North Carolina paving contractor indicted for government contract fraud by using “disadvantaged business” as a pass through
| July 29, 2013 |
Last week, a grand jury handed down a criminal indictment charging Boggs Paving Inc., based out of Monroe, North Carolina, with government contract fraud.
The 29-count indictment charges the company and six co-conspirators with the following crimes: conspiracy to defraud the United States Department of Transportation (USDOT); conspiracy to commit wire fraud; conspiracy to commit mail fraud; money laundering conspiracy; money laundering and wire fraud.
According to the Boggs Paving website, the company was started in 1994 by Drew Boggs, who is named in the indictment, and his brother Chris, who is not. The company grew into Boggs Group which is comprised of the paving company along with Boggs Materials, Inc. and Boggs Transport, Inc.
According to the indictment, Boggs Paving obtained federally and state funded construction contracts for 10 years with the help of Styx Cuthbertson Trucking Company Inc., a certified disadvantaged business enterprise (DBE) and small business enterprise (SBE).
The USDOT uses its DBE program to increase the participation of disadvantaged business enterprises in federally funded transportation-related projects. To obtain these contracts, a DBE or SBE must perform a part of the work and be paid for it.
However, the indictment alleges that Boggs Paving used Styx Cuthbertson Trucking Company Inc., a certified DBE and SBE, as a “pass through” to obtain these contracts while doing the work themselves.
According to the charges, Boggs ran “payments through a nominee bank account in Styx’s name but funneled checks back to Boggs Paving and its affiliates, which were not DBEs or SBEs but were doing the actual work.”
The indictment continues saying, “each time a deposit was made into the nominee account as supposed payment for construction work performed by Styx, a Boggs Paving employee would immediately cut a check from that Styx nominee account to the Boggs entity or another firm that had actually performed the work.
So what did Styx receive in return? The owner, also named Styx Cuthbertson, received an unspecified kickback from Boggs for using his name and DBE status.
The indictment charges that to sell the act, Boggs dressed up company trucks by covering up the “Boggs” logo with a magnetic decal of the Styx logo. Plus, Boggs allegedly lied to both the North and South Carolina Departments of Transportation on DBE paperwork and submitted bids purporting to be from Styx.
Boggs also allegedly “performed numerous clerical functions in Styx’s name, including creating quotes on Styx letterhead for construction contracts; drafting fraudulent contracts between Boggs Paving and Styx for subcontract work purportedly performed by Styx; creating invoices for work supposedly done by Styx; and giving Styx Cuthbertson pre-prepared documents (including quotes, contracts, and DBE reports) for his signature.”
In the end, the alleged act paid off for Boggs in the form of 35 federally funded contracts where the company was the prime contractor and an additional two contracts where the company was a subcontractor. In total, the contracts were worth $87.6 million for Boggs.
Boggs claimed DBE credits of approximately $3.7 million on these contracts for payments purportedly made to Styx. Styx only received payments of approximately $375,432 for actual work on these contracts, all according to the indictment.
Boggs Paving and its co-conspirators are scheduled to be in court August 20 and face a maximum of five years in prison for the conspiracy charge. Each wire and mail fraud and money laundering conspiracy count carries a maximum of 20 years in prison, while the money laundering charge carries a maximum of 10 years in prison.
Each of the charges also carries a $250,000 fine.