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Charlotte companies charged in massive construction fraud

A prominent Charlotte-area construction company was indicted Wednesday in a massive government fraud case, accused of receiving more than $87 million in state and federal contracts by misrepresenting the role that a minority-owned contractor played in the work.

The 29-count indictment, released Wednesday, charges Boggs Paving Inc. and its executives with crimes ranging from conspiracy to defraud the U.S. Department of Transportation and money laundering, to wire fraud, mail fraud and conspiracy.

If convicted, the defendants face up to five years in prison for the conspiracy charge and up to 20 years for each count of wire and mail fraud, and conspiracy to money launder. The money-laundering charge carries up to 10 years. Each count also includes a $250,000 fine.

The accused include Boggs Paving president and CEO Carl Andrew “Drew” Boggs III, 49, of Waxhaw, as well as company executives Kevin Hicks, 42, of Monroe, Greg Miller, 59, of Matthews and Greg Tucker, 40, of Oakboro.

Also indicted was John “Styx” Cuthbertson, 68, of Monroe, the owner of a trucking company that investigators say was at the heart of the long-running scheme.

“The government just got this wrong,” said Drew Boggs’ attorney, Ken Bell of Charlotte.

“If mistakes were made, they certainly weren’t intentional, and they aren’t federal crimes. We look forward to a trial as soon as we can get one.”

Hicks’ attorney, former federal prosecutor Rick Winiker, said he met with investigators several weeks ago after hearing his client might be charged.

“As the case moves forward, we look forward to getting to the bottom of it,” Winiker said. “We understand this investigation has been going on for a few years and only in the past two months did we learn that Mr. Hicks might be a target.”

Minority frontmen

The investigation involved the FBI, Internal Revenue Service and the federal highway department.

Here’s what the indictment says was found:

Over the past 10 years, Boggs received 37 federal construction contracts worth $87.6 million. The company would have gotten none of the jobs without claiming that minority subcontractors known as DBEs (short for “disadvantaged business enterprise”) would receive a required percentage of the work.

According to the investigators, Boggs Paving misled the government into thinking it met the requirement with the help of Styx Cuthbertson Trucking, a certified DBE from Wingate.

Boggs then exaggerated how much it used Styx Trucking during the projects, even using magnetic decals with the “Styx” logo on Boggs’ own trucks, and Styx letterhead to create phony contracts and other records.

Boggs Paving paid Cuthbertson’s company some $375,000 for actual work, the indictment says. But it claimed so-called “DBE credits” for 10 times that amount.

Company executives shoveled the larger amount into a phony bank account under the trucking company’s name, then funneled most of the money back to Boggs or its affiliates.

Investigators also accuse Boggs Paving of paying Styx Cuthbertson kickbacks for agreeing to let Boggs use his company and DBE status.

Poor oversight

Fraud involving minority contracts appears to be a growing problem, says David Wonnenberg of the U.S. Department of Transportation’s Office of the Inspector General.

In fiscal years 2009 and 2010, DBE fraud or abuse accounted for 25 percent of the Inspector General’s caseload. By April of this year, he said, that had risen to 29 percent.

Last year, a Pennsylvania bridge-beam manufacturer was convicted of what was described at the time as the largest fraud ever involving the DBE program. The company received more than $136 million in contracts by using a minority-certified company as a front. After his conviction, the bridge company’s owner faced up to 330 years in prison.

A recent Inspector General audit found significant problems in the DBE program, including “weak” contract oversight and safeguards that participation by minority firms is legitimate.

Cooperation then indictment

The accused in the Boggs’ case will appear in federal court on Aug. 20.

The company is active in both Carolinas. Its website portfolio lists everything from construction on U.S. highways to repaving of airport runways and neighborhood streets. This month, Boggs received a $3.9 million contract for runway repairs at the Charlotte-Monroe Executive Airport.

In a prepared statement, Boggs’ spokesman Bobby Fisher said the 31-year-old company has “cooperated fully” with investigators since learning it was a target of the federal probe.

“Despite this cooperation, the U.S. Attorney’s Office has brought charges that we will vigorously contest,” he said. “We are confident a full and complete examination of the facts will clear Boggs Paving and all its employees.” Neil Haggerty and Maria David contributed.

Gordon: 704-358-5095
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