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Paving Exec Takes Plea in $87M Fraud

Friday, July 25, 2014

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The chief financial officer of a North Carolina paving contractor is the latest defendant to admit his role in an $87 million fraud scheme that used disadvantaged firms as a pass-through to win government contracts.

Kevin Hicks, 43, of Monroe, N.C., former CFO for Boggs Paving Inc., pleaded guilty Tuesday (July 22) in federal court to one count of conspiracy to defraud the U.S. Department of Transportation and one count of money-laundering conspiracy, the FBI announced.

Boggs Paving
Photos unless indicated: Boggs Paving

Boggs Paving is accused of conspiring with a DBE/SBE-certified subcontractor to use the sub as a pass-through to obtain government government contracts.

Hicks is one of eight named defendants charged last July in a 29-count indictment with government procurement fraud and related offenses in the case, which involved several dozen contracts from June 2004 to July 2013. He is the second defendant to plead guilty in the case.

He faces up to five years in prison on the DOT charge, up to 20 years on the money-laundering charge, and a fine of up to $250,000 on each charge when he is sentenced.

How It Worked

According to court documents and court statements, Boggs Paving and the defendants obtained federally and state funded construction contracts by falsely certifying that the company would hire a disadvantaged business enterprise (DBE) or a small business enterprise (SBE) for part of the work.

Authorities said that Styx Cuthbertson Trucking Company Inc., a DBE- and SBE-certified road construction hauler based in Monroe, NC, allowed Boggs Paving to use Styx's name on documents without doing the work described.

DrewBoggs
Via KSOC-TV

Both Boggs Paving Inc. and president Carl Andrews "Drew" Boggs III are charged in the case, which alleges years of fraud.

According to court documents, owner John Cuthbertson allegedly received kickbacks for allowing his company’s name and DBE status to be used by Boggs Paving.

Hicks was the CFO for Boggs Paving and Boggs Group throughout the period.

About the Companies

Founded in 1994 by Carl Andrew ("Drew") Boggs III and Chris Boggs, Boggs Paving is a major regional contractor that provides hauling, asphalt, concrete, paving and related services in the Carolinas and Georgia. The company has 425 employees and boasts "five of the most productive and efficient asphalt manufacturing facilities in the Carolinas."

Half of the projects featured in Boggs' online portfolio are public contracts. They include, for example, a seven-month, $17.1 million grading and paving job on U.S. Highway 220 in 2007.

The status of Boggs' current government contracts could not be determined Thursday.

Styx Cuthbertson is a USDOT-certified general-freight hauler with four trucks, according to quicktransportationsolutions.com. The company does not have a website.

Concealing the Fraud

Attempts to conceal the fraud included the use of magnetic Styx company decals to cover Boggs' logos on company trucks while work was being performed. The defendants also ran payments through a nominee bank account in Styx’s name and then funneled the money back to Boggs Paving and its affiliates, the FBI said.

Boggs Paving

The Boggs Group businesses include Boggs Materials. The company's CFO has pleaded guilty to two felony counts in the $87 million fraud case.

During the period charged, Boggs Paving was the prime contractor on 35 federally funded contracts, and was a subcontractor for two additional contracts, worth more than $87.6 million, authorities said.

In addition, Boggs claimed DBE credits of about $3.7 million on these contracts for payments purportedly made to Styx. However, Styx was paid only $375,432 for actual work on these contracts, court records show.

Other Pleas

Hicks' guilty plea follows that of Arnold Mann, 55, of Fort Mill, SC. Mann was a project manager, estimator and area manager for Boggs Paving and managed DOT projects. He pleaded guilty in June to one count of conspiracy to defraud DOT.

Mann and Hicks are both free on bond while awaiting sentencing.

Boggs Paving

Boggs Paving was founded in 1994 by brothers Drew and Chris Boggs.

In addition, authorities filed a plea agreement this week for Greg Tucker, 41, of Oakboro, NC, on one count of conspiracy to defraud DOT.

Other Defendants

The other defendants in the case face multiple charges, including conspiracy to defraud USDOT, wire fraud and mail fraud conspiracy, wire fraud, mail fraud, money laundering and money laundering conspiracy.

Boggs Paving has denied the charges; Styx Cuthbertson has not issued a statement.

The remaining defendants are:

  • Boggs Paving Inc. and Styx Cuthbertson Trucking Co. Inc.;
  • Carl Andrew "Drew" Boggs, III, 50, of Waxhaw, NC;
  • Greg Miller, 60, of Matthews, NC; and
  • John Cuthbertson, 69, of Monroe, NC.

John Cuthbertson and his company are also charged with lying on a loan application.

The case was investigated by U.S. DOT's Office of Inspector General, the FBI, and the Internal Revenue Service.

   

Tagged categories: Contractors; Department of Transportation (DOT); Enforcement; Government; Government contracts; Industrial Contractors; Laws and litigation; Roads/Highways

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