How to Flag a Double Brokering Scam

You might have heard about the man who just went away for 20 years for running a double brokering scheme. 

According to CDL Life, “On September 26, 43 year old William Francis Hickey III pled guilty to two federal wire fraud charges relating to a scheme that took place between May 2016 and January 31, 2019.” Over the course of that time, Hickey scammed truckers and brokers out of more than a million dollars. 

What Exactly is Double Brokering? 

Double brokering is not new. However, back in 2007, FleetOwner urged carriers to be more cautious of double brokering scams, which was gaining traction due to the rise of the internet. FleetOwner online news editor Justin Carretta described double brokering at the time: 

“Double brokering occurs when a legitimate broker decides to give a load to a second broker, who then finds a carrier. Fraud enters the equation when the second [broker] is not legitimate and has no intent of ever paying--submitting its own invoice to the first broker, collecting payment and then disappearing.” Alternatively, the criminal can pose as a fake carrier company, who still double brokers a load to an authentic carrier company. The real company picks up the shipment, but the fake carrier takes the money and “disappears.”

What’s Been Done About It? 

The US Congress began work to update regulations and address issues in transportation during George W. Bush’s administration. In July 2012, President Obama signed the final version of the proposed transportation legislature, Moving Ahead for Progress in the 21st Century Act (MAP-21), into law. The purpose of the legislation was to create a better environment for those who transport freight. It required more accountability, transparency, and improved safety standards. This accountability and transparency required carriers to stop brokering their excess freight unless they acquired brokering authority (contact us at LDI to learn how carriers can legally broker freight. For full regulations, visit https://www.fmcsa.dot.gov/regulations/title49/b/5/3.) 

However, with the rise of digital load boards and due to the loosely interpretive language in MAP-21, double brokering continued, both legally (also called “rebrokering” or “co-brokering”) and illegally. And clearly, it has continued to this day. 

Legal or Not Legal? 

So what gives? How does double brokering continue when it hurts so many parties involved? Ari Ashe of JOC helps clear that up: 

“The difference between legal co-brokering and illegal double brokering comes down to commissions and communication. In co-brokering, the two brokers will split one commission and work as a team to vet the driver sent to the shipper’s dock. The co-broker also often has the blessing of the shipper.

“In double brokering, each broker gets a separate commission by lowering the rate to the driver twice to build in two margins. Often the transparency is lacking between the two brokers, and communication between the brokers and the shipper is virtually non-existent.”

So back to the Hickey story with this new understanding of the legal and illegal operations of double brokering. It was clear Hickey and his co-conspirators were very intentional in their deceit, knowing full well they were robbing carriers of fair payment. CDL Life reprinted sections of a news release from the US Attorney’s Office District of Maryland with the details of the operation:

“Hickey admitted that he and his co-conspirators obtained truck industry checks from brokers by posing as legitimate trucking companies; entering into agreements with brokers to transport loads; re-brokering, or “double brokering,” the same load to an actual trucking company; and then seeking payment from the brokers for transportation services that the members of the conspiracy did not provide. After the legitimate trucking company picked up the load, the conspirators requested an express code from the broker for the fuel advance payment, then used the express code to populate and subsequently cash or deposit a truck industry check. In some cases, the conspirators also requested a second express code from the original broker after the load was delivered, to deposit a second truck industry check. The conspirators did not pay the trucking company that actually transported the goods.” 

It’s crucial we work together as an industry to put a halt to this scam. Double brokering only benefits the criminal. Brokers are cheated out of margin, truckers can be cheated out of their entire payment, and shippers are cheated out of carefully allocated dollars for shipping.

How To Prevent Double Brokering

It takes everyone in transportation to be aware of double brokering warning signs, and LDI’s employees have some advice on how to prevent double brokering in the first place. 

Easiest way to prevent double brokering from continuing is don’t intentionally double broker in the first place. Some freight brokers might be tempted, as sometimes co-brokering makes business sense. For example, our Application Support Specialist Jena Jendrowski pointed out that teaming up with a freight forwarder might seem like a good business venture. The broker could move the freight once the forwarder clears customs (there are other versions of rebrokering or co-brokering as well). 

Jena doesn’t recommend this. There can be a myriad of problems, and once the accounts are cleared, the margin is minimal. That is to say, in most cases, this version of legal double brokering is not worth a freight broker’s time. 

How to Flag a Double Brokering Scam

Typically, if a double brokering scam succeeds, it’s because a broker will book a load with a new carrier. 

In 2019, it’s nearly impossible to not occasionally use a new carrier to cover loads. But, as our COO Mike Cannistra explains, there are ways to vet out the authenticity of the carrier. 

“When you are dealing with a carrier you have never used before, ask probing questions,” Mike recommends, “You dispatch the driver. Don’t let the carrier do it for you. This will usually spark up some conversation and you may find out who the actual carrier is.”

Brokers should also follow their gut instinct. If you’re suspicious, ask your shipper to verify the carrier at the time of pick up. “Or,” Mike suggests, “have the driver send you a picture of their truck. That will have the MC/DOT on it.” 

Finally, never allow a Quick Pay option with brand new carriers. Hold to a company policy that requires first time carriers be paid via standard payment (for LDI, that 28 days from when we receive the BOL and required paperwork, which is another step we require to prevent fraud). “Hopefully this will deter [scammers] from continuing.” Mike concluded. For even more freight wisdom and advice on identifying scams, listen to Mike’s interview on Episode 06 of The Midnight Freight Broker. 

Be diligent, be aware, and don’t let guys like this scam your customers, your carriers, or you out of a single dollar.