SALT LAKE CITY – Hubert Ivan Ugarte, 52, of Draper, Utah, pleaded guilty to his role in two separate fraud schemes last week in federal court. Ugarte initially pleaded guilty to charges related to a federal corruption case involving the purchase of FedEx Ground (FXG) contracted shipping routes worth $ 24 million in profit and also pleaded guilty fraudulently obtaining a federal paycheck protection program (P3) loan for other trucking companies. .
In the corruption case, Ugarte was convicted of fraud and money laundering for his involvement in a pay-to-play trucking system in which prosecutors alleged that Ugarte was one of ten defendants in paying around $ 1 million in bribes to the director of the Utah FXG Ground Hub. in order to exploit the manager’s position with FedEx and make their trucking business as lucrative as possible.
In the plea deal, Ugarte admitted to bribing FXG’s senior liner director Ryan Lee Mower with around $ 490,000, which grossed Ugarte’s trucking companies over $ 24 million over the course of a period of seven years between 2012 and 2019. In return for the bribe payments, the FXG director awarded the Ugarte companies several FXG delivery routes that Ugarte could not qualify for. under established FXG policies.
In order to carry out the program, Ugarte and the director of FXG worked to obscure the ownership of Ugarte’s many trucking companies by filing false compliance reports with FXG in order to give Ugarte more trucking routes than A business owner was only entitled under established FXG policies. . As a result, Ugarte was cleared to operate at least 45 trucking routes from the Salt Lake FXG hub, significantly exceeding the FXG limit of just 15 trucks for the Salt Lake City hub. This practice, known as “oversizing” in the contract transportation industry, along with paying bribes to the director of FXG, would have resulted in the automatic termination of Ugarte’s contracts if discovered by FXG authorities. Throughout the program, Ugarte’s companies received around $ 135 million in gross payments from FXG, resulting in net profits for its trucking companies of around $ 24 million.
In the second Paycheck Protection Program (PPP) loan fraud case, Ugarte pleaded guilty to submitting a fraudulent loan application to the Small Business Administration (SBA) through the CARES (Coronavirus) law. Aid, Relief, and Economic Security). Ugarte admitted that he fraudulently obtained $ 210,000 in P3 loans after failing to disclose that he was facing a federal indictment for his role in the fraudulent trucking scheme.
The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to millions of Americans suffering the economic effects of 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 maintenance and certain other expenses under the PPP. In April 2020, Congress authorized more than $ 300 billion in additional P3 funding.
Proceeds from PPP loans are to be used by businesses on salary costs, mortgage interest, rent, and utilities. The PPP allows the interest and principal of the PPP loan to be fully written off if the business spends the loan proceeds on those expense items within a specified time after receiving the proceeds and uses a certain amount of the PPP loan proceeds on wage costs.
On May 14, 2020, Ugarte received $ 210,000 from the Transportation Alliance Bank as part of the PPP. Instead of using at least 75% of the loan to pay for wage costs, including bad paychecks, Ugarte used 60% of the loan to pay off payment arrears for trucks, leaving 40% for wage costs.
Sentencing is set for June 32021, in both areas.
Assistant US attorneys at the Utah US Attorney’s Office continued the cases against Ugarte. Special agents from the FBI, IRS, and the Department of Transportation’s Office of Inspector General conducted the investigations.