Scam Artists Hit Brokers, Fleets

By Eric Miller, Staff Reporter

This story appears in the Nov. 17 print edition of Transport Topics.

Logistics executive Paul Lueck, a 27-year veteran of the transportation business, thought he’d seen it all before the silver-tongued con man from what turned out to be a fictitious Jonesboro, Ark., trucking company came calling last summer.

The con man convinced four of Lueck’s experienced logistics dispatchers to broker four different freight loads his company had advertised on Internet load board Web sites at prices totaling thousands of dollars.

“This happened on a Friday night and Saturday morning, when staffing was minimal,” Lueck, the director of administration and compliance for Quality Logistics, Boca Raton, Fla., told Transport Topics.

“By the time the ruse was unraveled on Monday morning, the money was gone forever,” he said.

Gone, too, was the scammer, and the freight never was delivered, leaving Quality employees red-faced and responsible for thousands of dollars in losses.

Lueck and his employees said they’ll take part of the blame for being conned, but at the same time, they believe that a lack of law-enforcement attention and vulnerabilities in federal regulatory Internet Web sites were also responsible.

Lueck is convinced the people who scammed Quality Logistics have moved on to con other unsuspecting trucking and logistics firms.

“This guy is one of the worst I’ve ever seen,” Lueck said, “but there’s nothing you can really do to stop it.”

Many others in the industry share Lueck’s sense of hopelessness for getting load-board scammers put behind bars.

That’s why so many brokers and truckers were pleasantly surprised recently when the federal government arrested two California men and charged them with bilking an estimated 118 brokers and carriers, using load boards such as Internet Truckstop and Getloaded.com.

Investigators with the U.S. Department of Transportation’s Inspector General’s Office put in three years of painstaking investigation before charging the two Russian immigrants in a scheme they say totaled roughly $500,000 over just the past 18 months.

The Oct. 10 indictment charged Nicholas Lakes, formerly Dmitry Livshits, and Viacheslav Berkovich, with illegally hacking into the Federal Motor Carrier Safety Administration’s licensing Web site and Internet-based safety records system to create fictitious companies and change the names, addresses and telephone numbers of legitimate brokers and motor carriers.

Phone messages left with the attorneys of both men were not returned.

But while many in the industry regarded the indictment as an encouraging development, it also exposed gaping security vulnerabilities in federal regulatory Web sites, and it drew attention to a crime that brokers and carriers say is on the rise.

“We’ve been dealing with fraud in the marketplace for a number of years now,” said Robert Voltmann, chief executive officer of the Transportation Intermediaries Association. “And people know they can do it with impunity. It’s really pretty sad.”

Voltmann and brokers and motor carriers who have been victimized by load-board fraud said they have no one to turn to in law enforcement, because cargo theft is not a priority at federal or local agencies.

“There is zero law enforcement,” Voltmann said. “None. Zip. Nobody seems to care.”

Although an FMCSA spokesman said the agency is making every effort to keep its Web sites secure, Voltmann said the entire system is built for “honest people doing honest things.”

“Basically, all you have to do is be breathing and have a check clear, and you’re a motor carrier or a broker,” Voltmann said, “You don’t have to own trucks, and you don’t have to have a CDL.”

Keith Lincoln, director of logistics for Bertling Logistics Inc., a Houston logistics company, said he personally tracked down a fraudulent carrier who lived two blocks from a police station in New York City.

When he walked into the police station to report the crime, he said the police asked him where he was from.

“I said, ‘Houston,’ ” Lincoln recalled. “They said, ‘You need to contact your local police department.’ ”

Houston already had passed on taking the case, Lincoln said.

“The legitimate shippers, brokers and carriers are on their own,” Lincoln said. “There’s no really clear jurisdiction, nobody to really go after these people. These people are doing this at an alarming rate with incredible success, and there’s no help out there.”

Probably the most common load-board scheme involves fraudulent brokers and trucking companies accepting freight loads on Internet load boards, and then “double-brokering” them with unsuspecting brokers and carriers who never get paid for their services.

Load-board Web site operators and other monitoring firms work hard to keep track of the scammers, but the con artists are typically a step ahead of the legitimate businesses.

Voltmann said it’s not uncommon for the criminals to change their company information on the FMCSA Web sites every 10 days.

Several carriers and brokers interviewed by Transport Topics also complained that virtually anyone with a credit card and minimal cash surety bond can gain instant legitimacy by registering on the FMCSA’s licensing and insurance Web site as a broker or carrier.

“Anybody can go out and get a license,” said Karen Pelle, chief executive officer of Megatrux Transportation Inc., Rancho Cucamonga, Calif. “We have no way of checking carriers, and FMCSA is not checking out their carriers.”

Darren Brewer, president of Carrier411 Services, an online firm that merges nine FMCSA databases to allow their clients to search and monitor motor carrier data, said fraud artists commonly will apply for and get as many as 15 federal motor carrier numbers.

“What’s interesting is these truckers sometimes will use identical information when applying for these multiple authorities, he said. “They may have different company names. Where they get trapped by our system is when they use the same phone numbers, same business and mailing addresses.”

Pelle said that Megatrux lost nearly $5,000 in a load-board scam in 2004.

“I took a file with documentation to the FBI,” Pelle said. “They told me that it was a blue-collar crime, and they don’t get involved in those cases.”

“This is a continuing problem that nobody is addressing,” Pelle said. “Companies like mine, we’re able to absorb this. Smaller firms aren’t. It’s just sad.”

Doug Moscrip, chief operations officer for the Internet Truckstop load board, said FMCSA has made some progress in securing its Web sites but that the agency “has some other holes to plug.”

He said the government “is busy with guns and knives or terrorists, or whatever.”

Moscrip said chasing the crooks is “sort of like playing chess. . . . We make a move to plug up what they’re doing, and they try to figure out something to get around it.”

“The moral of the story is: Everybody has to check out the person they’re doing business with,” Voltmann said. “You can’t just take a load off a load board and think you’re going to be safe.”

Fraud has become so common that Tony Abts, general manager of Elite Freight Solutions, Manitowoc, Wis., said his company checks out the actual owner’s home address and phone number before writing any checks.

He also asks the shipper to eyeball the carrier’s truck to make sure the correct company name is on it.

“Fraud is increasing, and I think it’s going to continue to increase,” Abts said.

“Since the first of this year alone, we’ve been taken for over $15,000 on frauds like this,” he said. “To lose $15,000 from these crooks, it hurts.”