When the broker disappears with the owner-op’s money

When the broker disappears with the owner-op’s money

Regular readers may recall my story around this time last year about the new flag the Federal Motor Carrier Safety Administration is putting on interstate brokers and forwarders whose required $75K worth in surety bonding is pending cancellation:

Pending long-awaited action on MAP-21’s direction to FMCSA to immediately revoke insolvent brokers’ authority, the pending-cancellation notice appears on the FMCSA Licensing and Insurance info page for any broker whose bonding company has put in the required 30-day notice of a cancellation upcoming. It’s a way of letting a carrier know that the deadline is approaching and is crucial to check in the decision-making process around whether to do business with a broker you don’t know or suspect of issues. Anything other than a routine term end could be a red flag that a broker is engaged in the classic whack-a-mole tactic of running up freight claims only to disappear and reincarnate when the cash runs out to do it all over again.

Idaho-based owner-operator Allan Workman believes his experience with this entity, whose bond will no longer be good near the end of this month after the surety put in the notice of cancellation just more than a week ago, fits that description:

Owner-operator Workman is owed a few grand on two Washington state moves he made with his 1999 Kenworth W900 in July, two pieces of heavy machinery, just weeks after this broker’s bond term began in June and days after its broker authority application was processed and put into place July 5.

Owner-operator Allan Workman hauls in this 1999 Kenworth W900L powered by a relatively rare 16-liter Cat factory 600 motor, he says.

As is usual for Workman, he didn’t make a claim on the bond before several attempts at getting the broker to pay directly went misdirected with multiple promises of payment, including notifications of particular check numbers and promises to get a check in the mail this Friday, or tomorrow, or another day next week, depending on the conversation.

“I’ve gotten different check numbers over and over,” Workman said before the broker stopped returning calls or other communications. A bonding agent confirmed that the broker’s surety was subsequently put on pending-cancellation notice due to a run-up in claims. (Workman says the surety told him $50,000 worth had come in as of last week.) My call to the federally listed phone number for the broker went unreturned as of this afternoon. Bond company reps noted they’d not been able to get the broker on the phone, either.

Allan Workman, pictured with his wife and business partner, Billie.

What’s more, owner-operator Workman was surprised to learn of a loophole that he believes allows a broker operating fraudulently to evade detection for as long as possible, and that’s the exemption from the surety requirement for loads brokered that are intrastate or otherwise exempt commodities, including fresh produce and more. (Here’s FMCSA’s full list of exempt commodities, which OOIDA pointed to — something to keep in mind before you take a load from a broker you’ve never done business with to haul such. OOIDA’s compliance services department, too, can be relied on by members for credit checks and other reconnaissance of brokers of such loads before the decision to do business, notes Norita Taylor, one of the benefits of membership.)

The two loads Workman hauled for the company were initially denied coverage by the surety provider because they appeared to be in-state Washington moves. Intrastate loads. Brokers “think they’re getting off the hook [brokering] intrastate loads,” Workman notes, pointing out that the fewer valid claims on a broker’s bond, the less likelihood the surety will be canceled, which leads to a revocation of authority, ultimately — that seems to be the primary basically self-enforcement tool against fraudulent activity. One bond provider told me they’d never received an investigative query from any enforcement authority.

Some owner-operators have successfully filed claims on intrastate loads (see the ongoing results of the poll item below, and feel free to weigh in if you haven’t already), but it’s relatively rare.

Check out the number (18 percent of total respondents as of this afternoon) who reported having never been paid after a bond claim on an intrastate load. If anywhere close to an accurate representation of the universe of owner-operators, that no doubt represents a lot of stiffed customers. Something needs to be done about it.

Workman’s not sure whether Congress or regulators or the courts (or all three) might be the most appropriate avenue for change and/or best hope for restitution in his particular case. This is “intentional fraud,” he believes, and something “you can plan all out from beginning to end” with little worry of getting caught before you’ve run up claims, your authority is revoked, and you disappear into the ether, a subject we’ve written about before, of course.

As commenter Jimmy Wells noted under the poll above, when a surety doesn’t cover your claim, perhaps the best option you’ve got might be to go direct to the shipper for payment. “This is a case where the Carrier must go after the Shipper directly for payment with an explanation of why,” he wrote. “The Shipper will then drop the Broker like a hot potato.”

That doesn’t always work. In Workman’s case, the shipper prepaid for the load after contracting with the broker, likely believing it was a carrier, via an online platform, paying less than the broker then offered Workman — he believes in attempt to sweeten the deal to lure in an unsuspecting carrier.

With the profusion of online load platforms, the business models of owner-operators like Workman have changed, following freight opportunities. “I’ve been doing this 37 years,” he said, and have “been with one broker” mostly exclusively “for five years” a time or two. It’s “getting to where I use over 100 brokers a year” sometimes. He knows there are plenty others in such a situation. “If they have a bond, it looks like they’re OK.”

As this example shows, that may well not be the case. Do the necessary due diligence on any you deal with, whatever the load.

There’s at least one silver lining to this story, ultimately — one of those intrastate loads Workman hauled rolled across the north tip of Idaho in the process of hauling between two Washington destinations. He’s likely to get some of that money in the end, if not all of it, depending on the volumes that are run-up on the broker’s surety.

Published at Tue, 05 Nov 2019 20:41:34 +0000

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