Bait & Switch

Imagine you’re a transportation broker. One of your clients, a midsize grower, has just called to find a carrier to deliver a truckload of bedding plants and perennials to several garden centers across the Northeast. They’ve told you they want the lowest rate you can offer. So you’re calling around, trying to find the lowest price for your client. You’re posting the shipment to every load board you know — online marketplaces designed to connect shippers and carriers. You may find someone offering a very tempting rate, but you’ve never worked with them before and none of your contacts have either. It could turn out the person portraying himself as a dispatcher at a trucking company may have no actual trucks. He could be sitting in an apartment in Southern California, not in a trucking company’s office in Pennsylvania as he claims. He may be planning to take that truckload and resell it to a real carrier, or even to another person who’s running the same scam as him. It’s called double-brokering, and it’s become a major problem in the freight industry.

Double-brokering is the unauthorized transfer of a load from one freight broker to another without the knowledge or consent of the shipper. Sometimes it is the result of negligence or poor communication, but in most instances it’s an act of malicious fraud.

This is different than co-brokering, in which multiple carriers and brokers work legally with the shipper to transport a load and payment for the completed haul is divided among the parties according to agreed-upon contract terms.

There are two primary types of double-brokering. In one, legitimate carriers accept loads but don’t have capacity, so they double-broker it even though they don’t have authority. While it is still illegal, there are often no claims unless there is an accident or a load is damaged. With fraudulent double-brokering, someone contracts with what they think is a legitimate carrier that then re-brokers the load.

This common fraud occurs when the scammers, masquerading as motor carriers or logistics companies, steal or re-broker loads without the knowledge or consent of any of the parties to the transaction. They will often steal the identities of legitimate motor carriers and find other victims to take freight and withhold payment. By the time the shipper or the original broker figures it out, which is usually when the invoices start showing up, the scammer is long gone. The broker often ends up paying multiple times for shipping the same load, which completely guts any chance at making a profit.

Russ Damyan is a senior executive logistics specialist for 365 Freight Solution, LLC, a broker that moves nursery stock daily. He says double-brokering increased by a staggering 1,000% in 2023. He’s got his company’s insurance agent and the Federal Motor Carrier Safety Administration (FMCSA) on speed dial.

“The guy who delivered the freight, he has the ability to go after the customer and get paid,” Damyan says. “The customer has to pay twice for the freight and if they don’t, it’s a lawsuit and a mess.”

How the scam works

It’s common for businesses to hire transportation brokers to find and schedule a carrier to ship its product to a customer. The broker hires a carrier, but the process breaks down when the “carrier” flips the load to another carrier.

Kevin Wolfe, CEO of C&W Transport Solutions, a nationwide freight broker with many clients in the nursery and greenhouse industry, has seen it many times in the last three or four years.

“It’s no different than identity theft,” Wolfe says. “They’re basically stealing identities for as long as they can, representing a different company. Eventually the actual carrier realizes they’re not getting paid because the fraudulent broker who is ripping them off hasn’t paid them.”

Because of how businesses typically invoice, it will usually be 30 to 60 days before the companies involved start to realize what happened.

“But at that point,” Wolfe says, “it’s too late, because I’ve already paid the fraudulent carrier and they’re in the Philippines by now.”

Wolfe says that nine times out of 10 the load is still delivered. The scammers are not after the commodity; they’re after the transactional piece of the freight — the invoices. In this case, the green industry is lucky. There is a lot of value on those trucks, sure, but it’s not the kind of item the scammers can resell online, like electronics. It’s not a commodity like steel that can be easily scrapped at a recycling center for cash.

Even if the freight arrives at its destination safely, there are still concerns. For instance, it creates liability for unsuspecting parties, nullifies insurance coverage and can deceive carriers into delivering loads without payment.

What’s being done about it

On Jan. 18, the Transportation Intermediaries Association (TIA) announced the launch of a quarterly fraud report to highlight the damage this problem is causing. TIA, an organization founded in 1978 for third-party logistics professionals, considers double-brokering the biggest problem facing the freight industry today.

“Fraud costs victims an estimated $500 million to $700 million in freight payments annually,” says Anne Reinke, president and CEO of the TIA.

With an annual revenue of more than $700 billion, the trucking and logistics industry is a big target. Double-brokering has become more prevalent for one big reason.

“Because you can get rich,” Wolfe says. “Think about how many loads you can steal in a matter of three months. You could have five people sitting on a phone taking things off a load board at $8,000 a pop, getting paid using Quickpay within two days, over the course of 60-90 days before you get caught. You can do that probably 100 times a day because they have no intention of paying the carrier.”

Matt Nease is general manager of Northland Express Transport, a third-party logistics company that specializes in nursery and greenhouse shipping. He says double-brokering ramped up with a sort of crescendo in 2020-2021 into 2022. While he doesn’t believe it’s been totally curbed, he believes by now that everyone in the transportation pipeline is aware of the problem. And everyone from brokers to the trucking companies themselves are working hard to gather the necessary information to weed those scammers out of the process.

Nease says brokers are working against the scammers by putting systematic tools in place to vet the carriers, cross-track their credentials, phone numbers, email addresses and independently verify those factors with other members of that company.

How to avoid the scam

Growers can minimize their chances of getting scammed by working with brokers that carefully vet the carriers they use. Damyan says it’s necessary to go the extra mile to check a carrier’s credentials in the age of double-brokering.

“When we check the drivers, we go to the FMSCA website,” Damyan says. “But they lie to it as well.”

Scammers will falsify the number of trucks in their fleet and the number of inspections they’ve had. Damyan has caught double-brokers in the past is by checking the VIN number the supposed carrier provides for the truck that will pick up the shipment. If it’s already affiliated with a different company, that’s a red flag.

Some growers adopt a methodology that is all about rate. Whether it’s their choice or they do it on behalf of their customers, they are looking for the lowest price possible.

“If you’re going to treat freight as just a transaction and only consider the lowest rate, you’re going to have problems with fraud,” Wolfe says. “I always say, ‘Anybody can give you a quote, not everybody can give you a truck.’”

Nease suggests a better model. Pick a few providers, one to three, based on your volume, and entrust them with the transportation part of your business. Then treat it like a piece of your business, as an extension of your logistics function.

Many growers use this multiple broker model, and some also have their customers send trucks for pickups. So when a truck shows up with the pickup number, they’re not going to question it. They’re just going to load the product. Wolfe says the way to stop this problem is for shippers to take ownership of their freight.

“This is your product you’re putting on a truck that you just assume is going to deliver,” Wolfe says. “That assumption is one that needs to go out the window right now. Let’s make sure that the truck that your broker or your carrier says is going to pick up is the actual one that you’re loading.”

Wolfe recommends growers use a check-in document. When drivers arrive on-site, they should check in with their seven-digit MC (merchant carrier) number, name of carrier, driver’s name and driver’s cell phone number. That creates a record on file and a trail to follow in case something goes wrong. The grower will know who showed up to take that delivery.

At the very least, he wants growers to make sure the name and number their broker provided matches the one on the truck idling at their dock. If it doesn’t, the grower should send their broker the MC number and name off the trailer or door of the truck. The broker will run a background check and let the grower know whether or not to load the truck.

Wolfe says it’s critical that shippers and receivers are aware of this scam, so that if they receive a seemingly-random freight invoice, they don’t just pay it. They should be making sure that the freight invoice is coming from the company which they contracted to haul the freight.

The easiest way to prevent getting scammed is to work with a freight broker you trust. Experience in the transportation logistics field, and especially with the special needs of nursery and greenhouse crops is important.

Matt McClellan is editor of sister publication Nursery Management. Reach him at mmcclellan@gie.net.