Road-building exec sent to prison for minority-contractor scam
The CEO of a prominent Charlotte-area road-building firm will serve 30 months in a federal prison for his role in a minority-contractor scheme that earned his company almost $90 million in highway work that prosecutors said it would not have otherwise received.
Drew Boggs pleaded guilty last year to conspiracy to defraud the federal highway department and money laundering conspiracy. On Monday, U.S. District Judge Max Cogburn closed the books on the 2-year-old case by sentencing Boggs and three of his company’s top executives for their roles in the scam.
Over the past decade, prosecutors said, Boggs Paving received more than three dozen state and federal highway contracts across the Carolinas by exaggerating the role played by a minority-owned contractor – known in government parlance as a “disadvantaged business enterprise” or a DBE.
The company would have been disqualified from bidding on the jobs without promising that a minority contractor would get a share of the work.
Yet Boggs Paving came up with a way to circumvent the rules. Prosecutors say company exec utives bribed John “Styx” Cuthbertson, 70, the owner of a DBE trucking firm in Monroe, to take part in the projects by name only. To mislead government inspectors, Boggs paid millions to Styx Trucking that it secretly funneled back to Boggs’ accounts. At some sites, Boggs’ workers put Styx logos on Boggs’ trucks.
Now Boggs is on the cusp of becoming the second member of his road-building family to be imprisoned for corruption-related charges. In the early 1980s, his father, Andy Boggs, spent 60 days in federal prison for rigging bids on North Carolina highway projects.
Boggs apologized Monday for his company’s crimes. While he never acknowledged a direct role in the conspiracy, he said he should have spotted and ended what was going on around him.
“I should have dug deeper. I should have done something to stop it,” the towering Boggs told Cogburn as he read from notes. “I’ve learned a lot about what’s right and wrong … to spend more time dotting the i’s and crossing the t’s.”
Federal prosecutor Jenny Sugar said Boggs played a leading role in defrauding the government and making himself and his company rich. She told Cogburn that the decadelong scheme involved every part of Boggs’ organization, and it relied on systematic illegal conduct that she said “was led by Drew Boggs.”
Sugar said the company’s plot stole government contracts from legitimate minority firms “that played by the rules.” She urged Cogburn to imprison Boggs for the longest allowable sentence and fine him $3.7 million – the amount of the government contracts that should have gone to DBEs. “Don’t let him hide from his obligations in this case,” she said.
Defense attorney Ken Bell said government prosecutors had adopted a “salt the earth” approach in which no punishment for Boggs was enough.
Boggs, according to Bell, had broken the law but had already been punished. Because of the federal indictment, Boggs Paving can’t bid on state or federal contracts, Bell said, and Drew Boggs will be banished from his lifelong profession. Drew Boggs and his brother Chris, who was not charged with any crime, have each lost some $7.5 million since the 2013 indictment, Bell said. Next year, when work on existing contracts ends, Boggs Paving will go out of business.
Bell said after the hearing there is no evidence that Boggs Paving bribed Cuthbertson. The company employed 45 minority contractors on the projects, paying them more than the government required, the attorney said.
Despite the government’s repeated allegations, Bell said there is no evidence that the fraud was essential in Boggs receiving the highway contracts.
Bell urged Cogburn to choose probation over prison time and said his client has already lost millions because of the charges.
While Cogburn repeatedly pointed out that Boggs Paving’s illegal activity had not cost taxpayers any money, he said he had an obligation to protect the minority-contractor program. He ordered Boggs to serve 30 months but said he will not ask him to report until after the holidays. The charges carried a maximum penalty of 25 years in prison and $750,000 in fines.
Boggs did not visibly respond. Several rows behind him, his brother sat with his eyes closed, holding the bridge of his nose.
Cogburn also fined Boggs Paving $500,000, the highest amount possible given the crime.
The other charges against defendants in the case include:
▪ Greg Miller, 61, of Matthews: 15 months in prison and two years’ supervised release.
▪ Kevin Hicks, 44, of Monroe: two years probation and a $2,000 fine.
▪ Greg Tucker, 42, of Oakboro: two years of probation and a $1,000 fine.
▪ Cuthbertson, 70: two years of probation (three months of it under home confinement) and a $2,000 fine.
A fifth defendant, Arthur Mann, 56, of Fort Mill, S.C., earlier received probation after pleading guilty to one of count of conspiracy to defraud.
Fraud involving minority contracts appears to be a growing problem with hundreds of millions of contracts involved. A recent government audit blamed weak contract oversight to confirm that minority participation was legitimate.
In his comments to the courtroom, Boggs said his legal problems had drawn nationwide scrutiny throughout the road-building industry.
“Contractors all over the country are watching our case with raised eyebrows,” he told Cogburn. “Some have changed the way they’re doing business. We’ve helped others learn what not to do.”
Michael Gordon: 704-358-5095
This story was originally published November 23, 2015 at 8:21 PM with the headline "Road-building exec sent to prison for minority-contractor scam."