Gordon Fuller of Plainfield, the former chief operating officer of a Morristown and Erie Railroad, and William Phillips of Langhorne, Pa., a former project manager for the company, have been indicted Wednesday on charges that they defrauded the state Department of Transportation of more than $800,000 by submitting false claims for grant funds in connection with railway improvement projects.
The state Division of Criminal Justice obtained a five-count state grand jury indictment charging Fuller, 71, E), the freight railroad’s CEO, and Phillips, 60, the project manager, with conspiracy, misconduct by a corporate official, theft by deception, submitting false contract payment claims, and tampering with public records.
The indictments are the result of an investigation by the Division of Criminal Justice Corruption Bureau. The investigation previously led to the indictment of a suspended DOT engineer, Gaudner B. Metellus, and an alleged accomplice on charges they solicited the Morristown and Erie (M&E) to fraudulently inflate the cost of a state-funded rail project by over $700,000 and pay them $325,000 in bribes. M&E alerted the state to that alleged fraud after Fuller was terminated by the company in 2010.
“We charge that this former railway company executive exploited a state grant program that was designed to keep our freight rail network strong in New Jersey, stealing over $800,000 by collecting grant funds for work that was never performed,” state Attorney General Jeffrey S. Chiesa said. “We will continue to crack down on individuals who fraudulently enrich themselves or their companies at the expense of government programs.”
“This is a good example of an investigation in which our efforts to uncover and prosecute one crime led to new leads, which we diligently pursued to charge another crime,” state Criminal Justice Director Stephen J. Taylor said.
In connection with the indictments, it is alleged that between January 2003 and August 2010, Fuller had M&E submit invoices to create and reinforce the false impression that certain work had been completed on four railroad improvement projects for which M&E received DOT grant funding. In fact, very little of the work had been performed. It is alleged that M&E fraudulently received a total of approximately $804,090 in grant funds from the DOT as a result of the false claims. Phillips allegedly participated in the fraud by submitting false claims while serving as project manager for M&E between 2003 and 2005.
Deputy Attorney General Perry Primavera presented the indictment to the grand jury. The investigation was conducted by Det. Sgt. David Salzmann, Det. Michael Behar, and Deputy Attorney General Anthony A. Picione.
The DOT implemented the New Jersey State Rail Freight Assistance Plan in 1975 in an effort to preserve and improve the railway freight transportation network in the state. Under the program, rail lines doing business in New Jersey apply for funding to assist in various rehabilitation projects. Eligible projects receive state grants covering 70 to 90 percent of the total project cost, with the balance to be paid by the rail line.
M&E, which operates in New Jersey, Pennsylvania, and Maine, received approval in 2003 for the four projects that are at issue in the indictment. They involved proposed rehabilitation and upgrading of three sections of track in Kenville and Cedar Knolls – with related improvements such as security fencing and lighting – and replacement of a railway bridge span over the Passaic River in East Hanover.
The grant program requires that no funds be disbursed until all work has been completed for a particular portion of a project. It is alleged that Fuller and Phillips knew of the requirement, but fraudulently submitted invoices for a total of $1,319,417 worth of work, creating the false impression the work was completed, when in fact only $52,745 worth of work was completed. As a result, M&E received $804,090 in grant funds it was not entitled to receive.
Second-degree crimes carry a sentence of five to 10 years in state prison and a fine of up to $150,000, while third-degree crimes carry a sentence of three to five years in prison and a fine of up to $15,000.
The indictment was handed up to state Superior Court Judge Mary C. Jacobson in Trenton, who assigned it to Morristown, where Fuller and Phillips will be ordered to appear in court at a later date to answer the charges.
Fuller is also named in a Nov. 1 indictment charging him with conspiracy, insurance fraud and theft by deception, all in the second degree, as well as fourth-degree falsifying or tampering with records. That indictment alleges that Fuller fraudulently inflated an insurance claim by more than $75,000 in connection with damage to a railroad switch on M&E rail lines in Morristown caused by a truck accident in 2005. Those charges are pending.
The June 29, 2011 indictment charging Metellus, 32, of Philadelphia, a senior DOT engineer, and his alleged accomplice Ernest J. Dubose, 31, of Boston, alleges that they solicited representatives of M&E to engage in a scheme to fraudulently inflate the cost of a project to rehabilitate the Eagle Rock Railroad Bridge in Roseland from about $693,000 to $1,421,510 in connection with an application under the state grant program.
Metellus and Dubose allegedly proposed that the company submit false invoices for rehabilitation work that would never be performed, and demanded that the company split the state grant funds with them. Metellus was responsible for confirming the need for repair work and inspecting completed work in connection with the grant program. Officials of M&E alerted the Division of Criminal Justice and cooperated in the state’s investigation. The two men were originally arrested and charged on Sept. 23, 2010. The charges in that indictment are also pending.
—TOM HESTER SR., NEWJERSEYNEWSROOM.COM