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Auditing the auditors

Some FA&P companies will receive money from shippers and pay freight bills on their behalf. The concept is sold as a convenient one-stop shop, but care should be taken to carry out due diligence as there have been problems with unscrupulous or even insolvent companies accepting money but then failing to pay the freight operator. In the worst cases, it amounts almost to a ‘Ponzi’ scheme with money taken from one shipper used to pay the freight bills of another. There

have been of companies handing

cases over

millions of dollars, only for the money to ‘disappear’ into the FA&P company’s accounts. In

March 2013,

in April aſter pleading guilty to charges of embezzlement. James Tucker was sentenced to eight months’ house arrest. Then, in May 2013, another

FA&P company found itself in serious trouble. TransVantage Solutions of Branchburg, New Jersey – which also operated as Freight Traffic Services, FTS Industries and FTS - filed a voluntary petition for Chapter 11 bankruptcy in its local Bankruptcy Court. Although the company claimed $71m in assets against $41m liabilities, the situation was complicated by a claim against Johnson Controls (JCI) which, in turn had sued TransVantage for $17m. President, Shirley Sooy


Information Systems, a major provider of freight audit and payment services in the US went into Chapter 11, owing millions of dollars to customers who had advanced it money to pay their freight bills.Initial reported claims from five clients alone were over $25 million. The case was filed in the Bankruptcy Court for the District of South Carolina. Creditors claimed that

funds entrusted to Trendset had been lost or misapplied. According to an email from Trendset’s president and CEO, the company would not be able to pay all of the freight bills in its system because of a significant deficiency in the bank accounts used to pay carriers. These had not been subjected to the rigorous financial controls which should have been in place, the email added. A trusted employee, director

of administration Julie Tucker had, together wither her husband, James Tucker, carried out a fraud and embezzled funds between 1996 and July 2011 from the company’s bank account used to pay freight invoices and used it

to fund

a “lavish lifestyle”. Federal authorities, including the FBI, were alerted and a forensic review carried out. Trendset was subsequently

acquired in June 2013 by Shreveport, Louisiana-based freight audit firm AFS for only $1.1m. Julie Tucker was sentenced to 33 months in jail

admitted to a multi-million dollar

“hole” in TransVantage’s

accounts. JCI alleged that Sooy had used its funds to try to fill the shortfall in its client fund account over two decades, but all the while the deficit had continued to increase. Sooy, it was alleged, had the deficit between


clients to avoid detection and mixed clients’ payment funds into a single account. However, the scheme fell apart aſter JCI asked TransVantage to use an account under its own control. Clearly, any FA&P firm offering

such a service needs to provide full visibility, offer fidelity bond cover and allow the customer full access to the relevant bank account. Warning signs to look out for

include FA&P firms charging customers a very low amount for the

auditing service itself

and looking instead to make money on cash flow. That said, most such problems

have occurred in the US, rather than Europe. European firms tend to have much stronger controls and in any case firms are reluctant to hand over large sums of money to third parties. Whether it will lead to tighter

regulation of the F&AP industry, in the US or elsewhere is a moot point. As Allan Miner, president of Cleveland-based CT Globl Freight Audit, points out, good companies in the sector already operate stringent

audits and

have to report to the Inland Revenue Service banks, insurers and customers.

Data2Logistics has been established in Europe for around a decade now, having set up a global processing centre in Rotterdam in 2004, but it is still the company’s fastest-growing area, says SVP global corporate development, Harold Friedman. Freight audit and pay may

be how the company describes its services - and for the first five decades of its existence (as a US

Issue 6 2014 - Freight Business Journal

Making Big Data work for you

company) the emphasis was on the latter word - “but these days clients typically look to us to provide data, as a single source for all modes,” is how Friedman encapsulates his company’s offering. If you’ve ever wondered what

the phrase ‘Big Data’ actually means, Data2Logistics can help firms makes sense of the myriad of shipping- and freight-related information that they have within

their systems. Collecting data has never been a problem, but putting it into a form that company managers can understand, interpret and use as the basis for decision making oſten requires specialist expertise. Data2Logistics has made a

successful transition from a US- based provider to a European one, Friedman continues. In the early days, there were some horror- stories of US providers that didn’t


understand VAT, currencies or the fact that European dates are usually written day-month-year rather than month-day-year as in the US, but continued investment in systems and soſtware have ironed these out, at least in Data2Logistics’ case, he says. Sophisticated IBM soſtware allows reporting in different languages and can put dates, currencies or other information into any format.

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