Back when it was tough to obtain a license from the Interstate Commerce Commission to operate as a carrier in interstate commerce, shippers didn't need to be too concerned about who they were dealing with. There was a "fitness" test that required applicants to be law-abiding citizens. If an applicant had committed a crime or had engaged in fraudulent practices, competitors were quick to disclose that information when they filed protests opposing the granting of operating authority.

Under today's relaxed regulatory scheme, however, anyone can obtain a license to operate as a motor carrier, broker, or surface freight forwarder for the price of a $300 application fee, with no substantive questions asked. The only requirements are for public liability, property damage, and cargo insurance for carriers; a $10,000 surety bond for brokers; and a minimum of $5,000 worth of cargo insurance for freight forwarders.

So what's the problem? The deregulation of the transportation industry has opened the door for dishonest, lawless characters to enter the field and defraud carriers and shippers alike. Fortunately, most shippers, carriers, and intermediaries are honest businesspeople who know and abide by the laws and regulations governing interstate transportation. To be sure, there are some people who are not well versed in those laws and therefore occasionally get themselves in trouble. But there are others who appear to be using transportation to further their criminal careers.

There are two methods these criminals employ to steal from shippers and carriers: embezzling freight charges and embezzling claims payments.

The first scam involves a broker, freight forwarder, third-party logistics provider (3PL), NVOCC, or any other intermediary between the shipper and carrier that receives shippers' payments for transportation services performed by the carriers and then absconds without paying the carriers. Few shippers anticipate this contingency, and they are surprised when carriers sue them for payment of freight charges they had already paid to the intermediary.

The second problem occurs when a carrier's insurer reimburses the carrier, which is the insured party, for a loss or damage claim with a check payable to the carrier. The carrier deposits the check in its account, closes its doors, and disappears or declares bankruptcy, leaving the shipper without any means of collecting reimbursement for its loss.

These situations can be prevented by carefully drawing up contracts between the shipper; its carriers, brokers, and 3PLs; and their insurers. A bigger problem is preventing these thieves from going into business again under a new name or in a different segment of the transportation industry.

The transportation community needs to report these illegal acts to the Federal Highway Administration and request that such troublemakers not be issued new authority to operate in any capacity. Screening procedures such as those developed by the Transportation Intermediaries Association could be useful in identifying these thieves. But the most effective method is to sue the persons responsible in both civil and criminal actions, and then report the judgments and convictions to the public through the media.

One way or another, we need to keep these criminals out of the nation's freight transportation community.

William J. Augello is an adjunct professor at the University of Arizona in Tucson, a member of the Institute of Logistical Management's board of directors and faculty, and executive director of the Transportation Consumer Protection Council Inc. (TCPC). He may be reached in Tucson at (520) 531-0203, at TCPC's headquarters in Huntington, N.Y., at (631) 549-8984, or via e-mail at williamaugello@worldnet.att.net.