight Broker Rules for a deeper understanding of the financial security requirements and compliance.
• Gain more insights into the evolving definition of a freight broker as reviewed by the FMCSA.
• Understand more about the industry reaction to freight brokers with a case study of trucking companies taking legal action against a brokerage.

Further Reading on Fraud in the Trucking Industry

• Learn about the implications of the Louisville freight fraud indictment, where two residents faced serious charges due to a complex scheme.
• Delve into the legal case against the Nikola founder, convicted on charges of securities and wire fraud.
• Understand the consequences of fraudulent financial practices through the case of a former CFO of Roadrunner Transportation Inc.
• Read about a trucker charged with fraud for evasion of hefty insurance premium payments.

• For more news and updates on the issue of in the brokerage industry, check out this page.
• For additional insights into the challenges facing the trucking industry, explore this page.
• To dive deeper into the topic of freight fraud and its role in the global context, follow this link.

Explore External Resources and Insights

• Owner-Operator Independent Drivers Association (OOIDA): Learn more about their mission, advocacy, and the areas they cover in the trucking industry. https://www.ooida.com/
• Transportation Intermediaries Association (TIA): Find information on their services, educational programs, and commitment to innovation in the transportation industry. https://www.tianet.org/
• Federal MAP 21 Act of 2012: Understand the regulations and laws that impact the trucking and transportation industry. https://www.fmcsa.dot.gov/mission/policy/map-21-moving-ahead-progress-21st-century-act