Guy Fieri and Sammy Hagar Learn About Double Brokering Fraud the Hard Way
Chef, restaurateur, and Food Network reality star Guy Fieri and rock-and-roll legend Sammy Hagar just lost a million dollars worth of tequila.
How does one lose 24,000 bottles—two full, 18-wheeler tractor truckloads—of premium-branded liquor? The answer is a logistics fraud scheme known as double brokering fraud, but let’s start at the beginning.
Hagar, the rocker who can’t drive the speed limit, and Fieri, who cultivated a persona of pushing culinary limits, founded Santo Spirits to craft a tequila where, according to the company website, “each barrel is filled with nothing less than the raw creativity and authenticity that has defined each of their lives—a full-throated declaration of true agave flavor.”
While it is clear the company leans into its celebrity benefactors, it hired a veteran beverage business executive, Dan Butkus, as CEO, and does not appear to be the type of slipshod operation that would be made into an easy mark. Nevertheless, the pace of fraud innovation and sophistication of tactics victimized Santo and provides a cautionary tale for companies using shipping companies.
Fieri spoke with CBS about the theft, and CBS described how the fraud scheme unfolded.
The tequila, aged three years, was made in Mexico, passed through customs, and was unloaded in Laredo, Texas. From there, it was shipped to a Santo warehouse in Landsdale, Pennsylvania. When the product was one day late, Butkus got a call from the logistics company saying a water pump issue on the truck had caused a short delay.
The next day, the logistics company sent a new note: “Looks like the issue is bigger than he thought. Mechanics advised the truck will be fixed Saturday…he says he can deliver Sunday but I know y'all are closed so he can be there first thing Monday.” This message was delivered with a video showing a semitruck being worked on.
The shipment of tequila included a GPS tracker, and the tracker put the location of the shipment in the area of Washington, DC, which is where the company said the breakdown had occurred. When the logistics company said the shipment was getting close, the tracker confirmed it.
The shipment, of course, never arrived. The tracker had been spoofed.
“Here's what happened,” CBS reported. “The logistics company that worked for Santo hired a trucking company to move the tequila from Texas to Pennsylvania. But then, that trucking company outsourced the job to two other trucking companies, who then hired drivers. The problem is those second trucking companies were fake—with phony letterheads, email addresses, and phone numbers to appear legitimate. It's a bit of a tractor-trailer shell game called ‘double brokering’ and it happens more than you might expect.”
Santo had hired a logistics firm. That firm hired what it thought was a legitimate trucking company, but which turned out to be organized criminals. The criminals in this case did not have their own truck drivers. Instead, they hired legitimate truckers, and redirected them to drive the merchandise to Los Angeles.
“The driver that picked it up has no idea that he’s committing a crime,” Keith Lewis, an investigator who hired to look into the shipment, told CBS.
The criminals behind the heist are unknown—nothing left of them but an electronic trail leading to fake companies. Lewis told CBS they were not even likely to be in the United States. In fact, “investigators say the tequila heist had all the characteristics of a criminal gang operating out of Armenia,” CBS reported.
In this case, the criminals likely sold the merchandise at a steep discount, possibly to buyers who did not know the goods were stolen. The Los Angeles Police Department has a unit dedicated to cargo theft, which has recovered $42.8 million of stolen goods in the last year alone.
It’s this unit that ultimately found, three weeks later, Fieri and Hagar’s tequila. Half of it anyway; the other half was never found.
Santo fell victim to a sophisticated double brokering scheme. Not all double brokering methods end up with stolen goods. One common scheme involves the fraudulent shipping company hiring a legitimate one, which will successfully deliver the load to the intended location. But the fraudulent company vanishes after taking payment from the manufacturer, thus defrauding the subcontracted, legitimate shipping company that delivered the goods from being paid.
Consulting firm Grant Thornton wrote an article on avoiding double brokering fraud. The problem is logistics has become a commodity with intense price pressures and marketplaces that can be chaotic. They provide several tips on best practices, like performing fraud assessments, verifying contracts and payment mechanisms, and conducting audit and review processes.
Ultimately, however, the advice does not break new ground—it is the due diligence that all businesses should be doing to safeguard their assets. What is important is keeping up with the tactical innovations the bad guys deploy, and testing the systems your business use to ensure they are up to the task. The logistics company Santo used appears to have failed them—it’s unknown if there were any factors that might have indicated the risk of the outcome. One important consideration: Shortcuts could lead to higher profitability. They could also lead to a million dollars of stolen tequila.
