This is Part III of an ongoing FreightWaves investigation into an alleged double-brokering ring based in Southern California. Click here for Part I. Click here for Part II.
All State Association CEO Steve Avetyan describes his family as “the originals” in setting up an elaborate network of transportation companies largely based in Southern California, but claims that his business “platform” is very different from his uncle’s and cousins’ double-brokering scheme that landed them in prison.
In March 2011, Steve’s uncle, Rubik Avetyan, and his cousins, Rubik’s sons Allen and Alfred, were sentenced to between four and five years in federal prison and ordered to pay more than $1.1 million to approximately 165 victims of an illicit double-brokering scheme.
According to court documents filed in the U.S. District Court for the Middle District of Pennsylvania, Rubik Avetyan and his sons provided false information to the Federal Motor Carrier Safety Administration to obtain a motor carrier registration number for their new company, State Transport Inc., headquartered in Harrisburg, Pennsylvania, in July 2008. However, the three failed to disclose their prior relationships with Eternity Trucking and Express Freight Solutions, among others, which they helped establish over the previous three years.
“They did some stupid things, they deserved to go to jail,” Steve Avetyan told FreightWaves.
The U.S. Department of Transportation’s Office of Inspector General said in a statement that Rubik Avetyan and his sons used load boards to vie for freight from brokers, sometimes asking victims of the scheme for fuel advances and payment up front. Feds claim the three re-brokered the loads to legitimate motor carriers and didn’t pay them. Instead, they used a post office mailbox drop and a telephone service to forward calls and faxes from Pennsylvania to Southern California, where they lived, to conceal their identity and location.
Over a 10-month period, prosecutors claim 165 brokers and motor carriers fell victim to the double-brokering scheme before Rubik Avetyan and his sons were indicted in July 2009.
Steve Avetyan has never been convicted or charged in connection with a double-brokering scheme.
“We were the originals,” Steve Avetyan told FreightWaves, describing his family members’ immigration from Armenia to the U.S. to work in the industry. “When my uncle got into trucking in 1990-1991, nobody even knew what the trucking industry was.”
Avetyan said his uncle and cousins are again working in the trucking industry after completing their jail sentences.
‘New name, same game’
Avetyan describes his business model as a transportation services platform that helps other entrepreneurs build their trucking companies or brokerages. But it comes with a hefty price — All State gets 20% of clients’ revenue — in exchange for financing, truck access and its technology.
However, brokers and truckers told FreightWaves they’ve been burned by the vast network of over 600 companies, largely in Southern California, with alleged links to Avetyan and his childhood best friend, Alfred Megrabyan, who co-founded All State in 2003.
“When one MC number gets shut down for various reasons, another eight or nine pop up,” one source, who didn’t want to be named for fear of retaliation, told FreightWaves. “It’s a new name, but it’s the same game. They can all be traced back to All State.”
Hundreds of complaints over unauthorized re-brokering of loads, missing freight or nonpayment have been filed against transportation companies founded by Avetyan and Megrabyan, a source told FreightWaves. The original three companies are All State, headquartered in San Fernando, California, and two large brokerages that are still operating, Broadway Brokerage and TriStar Brokerage, both headquartered in Glendale, California.
Brokers told FreightWaves they’ve taken down FreightGuard reports linked to the Southern California network, claiming sales agents and employees of the businesses they reported harassed them with constant phone calls and spam emails until the reports were removed.
In one case, a freight broker — who filed a complaint against one of the Southern California companies over allegations of unauthorized re-brokering — said he grew concerned after the employee threatened to harm himself unless the report was taken down.
“I called the Glendale Police to do a wellness check on the employee at the business address listed for this company,” the freight broker, who didn’t want to be named, told FreightWaves. “Police called back and said that nobody lived there.”
Logistics industry responds to burgeoning network
Joe Howard, who works for a Midwestern logistics company, has been tracking the burgeoning network of companies tied to the alleged double-brokering ring for nearly two years.
“It honestly could be a full-time job,” Howard told FreightWaves.
He now works with his own network, including brokers and logistics specialists from around the country, who swap information as new MC numbers emerge with links to the original three freight brokerages operating in Southern California.
Shutting down alleged load board scammers is tricky business, Howard admitted.
After All State, Broadway and TriStar were blocked from vying for loads on Oregon-based DAT’s load boards, Howard claims two new brokerages popped up — all parented by Massive 3PL Corp., headquartered in Edinburg, Texas, and Fargo Freight Inc. of La Crescenta, California.
Avetyan confirmed that DAT and other load board platforms “had shut down 300 users for alleged fraud,” but denied any claims of illegal double brokering can be linked to his network of companies or sales agents.
“I’ve never had a cop or FBI or somebody show up to my door,” he told FreightWaves. “Some people don’t look at all of the good that takes place. How many people are making a lot of money? How many people are doing really, really well because of what we’ve done, creating opportunities? Every single day, when people see me, they say, ‘Thank you for the opportunity.’”
All State and its transportation platform is lucrative, Avetyan said, claiming the company posted between $500 million and $600 million in revenue in 2020.
“Some of these sales guys are making $100,000 a month,” he said.
Carrier411 CEO Darren Brewer told FreightWaves that he estimates double-brokering scams, including fraudulent fuel advances, cost the transportation industry more than $100 million per year.
All State’s platform compared to owning fast-food franchise
Avetyan told FreightWaves that he’s “in the industry” but “not doing trucking.” Instead, he compares All State’s transportation services platform to owning a fast-food restaurant franchise.
“People ask me to show them how to get into transportation,” Avetyan told FreightWaves. “It’s like opening a McDonald’s franchise. I give them tools.”
He also claims All State doesn’t have sales agents and that what he said during a 2018 interview on the podcast, Vibes, was an easy way to explain to listeners about how the company’s business platform worked.
“I claimed they worked for me,” Avetyan said. “I’m the CEO of the company, but there are many, many businesses, small trucking companies, brokerages, 3PLs that have their own sales guys. They indirectly work for me.”
Watch and learn
A former sales agent claims All State co-founders Avetyan and Megrabyan are directly involved in the day-to-day operations of the branch offices or its franchises.
In fact, Avetyan monitors every branch office All State has helped establish, using video surveillance that is sent to a flat-screen TV in his office in San Fernando.
He and Megrabyan have annual sales goals for each branch office and top earners receive perks like Rolex watches, trips on private planes to lavish banquets and vacations each year, the source told FreightWaves.
In a video message to All State’s branch offices in 2017, Avetyan names the top earners for each office that were picked to go by private plane to Las Vegas. The agents were also invited to bring their families along on vacation retreats to Cancun and Puerto Vallarta, Mexico, a former employee told FreightWaves.
This contradicts Avetyan’s claims that the sales agents work independently once they start their transportation franchises.
“These sales agents, I don’t even know who they are,” he told FreightWaves. “I don’t cut their checks, I don’t pay them.”
All State also controls which motor carriers its agents use to move freight through a sophisticated technology platform, updated daily, that allows them to access how many trucks and trailers are available in specific freight lanes throughout the U.S.
In a training video, obtained by FreightWaves, sales agents are coached to use motor carriers, mainly owner-operators, in All State’s network “because outside carriers don’t get posted on our boards.”
“We have direct relationships with these guys, they abide by our policies and procedures,” the voice on the recording, identified by a former employee as Armen Karibyan, another All State executive, states in the video.
Armen Karibyan also warns agents against using “outside” carriers not vetted through All State’s carrier compliance department to prevent double brokering.
“The only way to even have access to outside carriers is if you have a load booked under All States. … It doesn’t matter if it’s from a broker or a shipper. As long as the load is booked under All State, you can move it outside,” Karibyan said on the video. “But outside, guys, it’s at your own risk. … Outside carriers are poor quality. … You have a risk of them hijacking you, double brokering, missing trucks.”
Using carriers outside of All State’s network is fraught with problems, Karibyan says on the video.
“If you convince them [outside carriers] to take loads under your own motor carrier authority for some reason, you have a high risk — that means they can go directly to your customer, they’ll try to get paid directly, you can face a lot of issues,” he warns agents. “It’s completely at your own risk. I wouldn’t do it personally.”
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