A former owner of a Utah trucking company pleaded guilty in federal court to bribing a former FedEx Ground manager as part of a payment scheme to gamble for lucrative contracts and to defrauding the PPP loan program.
Hubert Ivan Ugarte, 52, of Draper, Utah, pleaded guilty to fraud and money laundering last week in U.S. District Court in Salt Lake City. He admitted to paying a former FedEx Ground (FXG) senior liner manager, Ryan Lee Mower, approximately $ 490,000 over a seven-year period between 2012 and 2019 in exchange for operating at least 45 routes from delivery from the Salt Lake City hub, tripling the limit of permitted routes under established FedEx Ground policies.
The practice, known as ‘on-scale’ in the contract transportation industry, along with paying bribes to the manager of FedEx Ground, would have resulted in the automatic termination of Ugarte’s contracts if it were to be. discovered by FXG, a subsidiary of Memphis-based shipping and logistics giant, FedEx Corp. (NYSE: FDX).
In return for the payments, Ugarte’s 14 trucking companies have grossed more than $ 24 million over seven years. Ugarte was one of 10 accused who paid around $ 1 million in bribes with the mower, according to federal investigators.
Prosecutors say the trucking companies involved in the program with Mower raised more than $ 280 million in total over a 10-year period.
PPP loan fraud
Ugarte also pleaded guilty to submitting a fraudulent loan application to the Small Business Administration (SBA) through the CARES law (Coronavirus Aid, Relief and Economic Security) Paycheque Protection Program (PPP). The forgivable loan program was introduced to help struggling businesses pay employees, mortgage interest, rent, and utilities.
According to court documents, Ugarte falsely answered no when asked if he was subject to formal criminal prosecution in any jurisdiction when filling out the PPP loan application. Ugarte also said no when asked if he had been placed in interim diversion, although he entered into a two-year interim diversion to resolve a felony drug possession charge in 1988, according to the act. accusation.
Documents filed by court say Ugarte’s PPP loan application was turned down or denied by two banks after companies discovered he was facing a federal indictment in the bribery case FXG, but he received a loan of $ 210,000 in his third attempt for one of his companies, Frisbu Trucking, from the Transportation Alliance Bank (TAB) of Ogden, Utah, in May 2020.
Under the terms of the PPP borrower, Ugarte agreed that 75% of the loan amount would be used for staff costs.
Before receiving the PPP money, a former Frisbu employee, who was not named in court documents, claims that Ugarte’s company was in financial difficulty and returned paychecks five times over a period of time. 90 days.
Instead of using 75% of the PPP loan to pay employees, Ugarte used almost $ 127,000 to make past lease payments on 13 Kenworth trucks, as well as to purchase various truck parts.
Federal investigators say Ugarte violated the PPP agreement by using 60% of the loan amount to pay Kenworth for the leased trucks, leaving only 40% of the funds for the payroll.
The former Frisbu employee also claims that Ugarte deposited an insurance check for nearly $ 61,000 for a destroyed 2016 Freightliner Cascadia into the trucking company’s bank account.
However, that money was supposed to be turned over to the FBI as part of the seizure warrant in the FedEx case, according to court documents.
In November 2019, former Chief Justice Paul M. Warner issued a warrant authorizing the seizure of 41 Ugarte trucks, but the 2016 Freightliner and a few others were missing.
Court documents indicate that the 2016 Freightliner was involved in an October 2019 crash in Nevada and has been in storage there since the crash. After paying the storage fee, Ugarte was ordered to hand over the insurance balance to the FBI, but this did not happen.
Ugarte is expected to be sentenced in both cases on June 3.
A status conference in Mower’s case is set for May 13. No trial date has been set for the other nine defendants indicted under the alleged bribery scheme.