Previously in this series: A ‘hit it and move on’ broker scam — and more loopholes
A broker running up bills with no intention to pay is bad enough, but there’s another major reason why owner-operators might see little to no payment in a situation of fraud or insolvency. It’s when the carrier files a claim against the broker’s bond or trust fund, but the money’s not there to fulfill the claim.
Consider the failure of California-based broker Alliance Transportation, which began in 2011, says Dave Carney of Nationwide Transport Finance, a factoring company. Carney provided some testimony in a later class-action case filed by the Owner-Operator Independent Drivers Association against surety trust provider Pacific Financial Association. Its alleged failure to properly act on owner-operators’ claims. The required surety then was $10,000.
While claims began to run up in that case in the fall of 2011, PFA didn’t notify the Federal Motor Carrier Safety Administration of cancellation until January 2012, Carney noted in his testimony. He estimates carriers that were not paid by Alliance were due well more than $500,000.
In 2017, OOIDA’s case got new life in Arizona, where PFA is based, after an initial judgment against OOIDA was reversed on appeal. Carney says it was settled for an undisclosed six-figure sum disbursed in large part to owner-operators owed payment.
Alliance was a longtime, reputable broker, but extended too much credit to a large shipper that went out of business, says Daniel Larson, PFA’s CEO. PFA argued that it delayed on Alliance’s cancellation because it worked with Alliance to make payments to carriers for weeks, but “eventually it snowballed and they couldn’t continue.”
Following the passage of the Moving Ahead for Progress in the 21st Century Act in 2012, the broker surety requirement was raised from $10,000 to $75,000. However, in the case of a fraudulent broker rapidly pocketing shipper payments before closing up for good, or in the case of a sudden economic setback, even $75,000 might not cover all the claims against a single broker.
