Federal Jury Convicts Burlington Northern Santa Fe Contractor in Fraud Scheme
Defendant’s Son-in-Law Pleaded Guilty Last Month to Role in Conspiracy

FORT WORTH, TX—Following a two-day trial in Fort Worth, Texas, before U.S.. District Judge John McBryde, a federal jury has convicted Robert Steele, 64, on all seven counts of a superseding indictment relating to a conspiracy he ran to defraud Burlington Northern Santa Fe (BNSF), announced U.S. Attorney James T. Jacks of the Northern District of Texas. Specifically, the jury found Steele guilty of one count of conspiracy to commit wire fraud and six counts of wire fraud. Each count carries a maximum statutory sentence of 20 years in prison, a $250,000 fine and restitution. Steele, a resident of Gardner, Kansas, was taken into custody pending his sentencing, which is set for July 23, 2010.

Co-defendant, Mathew Wyrick 35, of Olathe, Kansas, who is Steele’s son-in-law, pleaded guilty on March 5, 2010 to his role in the conspiracy. Wyrick, who testified for the government, remains on personal recognizance bond; sentencing is set for June 18, 2010.

The government presented evidence at trial that from March 2005 through August 2007, Steele, Wyrick and others conspired to commit wire fraud by running a scheme to defraud BNSF using interstate wires. From January 2003 to August 2007, Wyrick worked at BNSF as a supervisor in the Structures Division. From January 2003 to February 2005, he was stationed in the Memphis, Tennessee area. In early 2005, he was moved by BNSF to the Kansas City, Kansas area. As a supervisor, Wyrick had the authority to employ vendors to work for the railroad and he had authority to authorize certain payments to those vendors.

In early 2003, Wyrick and others were engaged in a scheme to over-bill BNSF to obtain money and other goods for Wyrick and the others involved in the scheme. In early 2003, Wyrick met a man who owned a hardware store in Smithville, Mississippi. Wyrick and this hardware store owner agreed that they would cause the store to submit fraudulent invoices to BNSF for payment, billing BNSF for products and services that were never provided. After the invoices were submitted, Wyrick would approve the invoices for payment and they would then split the proceeds from the fraudulent bills. In fact, between February 2003 and July 2005, Wyrick and his co-conspirators caused the hardware store to submit more than 100 fraudulent invoices totaling more than $350,000.

The government presented further evidence that when Wyrick moved to the Kansas City area, his supervisors encouraged him to find additional vendors to ensure that BNSF was not being overcharged for services. Wyrick then recruited his father-in-law, Robert Steele, to become a vendor for BNSF. At the time, Steele was an out-of-work long-haul trucker. With Wyrick’s encouragement, Steele changed the name of his company to S&S Erectors to provide services to BNSF. Wyrick then prepared a “Vendor Master and Accounts Payable” request for S&S Erectors, failing to disclose his relationship to Steele, thereby indicating there was no conflict of interest.

Evidence presented showed that between 2005 and 2007, S&S Erectors submitted approximately $1.8 million in invoices to BNSF. Some of the invoices were legitimate and billed BNSF for work actually performed by S&S Erectors. Others invoices, however, were fraudulent in that they either billed BNSF for work never performed, misrepresented the nature of work performed or grossly overcharged BNSF for work performed. Wyrick approved the vast majority of the S&S Erectors invoices, including all but a handful of the fraudulent invoices.

Steele paid Wyrick more than $600,000 of the proceeds of his contract with BNSF by either writing a check to Wyrick, withdrawing cash from the S&S Erectors accounts for Wyrick to deposit, or paying Wyrick’s mortgage and other bills. Wyrick admits that he knew some of the invoices were fraudulent but approved them anyway because he would receive some of the proceeds.

For example, Wyrick and Steele caused S&S Erectors to submit approximately $400,000 in invoices to BNSF for hazardous waste disposal associated with a BNSF project. Those invoices were fraudulent because the waste disposal was not “hazardous” and, in fact, was disposed of by S&S Erectors for less than $10,000.

The case is being investigated by the FBI and prosecuted by Assistant U.S. Attorneys Robert A. Klinck and Jay Weimer.