Q: I just read an article about a motor carrier’s owners getting sent to jail for stealing nearly $1 million from a shipper over a span of several years. Can you give me any more details about this?
My main interest in finding out is so we can take security measures to be sure this doesn’t happen to us at some point. We use a lot of motor carriers in our business, some of them fairly small ones, and we certainly don’t want any of them ripping us off the way this one reportedly did its shipper.
A: That’s a tough one. My information, too, is pretty limited. I checked around and found quite a number of news reports about this case, but they all seemed to derive from the same source — a wire-service report of the trial — and none offered a plethora of detail.
As best as I can make out, the carrier was being paid on a per-mile basis. Its fraudulent scheme was pretty basic; it simply inflated mileages on all its submitted freight bills by a significant amount. The shipper, accepting its mileages, paid — for years. The articles I found were mum on how the scam ultimately unraveled except that somehow the FBI got involved.
Ordinarily, such an elementary fraud would come to light with the first bill. Billing miles aren’t calculated off a truck’s odometer; they’re based on standard “mileage guides” used for that purpose. Those mileage guides are available (for a small price) to shippers as well as carriers, so billed miles are easy to verify. Indeed, the mileage inflation was sufficient in this case that it would have showed up even on comparison with consumer online systems such as Google Maps, MapQuest and the like.
In this case, however, the trucking company owners appear to have acted in concert with a key employee of the shipper, who shared in the ill-gotten proceeds. And that’s why the key part of your question — how can you prevent the same thing happening to you? — is difficult to answer.
Reading between the lines, this shipper employee apparently was the only one to substantively review the carrier’s bills. When he approved the inflated mileages, no one walked behind to double-check. The bills, therefore, got shunted right through to accounts payable, where the only further question was whether the arithmetic was correct.
One is left to wonder how this went on so long. What happened, for example, when the conspiring employee was on vacation, was out sick, etc.? Well, there are companies penny-pinching enough that they hire only one worker to do a particular job, and when he’s not in, the job simply doesn’t get done and the work piles up on his desk until he returns. Or perhaps this employee was so “loyal” to his job that he simply didn’t take vacations and wasn’t sick much (if at all).
What this whole thing shows, though, is the foolishness of putting so many eggs in a single employee’s basket. Sure, you like to think of all your people as fully devoted to your company’s interests. But what if one of them isn’t? What if that one is not only willing to put his own interests ahead of his employer’s but has a crooked bent and the unsupervised capability of acting it?
There are many ways in which unscrupulous suppliers can basically steal from your company, many of them a good deal more sophisticated than this trucker’s plot. But you should be able to foil them as long as your company properly reviews submitted bills, comparing goods or services received with those billed, etc.
You’re asking for trouble, though, if you concentrate the review responsibility in the hands of one person. Spread the job around, and do it in such fashion that it will be unpredictable who will deal with any given bill.
It’s axiomatic that the security of any conspiracy varies inversely with the number of conspirators. Something known to only one or two people can be a secret; something known to many more than that has another name: gossip.
It also strikes me that this scheme would have had a much shorter shelf life if the shipper had rebid its trucking work on a regular basis; the discrepancy between actual and billed miles would almost surely have been uncovered in that process. And again, this should have been handled by someone other than the designated freight bill verifier.
Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.