Contractors Indicted in 10-Year Fraud
A North Carolina construction company and five individuals have been charged in a massive fraud that allegedly used bogus small-business and disadvantaged-business designations to obtain more than $87 million in federal contracts over 10 years.
The defendants are facing decades in prison after their indictment on a host of federal fraud and conspiracy charges. A 29-count indictment announced Wednesday (July 24) details the charges against:
All of the defendants are accused of conspiracy to defraud the U.S. Department of Transportation, conspiracy to commit wire fraud, conspiracy to commit mail fraud, money laundering conspiracy, money laundering, and wire fraud for a scheme that prosecutors say lasted more than 10 years and involved more than $87 million in government contracts.
All the defendants except Greg Tucker are also charged with mail fraud.
Kickbacks and Fraud
The indictment accuses Boggs Paving of fraudulently obtaining federal and state construction contracts since 2003 by falsely certifying that a disadvantaged business enterprise (DBE) or a small business enterprise (SBE) would perform and be paid for portion of the work on such contracts.
Styx Cuthbertson Trucking Company Inc., a road construction hauler owned by John Cuthbertson, was a certified DBE and SBE that acted as a “pass through” entity for Boggs on the contracts, the indictment says. Boggs Paving, which was neither a DBE nor an SBE, did the actual work on the projects, the indictment says.
To create the "illusion" that Styx was actually doing the work, prosecutors said, the defendants created an intermediary (nominee) bank account in Styx's name. They then "ran payments through a bank account in Styx’s name but funneled checks back to Boggs Paving and its affiliates."
The scheme helped land Boggs Paving dozens of contracts totaling more than $87 million, authorities said.
Each time a deposit was made into the nominee account as supposed payment, a Boggs Paving employee would "immediately cut a check" from that account and send it to Boggs or whomever had performed the work, authorities said.
Styx Cuthbertson received a kickback for allowing Boggs Paving to use his name and DBE status, the indictment says
The indictment says the defendants "took careful steps to conceal their fraud."
Those measures allegedly included:
Boggs Paving also performed numerous clerical functions in Styx’s name, including creating phony quotes on Styx letterhead; drafting bogus subcontracts between Boggs Paving and Styx; creating dummy invoices; and giving Styx Cuthbertson pre-prepared quotes, contracts, and DBE reports for his signature, the indictment says.
35+ Contracts, $87.6M
The indictment alleges that since June 2004, Boggs Paving has been the prime contractor on 35 federally funded contracts and was a subcontractor for two additional contracts worth a total of more than $87.6 million.
For 10 years, prosecutors say, Boggs Paving used a DBE-certified firm as a pass-through to get federal and state contracts. Boggs denies the charges.
Boggs paving claimed DBE credits of approximately $3.7 million on these contracts, but Styx received only $375,432 on these contracts, according to the indictment.
The conspiracy charge carries a maximum of five years in prison. Each wire and mail fraud count carries a maximum of 20 years in prison. The money laundering conspiracy charge carries a maximum of 20 years in prison. The money laundering charge carries a maximum of 10 years in prison. Each of the charges also carries a $250,000 fine.
The defendants’ initial appearances in federal court have been set for August 20, 2013.
Boggs Paving spokesman Bobby Fisher released this statement:
“We are extremely disappointed in the allegations from the U.S. Attorney’s Office for the Western District of North Carolina. Boggs Paving has been cooperating fully with officials since learning of questions about our company’s relationship with Styx Cuthbertson Trucking, Inc., which is a certified Disadvantaged Business Enterprise. Despite this cooperation, the U.S. Attorney’s Office has brought charges that we will vigorously contest.
“While this unfortunate situation is most troubling, we look forward to having our day in court and an opportunity to present our side of the story. We are confident a full and complete examination of the facts will clear Boggs Paving and all its employees.
“For almost three decades, our family business and its 400 employees have served communities across North and South Carolina. We are committed to continuing to work extremely hard to deliver the same outstanding service our clients have come to expect from the Boggs Group.”
Styx Cuthbertson released no statement.