When the gavel finally came down on convicted scam artist Kulwant Singh Gill on March 28, it came down hard.
A federal judge sentenced the California resident to 10 years and 10 months in federal prison for defrauding more than 100 trucking companies, followed by three years of supervised release and topped by $443,388 in restitution to victims of his illegal brokerage scheme.
Gill’s sentence is one of the toughest prison terms handed down in recent memory for a brokerage scam. Similar cases often end with shorter prison terms, even though they may involve much larger fines.
For instance, a federal court in Pennsylvania last month ordered Rubik Avetyan and his sons Alfred and Allen to pay $1.1 million in a similar broker fraud case. Avetyan was sentenced to five years in jail. His sons got four years and two months each.
It would be nice to think such tough action by federal courts indicate a broad-based crackdown on fraudulent brokers, and that long jail sentences and big fines soon will discourage such con artists. That’s not likely, however.
The transportation arena is ripe with fraud of this type, according to Robert Voltmann, president and CEO of the Transportation Intermediaries Association. Because brokerage scams often involve small businesses defrauded of small amounts of money, they are difficult to uncover and prosecute. Broker fraud often goes unreported, because truckers are worried insurance premiums will rise, or they simply don’t know where to report the crime.
The Federal Motor Carrier Safety Administration is tasked with investigating brokerage fraud, but has little resources to dedicate to the task.
Voltmann believes the best way to fight scam artists who give honest brokers a bad name is to pass the Fighting Fraud in Transportation Act, included as an amendment in the $109 billion transportation bill passed by the Senate and the bill stalled in the House of Representatives.
“These convictions are a positive sign, but the transportation industry is ripe with fraud, and the FMCSA can only do so much,” Voltmann said. “This is why the professional private sector is supporting the Fighting Fraud in Transportation Act contained in the Senate and House transportation bills. The legislation will provide the private sector with the means of going after fraudulent operators and cheats.”
That legislation is opposed, however, by the Association of Independent Property Brokers and Agents, which claims thousands of small brokers would be put out of business by the bill’s $100,000 surety bond requirement. Emotions run hot over the issue. An unsigned note sent from firstname.lastname@example.org — an AIPBA Web domain — compared the TIA to “terrorists” and “fascists.”
The higher broker bond, however, is only one element of the bill in question. The legislation also would order the Department of Transportation to screen its list of registered carriers, brokers and freight forwarders annually and require the FMCSA to ensure that list accurately reflects only businesses with active operating authority. The bill also states that truckers need separate broker or forwarder authority and surety bonds to act as freight intermediaries.
Practically everyone in the transportation arena, including the FMCSA, wants the FMCSA to do a better job of vetting applicants for motor carrier and freight broker authority. The ease with which applicants can obtain authority and pose as carriers or brokers contributes greatly to the proliferation of fraud schemes such as the ones run by Avetyan and Gill. In fact, Gill set up more than two dozen fraudulent brokerage firms and motor carriers, and continued his scam even after being indicted in 2006, defrauding at least 100 legitimate trucking companies.
According to the U.S. Justice Department, Gill would use Internet-based load boards to find shipments and pose as a trucker, offering to transport those loads for shippers or brokers. He then would repost those loads on the same or different load boards, acting as a broker seeking another trucking company to transport the freight. Gill collected payment from the original broker or shipper, but when the trucker who actually hauled the freight billed him, Gill refused.
He was first indicted in 2006, indicted a second time in 2008 and convicted after pleading guilty in 2009 to eight counts of wire fraud and five counts of making false statements to a government agency.
It will take many more sentences of this type, however, as well as federal regulations with teeth, to convince con artists to abandon the lucrative brokerage field for a new gig.