The debate over fighting broker fraud

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Dsc 0097The high-profile case of fraudulent broker Kulwant Singh Gill, who last week was sentenced to 11 years in prison and ordered to pay restitution to his carrier victims, has owner-operators and industry watchers debating just how to solve the problem of fraud in transportation for once and all. A big part of that debate is a piece of legislation, H.R. 2357, or the Fighting Fraud in Transportation Act, that was introduced in this session of Congress last year and then included in H.R. 7 earlier this year. That was the House’s as-yet-futile attempt at a multiyear highway reauthorization, and settled within it was a the H.R. 2357 measure to raised the broker surety bonding minimum requirement from $10,000, a level it’s been hovering at since the 1980s, to $100,000.

Essentially, a surety bond is held in order to ensure that, if a broker fails to pay the carrier, the carrier can seek restitution from the surety and be paid for his/her services.

The measure to increase the requirement has been supported by an unlikely alliance of the Transportation Intermediaries Assocation, an association of brokers, 3PLs and freight forwarders you might well think of as the American Trucking Associations of the freight brokering world, and the Owner-Operator Independent Drivers Association.

Not everyone agrees that the $100,000 bond figure is the right one.

The Association of Independent Property Brokers and Agents, which wants you to think of it in relationship to TIA as, in the carrier world, a sort of small broker’s OOIDA to the big boys of the ATA, certainly believes $100,000 is far too high. Their “Open Letter to OOIDA,” published on their website shortly after the introduction of H.R. 2357 last year, pleads with the association and its owner-operator members to recognize the realities of the surety bonding world for small brokers.

“If the bond were to be drastically increased as proposed,” the AIPBA’s letter reads, “then small and mid-sized property brokers would not be able to afford the premium and/or the cash collateral requirements that would be imposed by surety companies. As a result, thousands of small business owners, including our members, would be forced out of business. Tens of thousands of employees and agents would lose their jobs. Big Brokers would then control the market and make shippers pay more and would pay owner-operators less. Everyone including small brokers, owner-operators, shippers and consumers would lose…everyone, except the big brokerages and the TIA.” AIPBA favors an increase to $25,000 to account for three decades of inflation, an amount the FMCSA has placed on household goods brokers effective this year.

The often antagonistic relationship that owner-operators and brokers seem to have in the realm of truck-stop conversation and online chatter, to my thinking, often stands in direct opposition to the reality of many an independent owner-operator business. It’s the oft-used broker or indepedent freight agent who becomes for many operators their most important customer, serving in some instances almost like a committed outside sales agent for the carrier.

If AIPBA was nursing this working relationship with their open letter last year, when H.R. 7 showed up in February and included the $100,000 requirement, such nursing was thrown by the wayside. At the bottom of the 2011 “Open Letter…” today is a link to a 2012 follow-up message to “OOIDA and their members,” featuring a portrait of a shaggy, long-unshorn sheep and the headline, “Dear OOIDA, TIA has pulled the wool over your eyes!”

I imagine OOIDA’s perspective will sound familiar to you: In a policy paper about the subject, they characterize the problem this way: “Every day we hear from truckers who have been cheated by bad brokers out of compensation for hauling a load. Often when we file a claim against a broker’s surety bond, $150,000 or more of claims have already been filed against the $10,000 bond. It is far too easy for unscrupulous brokers and their surety bond providers to shrug off financial responsibilities.”

In short, claims filed in excess of the minimum bond amount are never paid, and a small-business owner-operator is left with little recourse.

On news of the the conviction of Kulwant Singh Gill, mentioned above, owner-operators and industry watchers on my Facebook page sounded off in debate of the appropriate tack toward dealing with the problem of bad actors in the industry — the brokers among them, particularly. One, who was mystified by OOIDA’s stance on raising the bond for all brokers, regardless of size, was of the mind that pouring investigative resources into cases like Singh Gill’s was “the correct deterrent,” he said. “I tend to have more difficulty dealing with large brokers than small ones. It might be more logical to base the bonding amount by a percentage of the freight that is actually brokered.”

The owner-operator noted that a $10,000 bond represents to a small firm a larger share of its business than $100,000 would to a large brokerage.

Broker Dan Metully, of TFI Logistics in Stevensville, Mont., says his brokerage holds the minimum $10,000 bond. “I’ve contacted the people who hold my bond,” he says, to ask about the possibility of them writing a $100,000 bond for his business, “and they’re not sure they can write these sureties” given the basics of his business, with a total 10 independent contracted agents and 2 office staff to whom Metully of course feels a responsibility to keep in business. “A lot of carriers want to say that a lot of brokers are no better than pond scum, but there are a lot of us that are trying to make a living just like other honest people. In my view, the carriers that we deal with, we have real relationships with them, and we try to make sure that that’s honored. If something goes wrong, and it’s our fault, we stand accountable.”

Transport WatchMetully, who was a guest in March on Allen and Donna Smith’s Truth About Trucking Live online radio program (listen via the link) about the subject of raising the surety bond, has launched in recent times an online tool that he hopes will garner better participation from carriers and other transport industry participants as time goes on. enables users to market their services as well as post alerts on bad actors, whether brokers, carriers or shippers, they’ve dealt with. This kind of crowd-sourcing of information Metully views as a potentially sizable chink in the solution to fraud in the industry, enabling users to take policing bad actors into their own hands.

“I want to see people take this tool that I have built and use it,” he says, “and get the word out there: ‘This guy did this,’ and we may not be able to get anybody’s money out to him, but we might be able to save the next guy, and then the next guy provides some information about somebody else he has dealt with, and maybe that information will save you.

“We’re also working on a kudos section,” he adds, “for the guys who did things the right way and need to be recognized for it and should receive more business for it.”

Posting alerts and listing your business there is free, but you have to register your company, part of Metully’s efforts to keep down potential instances of unwarranted blackballing. Companies named on the site for fraudulent actions will always get an opportunity to respond, he says.

There’s also a premium membership that is free during a six-month promotional period. “It’s a free webpage in the site, essentially,” he says, and you get a promo code that you can pass on to other interested parties. “If one signs up, you’ll get another month, too,” he says. “At the end of all that, say you took the six-month promo period and that’s it. At the end, you’ll still have a free listing and people will be able to find you based on your traffic patterns and the equipment that you use. From a broker standpoint, I could have used that a million times.”

Give them a look at and tell us what you think.


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