Former Chief Financial Officer for Boggs Paving, Inc. Pleads Guilty in Connection with $87 Million Fraud Scheme Involving Government-Funded Construction Projects
|U.S. Attorney’s Office July 22, 2014|
CHARLOTTE, NC—Kevin Hicks, 43, of Monroe, N.C. and former Chief Financial Officer (CFO) for Boggs Paving Inc. (Boggs Paving) entered a plea of guilty today before U.S. Magistrate Judge David S. Cayer for his role in an $87 million fraud scheme involving government-funded construction projects, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina.
Hicks is one of the eight named defendants charged with government procurement fraud and related offenses. During the relevant time period, Hicks served as the CFO for Boggs Paving and Boggs Group, and was in charge of Boggs Paving’s accounts payable and receivable, job cost accounting, human resources and information technology. Today, Hicks pleaded guilty to one count of conspiracy to defraud the United States Department of Transportation (USDOT) and one count of money laundering conspiracy.
Marlies T. Gonzalez, Regional Special Agent in Charge, U.S. Department of Transportation, Office of Inspector General (DOT-OIG), Region IV; John A. Strong, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division; and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service-Criminal Investigation Division (IRS-CI), join U.S. Attorney Tompkins in making today’s announcement.
According to documents filed in the case and statements made in court, from 2003 through 2013, Boggs Paving and the defendants conspired and fraudulently obtained federally and state funded construction contracts 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 those contracts. The purpose of USDOT’s DBE program is to increase the participation of DBEs and SBEs in federally-funded public construction and transportation related projects. Styx Cuthbertson Trucking Company, Inc. (“Styx”) is a road construction hauler owned by John Cuthbertson and based in Monroe, N.C. The company is also a certified DBE and SBE. According to filed court documents, Boggs Paving and the defendants used Styx as a “pass through” entity to obtain the lucrative government-funded construction contracts.
Court records indicate that to conceal the fraud and to appear as if Styx was doing and being paid for the necessary work, the conspirators ran payments through a nominee bank account in Styx’s name, and then funneled the money back to Boggs Paving and its affiliates. According to court documents, John Cuthbertson allegedly received kickbacks for allowing his company’s name and DBE status to be used by Boggs Paving. Court documents reflect that the defendants took additional steps to conceal their fraud, which included using magnetic decals bearing the “Styx” company logo to cover the “Boggs” logo on company trucks to create the appearance that Styx was the company performing the work.
According to filed court documents and court proceedings, from June 2004 through July 2013, Boggs Paving was the prime contractor on 35 federally funded contracts, and was a subcontractor for two additional contracts, worth over $87.6 million. Boggs Paving 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, court records show.
A superseding indictment filed in October 2013 also brought criminal charges against Arnold Mann, 55, of Fort Mill, S.C. Mann was a project manager, estimator and area manager for Boggs Paving, and his duties included bidding and managing municipal, commercial, military, and North and South Carolina Department of Transportation projects. Mann pleaded guilty in June 2014, to one count of conspiracy to defraud USDOT. Greg Tucker, 41, of Oakboro, N.C. and Boggs Paving’s project manager, estimator and vice president in charge of bidding on federal construction projects in North Carolina, has also agreed to plead guilty to one count of conspiracy to defraud USDOT. Tucker’s plea agreement was filed today and he is scheduled to appear tomorrow before Judge Cayer to enter a formal plea.
The remaining defendants in the case are Boggs Paving Inc., Carl Andrew Boggs, III, 50, of Waxhaw, N.C., Greg Miller, 60, of Matthews, N.C., John Cuthbertson, 69, of Monroe, and Styx Cuthbertson Trucking Company, Inc., of Wingate, N.C. They face multiple charges including conspiracy to defraud USDOT, wire fraud and mail fraud conspiracy, wire fraud, mail fraud, money laundering and money laundering conspiracy. John Cuthbertson and Styx Cuthbertson Trucking are also charged with one count of making a false statement on a loan application.
Both Hicks and Mann have been released on bond and will be sentenced by the Court at a later date. The conspiracy to defraud USDOT charge carries a maximum of five years in prison. The money laundering conspiracy charge carries a maximum of 20 years in prison. Each of the charges also carries a $250,000 fine.
The investigation of the case was handled by USDOT-OIG, FBI and IRS. The case is being prosecuted by Assistant United States Attorneys Jenny G. Sugar and Michael E. Savage of the U.S. Attorney’s Office in Charlotte.