On the Lookout for Fraud and Embezzlement in the Trucking Industry

In her article, “Trucking Companies: The New Target for Scammers, Kayla Matthews points out that COVID-19, has brought a marked increase in fraud and scams in the trucking industry. The confusion caused by the health risks of the situation is leaving many people vulnerable to scams and con artists both inside and outside the company who see opportunity.

The logistics industry, like many industries faced with the COVID pandemic, has been stretched to the limits. More and more companies and people have come to depend on it and as the demand for truck drivers has increased across the country. Unfortunately, increasing demands can open opportunities for scammers to move in for a part of the action.

Although Matthews’ article focuses on the trucking industry in general, the same issues can apply to trucking in the timber industry as well. Most trucking firms are small businesses with limitations on segregated duties which can make them vulnerable to fraud. First, let’s look at the cautions Matthews mentions in her article.

I’ve also added other fraud and embezzlement cases from the general trucking industry. With the goal to learn from other peoples experiences with fraud.

Finally, let’s review a few past cases specifically related to the timber industry that you might find interesting. We have reviewed some of these in the past, but it is worth remembering that trucking played it’s part in these cases.

All of this shows the variety of ways fraud and embezzlement is becoming more sophisticated and the many angles it can take. I hope you enjoy the tour of trucking fraud in this month’s newsletter.

A Tour of New and Old Fraud in the Trucking Industry

Kayla Matthews, in her article about how trucking is the new target for scammers, points out three ways that the growth in the trucking industry has caused a growth in creative fraud in that industry as well.

She mentions three areas that we might not consider for trucking in the timber industry. But perhaps we should.

• CARES Act Fraud – The recently passed CARES Act provides small businesses with loan forgiveness. While this program is undoubtedly helpful to small trucking and logging companies, it also spells opportunities for scammers to take advantage of business owners seeking help under the Act. Logistics companies seeking help under CARES may inadvertently disclose sensitive information to these scammers

• Identify Theft – Fraudulent companies impersonate a legitimate company and then offer fake job opportunities and during the hiring process obtain credit card information and even social security numbers. Those who might have lost jobs in this challenging economy are more likely to fall for the scams in their desperate effort to find work. An additional detriment of this type of fraud is that the company that is the victim of the identify theft will end up with a poor reputation and lose irritated customers who blame them for the breach.

• Cyberattacks – Just like every other industry, cyberattacks are increasingly challenging. Especially smaller businesses often do not have sophisticated cybersecurity protocols in place to combat attackers. Hackers obtain bank information and social security numbers.

Although these are new challenges exacerbated by recent circumstances, don’t forget the usual types of embezzlement and fraud related to the trucking industry. Here are some case studies you can find with a quick internet search:

Typical fraud cases in the trucking industry

• In Las Cruces, NM, a Mesilla Valley transportation employee pled guilty to embezzling $1M from her company. From 2011 to 2018, Sandra Roberto used her position in the accounting department deposited checks ranging from $400 to $975 into her personal bank account. Roberto was the primary contact with two third-party payment processors. To make matters worse, in addition to wire fraud, Roberto also falsified her income tax returns by failing to report any of the illegally embezzled funds to the IRS. Who would? As an example, in 2017, she embezzled $217,260, but only reported $31,932 as taxable income. Fortunately, in this case, she was convicted and faces up to 20 years in prison.

• In 2020, a Utah trucking company ex-payroll manager pled guilty to embezzlement charges that cost her company about a half-million dollars. Danielle Apadaca-Roberts worked at Parke Cox Truck and is guilty of wire fraud and filing a false report in her income taxes. She would create false expense reports for truck drivers and then put one of her accounts, rather than those of the truck drivers, as the destination account for the false payments. She concealed her work by suppressing the computer-generated email notifications to the truck drivers. Then she created an automatic clearly house (ACH) transfer file, which had both legitimate and false expenses. Her mother had worked for the company for 25 years as well. She did not declare the embezzled funds as income.

• In September 2019, an Indiana woman was sentenced for stealing hundreds of thousands of dollars and was ordered to pay $820,483 in restitution. She conducted a five-year long embezzlement scheme. She used her position as the accounts payable clerk to pay over $460,000 in personal credit card bills from the company’s bank account. As administrator of the diesel fuel card program, she helped two individuals obtain over $330,000 in unauthorized cash advances at truck stops. One of the drivers was from a rival trucking company. She also used her portion of the stolen funds to pay for frequent vacations, dining, clothing, jewelry, etc.

• In December 2020, a trucking company payroll clerk, Sheila Verbrugge, of Brandon, SD, was ordered to pay back $577,577 and spend three years in prison. Verbrugge managed the company’s T-Chek account, which is used to pay for job-related expenses for the truck drivers (e.g., fuel and truck maintenance). She issued T-Cheks payable to herself, deposited them into her personal account. She disguised her theft by deleting her name and location and replacing it with the names of truck drivers and their related locations.

• In St. Louis, an ex-truck driver recruiter embezzled $121,000 from two trucking companies. Michelle Serth-Stein of Smithton, IL, submitted fake recruiting expenses for reimbursement from October 2017 to January 2019. When she was fired by Serth-Stein she was hired by another St. Louis carrier as a recruiter and to oversee driver safety.

• In New Orleans, five people were indicted on six counts of fraud for staging a phony crash with a truck. The intentionally collided with a tractor-trailer, then switch car drivers immediately after the incident because the crashing drivers was better at smashing into trucks without getting injured. The original driver then told police he was a witness to the crash. The group in the car strengthened their injury claims by visiting doctors who were in on the scheme, performing unnecessary treatments and writing make-believe reports. They also hired an attorney who filed claims he knew were untrue.

All of these could happen at any point in the timber industry as well. The best defense starts with an understanding of the nature of the threat or the potential threat. If it happens elsewhere, it can happen here.

Trucking industry fraud related to the timber industry

So, to sum up my tour of the trucking industry fraud challenges, Let’s revisit trucking-related cases specifically found in the timber industry:

• Truckers from Georgia cost a Rome, GA, mill $4.8 million. The truckers pled not guilty in 2009 but were charged with conspiracy to commit wire fraud in helping a scale operator steal from the mill. The scale operator, Aaron Freeman, figured out a way to make the mill’s scale house computer system produce two scale tickets when only one truck delivered a load of wood. Freeman got a kickback from each phantom load.

• Tracy Clemons of Quitman, AR, owned Clemons Timber Incorporated (CTI), a logging company contracted to harvest timber for Deltic Timber Corporation (Deltic). The agreement identified specific mill names and locations to which specific types of harvested wood were to be delivered. From August 2005 through February 2007, Clemons directed his lot truck drivers to divert some loads to another mill and the truck drivers claimed a different tract location in order to paid a higher rate. (Keep in mind this is a much simplified summary of this case).