Paving company executive pleads guilty in massive fraud case
07/22/2014 11:01 AM
07/22/2014 5:53 PM
A second Boggs Paving executive pleaded guilty Tuesday morning in connection with charges that the company received more than $87 million in road projects by misrepresenting the role a minority-owned contractor played in the work.
Prosecutors say a third high-ranking company official will plead guilty Thursday.
Kevin Hicks, the chief financial officer for the Monroe-based company, pleaded guilty to conspiracy to defraud the U.S. Department of Transportation and conspiracy to launder money. He will be sentenced at a later date.
Hicks, 43, of Monroe, faces up to 25 years in prison and a $750,000 fine.
“The entire event has been very difficult for Kevin Hicks and his family,” his attorney, former federal prosecutor Rick Winiker, said Tuesday morning.
“Kevin Hicks has done everything in his power to take responsibility for his role in the matter and continues to cooperate with the United States.”
Prosecutors say Greg Tucker, 41, of Oakboro, a company vice president in charge of bidding on federal projects in North Carolina, is scheduled to plead guilty Wednesday to one count of conspiracy to defraud the highway department.
Arnold Mann of Fort Mill, S.C., a former project manager for the company, pleaded guilty last month to conspiracy to commit wire fraud and mail fraud against the federal government.
All three were among six men indicted in what investigators have described as a massive government fraud that involved a decade of state and federal road projects, several of them around Charlotte. Hicks, Tucker and Mann also are expected to cooperate with the ongoing probe against their company, which could include testifying at any trials.
The accused include Boggs Paving President and CEO Carl Andrew “Drew” Boggs III, 49, of Waxhaw, as well as company executive Greg Miller, 59, of Matthews.
Drew Boggs’ attorney, Roy Black of Miami, could not be immediately reached for comment.
Also indicted were John “Styx” Cuthbertson, 68, of Monroe, along with his Wingate-based trucking company that investigators say was at the heart of the long-running scheme.
Prosecutors have charged the company 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, as well as conspiracy to money launder. The money-laundering charge carries up to 10 years. Each count also includes a $250,000 fine.
The original investigation involved the FBI, Internal Revenue Service and the federal highway department.
According to the indictment, Boggs received 37 federal construction contracts worth $87.6 million dating back to 2004. 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.
Boggs, however, 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, the indictment says.
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, the indictment says.
Investigators also accuse Boggs Paving of paying Styx Cuthbertson kickbacks for agreeing to let Boggs use his company and DBE status.
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 2013, he said, that had risen to 29 percent.
A recent Inspector General audit found significant problems in the DBE program, including “weak” contract oversight and safeguards to ensure that participation by minority firms is legitimate.
Boggs Paving is active in both Carolinas. Its website portfolio lists everything from construction on U.S. highways to repaving of airport runways and neighborhood streets.
Andy Boggs, Drew Boggs’ father and the founder/president of Boggs/Vaughn Contracting, served a 60-day federal prison sentence in the early 1980s after being convicted of rigging bids on North Carolina highway projects while working for another company.
The elder Boggs was one of more than 100 paving company executives from about 80 companies across the Southeast convicted in the sweeping federal investigation, which at the time was called the largest anti-trust probe in U.S. history. Researcher Maria David contributed
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