Walter the Fraud and the Case of Illegal Double Brokering
At TMX Logitran, we recently ran across an incident of illegal double brokering, but were fortunate enough to catch it before any major damages occurred. The case started with a man known only as Walter—no affiliation with AMC’s “Breaking Bad” Walter White, though but still just as criminal.
Although heavily frowned upon in the logistics industry, double brokering is a hot, complicated gray-area topic in logistics. Often, innocent, well-intentioned people get entangled in this practice as the result of poor communication. This is not always the case as there are many scammers out there employing it as a predatory practice, turning a bit of a gray area into illegal dealings that, at minimum, end in jail time and thousands of dollars in fines.
But What is Double Brokering?
Blythe Brumleve of Digital Dispatch defines Double Brokering as “when one freight broker accepts a shipment and then passes it off to another freight broker rather than a motor carrier.” Sloppy brokers usually do this trying to make a quick buck, or its predators looking to scam customers for money.
Why is Double Brokering a Problem?
The biggest problem with double brokering is that this leaves the original customer vulnerable to losing money, damage to their product, insurance not covering vehicle accidents or death…the list goes on and on. Broken down, their property was stolen, and sold again, without their knowledge.
Carriers performing the work often end up not being paid because the scam artist, in this case Walter, takes the payment and runs. The carrier then has to call the shipper and receiver to figure out how to get paid and for the work they did, all while hopefully avoiding the courts and legal fees associated with incidents like this.
Is Double Brokering Illegal?
The quick answer is no, not technically. The long, complicated answer is that Double Brokering is a “gray area,” and just because something is technically legal, doesn’t make it ethical. You can establish your own opinion on the subject by reading the following articles linked below;
By using double brokering, if someone is killed on the road or a shipment lost, you risk losing your license as a broker, jail time, and major fines. So, while double brokering may seem like the quick, easy fix, is it worth the risk?
When Does Double Brokering Become Illegal?
The biggest cases of illegality of DB involve fraud and identity theft. Our unknown “Walter” is one such case. The man used the information from a company and their MC# without their knowledge, to broker a load, all without his own broker license or authority. This leaves that company liable for any damages or vehicle accidents that may occur.
Thankfully, our broker, Stephen Ruhe at TMX Logitran, caught on before the fraud could continue. Sometimes, the other broker (a.k.a. the scam artist) involved also benefits by avoiding the risk of non-payment. In this case, Stephen honored the original rate, even giving the real carrier a $300 raise on what they originally booked.
How Can I Avoid Double Brokering?
There are plenty of ways to keep everything legit, but it all boils down to consent. Always keep open lines of communication between everyone—brokers, shippers, and the customer. The best way you can avoid encountering double brokering is to work within your established network of trusted brokers, shippers, and carriers. You can also have co-brokering agreements with other companies, which keeps everything legitimate.
What if I’m working with someone new?
This isn’t an ideal world, so we won’t always have our established network of trusted carriers and customers to work with. We can protect ourselves by asking a few simple questions and using these quick tips, such as;
Do they have their own brokerage authority?
Can you contact the customer?
Is the customer aware you’re re-brokering their shipment?
Do we have an agreement to co-broker? If not, can you establish one?
Make sure you’re always carefully confirming every rate, paying attention to exactly who is doing what and where, for however much money.
Thoroughly vet carriers and customers using transportation networks and technology resources available online. At TMX Logitran, we recommend McLeod Software, a technology company that provides direct resources to vet carriers and customers and helps run your brokerage and/or transportation company.
What if I suspect Double Brokering?
You can file a formal complaint online of illegal double brokering to the FMCA at File a Moving Fraud Complaint | FMCSA (dot.gov) or call their number at 1-888-DOT-SAFT (1-888-368-7238).
You can also report suspicious or illegal brokering on most DAT Load Boards, which causes those admins to remove the access of the person(s) and they won’t be able to book loads anymore through that portal anymore.
Make sure you keep documentation for your records and alert all the parties involved to reconcile the incident as soon as possible.