Freight fraud: Burgeoning double-brokering scheme like ‘whack-a-mole’

Part I of a three-part investigation into an alleged double-brokering scheme from Southern California.
Part II: CEO denies tie to double-brokering scheme
Part III: Former employees shed light on double-brokering network

Frustrated with brokers and carriers being looted by a sophisticated network of load-board scammers posing as legitimate companies, Joe Howard created a spreadsheet to track a list of suspect companies, largely based in Southern California, to warn others to do their due diligence or pay the price.

When he started the project two years ago, Howard, who works for a Midwestern logistics company that he asked not be named, said there were only a handful of companies on his list to avoid dealing with. Now it has grown to nearly 500.

“I’ve never been burned because we are a small company and we are very careful with anyone we use,” Howard told FreightWaves. “However, they are burning several brokers daily with absolutely zero repercussions, and a lot of brokers are too busy or too big, or maybe a little lazy, to really do some research on each MC [motor carrier] number being thrown at them.”

Howard said the alleged 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. None of the companies responded to FreightWaves’ request for comment. 

The three brokerages use an elaborate network of employees and fake carrier MC numbers to “pretend to have a truck so they could re-broker loads,” Howard alleges. He claims they were kicked off the Oregon-based DAT load board in December after brokers filed numerous complaints. 

“Several of us were pretty happy about it. However, we know they will eventually come back with different identities,” he told FreightWaves. “It was a big deal for many brokers, who were hounded by employees of these companies daily. They were relentless, calling up to 10 times a day and sending multiple emails every time we advertised freight on DAT. Like many other brokers, we just block telephone numbers from these area codes.”

DAT spokesperson Annabel Reeves said the company is aware that fraudulent double brokering occurs in the industry and “DAT takes this very seriously.”

“Double brokering violates a number of state and federal laws, and if we became aware of such behavior and were provided sufficient information, we would contact the appropriate law enforcement authorities or encourage those who brought it to our attention to contact the appropriate authorities if they were more comfortable doing so,” Reeves told FreightWaves.

She declined to comment on whether the Southern California brokerages Howard cited were kicked off the DAT board.

However, not long after the entities were blocked from vying for loads on DAT, Howard claims, two new brokerages popped up — all parented by Massive 3PL Corp.,  headquartered in Edinburg, Texas, and Fargo Freight Inc. of La Crescenta, California.

“These are just former All State, Broadway and TriStar employees and managers using different identities that are working together,” Howard says.

Several complaints have been lodged against All State, Broadway and TriStar, along with Massive 3PL, for “unauthorized re-brokering or payment issues,” according to reports from Carrier411 FreightGuard and Transportation Intermediaries Association (TIA) Watchdog.

Suren Arustamyan, manager of Massive 3PL, did not return FreightWaves’ telephone calls or emails seeking comment.

Fargo Freight has also racked up several complaints for unauthorized re-brokering of loads and for not paying carriers. No one at Fargo Freight returned FreightWaves’ telephone calls or emails. There are 11 brokerages and carriers listed in La Crescenta, with eight of those companies located on Foothill Boulevard in the city, which has a population of around 20,000.

Network based largely in Southern California

In Southern California, Howard said the cities of Glendale, Tujunga, North Hollywood and Burbank “could maybe hold between five to 10 legitimate trucking companies,” yet he said over 400 MCs are registered there. He claims most of the entities and employees involved in the alleged double-brokering scheme are “affiliated with each other in one way or another” and can be traced back to his original list.

“This is definitely the most complex operation I’ve seen in my 20 years in the logistics industry,” Howard said. “I’ve shared this information with several brokers and receive multiple requests for the list daily.”

However, he said some ignore or delete the list without reading it and wind up with loads that are double brokered without authorization, or else their freight is held hostage, goes missing or is damaged.

Howard said he has also shared his list with the Federal Motor Carrier Safety Administration in hopes of shutting down the load-board scammers’ network.

FMCSA did not respond to FreightWaves’ request for comment.

How it works

Howard says this elaborate network has created hundreds of fake MC numbers, pretending to have trucks to get the loads from other brokers. Another entity involved in the alleged scheme re-brokers the freight to legitimate carriers that often have no idea the freight has been illegally double brokered. 

Once the legitimate carrier picks up the load, Howard said the scammers often seek payment from the broker they booked the load with for transportation services or request fuel advances from the brokers before their unauthorized re-brokering scheme is discovered. Frequently, the legitimate trucking companies that transport the freight have little or no communication with the shippers that didn’t authorize the double brokering and sometimes have to fight to be paid.

Dale Lenz, owner of Story Express of Ames, Iowa, a small trucking company and freight brokerage, said he mainly has dedicated accounts. But on occasion, Lenz said when he posts a load on DAT, he is hammered with phone calls from Southern California area codes that have a connection to Howard’s growing list. 

“Double brokering in one aspect or another has always been around, but this is much more organized than anything I’ve ever seen before and I’ve been in business for more than 20 years,” Lenz told FreightWaves. “There is a widespread fraud going on of shell carriers booking loads from brokers and then double brokering them.”

Victims of load-board scammers need to fill out detailed reports to possibly prevent it from happening to others, Lenz said.

“Scammers are gaining legitimacy by being allowed to be on the load boards,” Lenz said. “It used to be if they were on the board, they were mostly legit. Well, that’s not really the case anymore.” 

Carrier411 CEO Darren Brewer told FreightWaves that he estimates these double-brokering scams, including fraudulent fuel advances, cost the transportation industry more than $100 million per year.

Brewer’s company, which allows brokers and shippers to research and monitor trucking companies based on safety, compliance, performance and transportation metrics, diligently monitors its site to prevent double-brokering fraud.

“Through Carrier411’s FreightGuard Reports, brokers and shippers can post problems with certain carriers,” Brewer told FreightWaves. “This allows users to track and monitor carriers that have a history of double brokering.”

He said Carrier411 uses proprietary data to analyze trucking companies throughout the United States based on different risk levels of reported activity, such as double brokering, holding loads hostage and back solicitation.

His site also tracks all new applicants and new MC numbers issued daily by FMCSA, which it uses to identify chameleon carriers that apply for new operating authority.

“Using archived data going back to 2005 and fraud prevention tools, brokers and shippers can identify chameleon carriers that may be operating illegally using a new identity and new MC number to disguise their former identity and evade enforcement actions issued against them by the FMCSA,” Brewer said.

Despite his ongoing fight to prevent fraudulent double brokering, Howard said new MC numbers based out of Southern California are cropping up monthly as he compiles data and connects the dots between employees of the old entities and the newly established ones.

“It’s like playing whack-a-mole, where you knock one down but two more pop back up,” Howard said.

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