Utah Trucker Pleads Guilty to Paying Bribes
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A Utah man has pleaded guilty to paying $490,000 in bribes from 2012-2019 in order to steer $24 million in business to trucking operations he founded.
Hubert Ugarte, 52, of Draper, Utah, also earlier this month pleaded guilty to fraudulently obtaining a federal Paycheck Protection Program loan for some of his other trucking companies.
In the bribery case, prosecutors said Ugarte was convicted of fraud and money laundering charges for his involvement in a pay-to-play scheme where prosecutors alleged that Ugarte was one of 10 accused defendants who collectively paid approximately $1 million in bribes to FedEx Ground senior linehaul manager Ryan Mower to steer shipments to their businesses. According to his plea, Ugarte alone was responsible for about half of that total.
Ugarte also earlier this month pleaded guilty to fraudulently obtaining a federal Paycheck Protection Program loan for some of his other trucking companies. (Kameleon007/Getty Images)
In a statement reacting to the plea agreement, a FedEx Ground spokesman said, “FedEx Ground does not tolerate illegal activity and expects all employees and service providers to act with the highest ethical standards. We cooperated fully with the authorities in their investigation of this matter.”
During the scheme, Ugarte’s companies received approximately $135 million in gross payments, resulting in net profits of approximately $24 million, according to an April 6 press release by the U.S. Attorney’s Office for the District of Utah.
To carry out the scheme, Ugarte and Mower worked to obscure the ownership of Ugarte’s numerous companies by filing false compliance reports with FedEx Ground. By doing so, they were able to award Ugarte with more trucking routes than one business owner was entitled to under established FedEx Ground policies, prosecutors said.
As a result, Ugarte was allowed to operate at least 45 trucking routes originating from the Salt Lake City FedEx Ground hub, exceeding the company’s limit of only 15 trucks for the hub.
Prosecutors said the practice — known as “over scaling” in the contract shipping industry — along with the payment of bribes to Mower would have resulted in the automatic termination of Ugarte’s contracts if discovered by authorities at FedEx Ground.
As a result of his plea agreement, Ugarte forfeited to the federal government 14 of his companies, 35 trucks, more than $261,000 in bank accounts, six properties, four other vehicles, and $684,000 in currency seized from a company building one of his residences.
The investigation was conducted by agents from the FBI, IRS and the U.S. Department of Transportation Office of Inspector General.
Ugarte was the first individual named in a string of indictments unsealed in October 2019 alleging that 10 individuals participated in the decadelong scheme to bribe Mower to steer business to participants in the scheme, netting them hundreds of millions of dollars in fraudulent and unauthorized contracts.
The 2019 charges allege that Mower, 49, of Bountiful, Utah, allowed his co-conspirators to obtain unauthorized runs, boost miles, receive payments for “ghost runs” they never made and falsely report accidents, all to gain income.
In the PPP loan fraud, Ugarte pleaded guilty to submitting a fraudulent loan application to the Small Business Administration through the Coronavirus Aid, Relief and Economic Security Act. Ugarte admitted that he fraudulently obtained $210,000 in PPP loans after failing to disclose that he was under federal indictment for his role in the fraudulent trucking scheme.
On May 14, 2020, Ugarte received $210,000 from Transportation Alliance Bank under the PPP. Instead of using at least 75% of the loan to pay payroll costs, including bounced payroll checks, Ugarte used 60% of the loan to pay past-due truck payments — leaving 40% for payroll costs.
The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to millions of Americans suffering from the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $249 billion in forgivable loans to small businesses for job retention and certain other expenses. Ugarte’s sentencing in both matters is set for June 3, 2021.
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