A former Utah trucking company owner pleaded guilty in federal court to bribing a former FedEx Ground manager in a pay-to-play scheme in exchange 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 linehaul manager, Ryan Lee Mower, approximately $490,000 over a seven-year period between 2012 and 2019 in exchange for operating at least 45 delivery routes originating from the Salt Lake City hub, tripling the limit of routes allowed under FedEx Ground’s established policies.
The practice, known as “overscaling” in the contract shipping industry, along with the payment of bribes to the FedEx Ground manager, would have resulted in the automatic termination of Ugarte’s contracts if discovered by FXG, a subsidiary of Memphis-based shipping and logistics giant FedEx Corp. (NYSE: FDX).
In exchange for the payments, Ugarte’s 14 trucking companies netted over $24 million over seven years. Ugarte was one of 10 defendants who paid approximately $1 million in bribes to Mower, according to federal investigators.
Prosecutors claim the trucking companies involved in the scheme with Mower raked in more than $280 million 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 Coronavirus Aid, Relief and Economic Security (CARES) Act’s Paycheck Protection Program (PPP). The forgivable-loan program was enacted to help struggling businesses pay employees, interest on mortgages, rent and utilities.
According to court documents, Ugarte falsely answered no when asked if he was under formal criminal charges in any jurisdiction when filling out the PPP loan application. Ugarte also answered no when asked if he had been placed on pretrial diversion, though he had entered into a two-year pretrial diversion to resolve a felony drug possession charge in 1988, according to the indictment.
Court filings state Ugarte’s PPP loan application was rejected or denied by two banks after the companies discovered he was under federal indictment in the FXG bribery case, but he received a $210,000 loan on his third attempt for one of his companies, Frisbu Trucking, from the Transportation Alliance Bank (TAB) of Ogden, Utah, in May 2020.
As part of the PPP borrower’s terms, Ugarte agreed that 75% of the loan amount would be used for payroll costs.
Prior to receiving the PPP money, a former Frisbu employee, who wasn’t named in court documents, claims Ugarte’s company was in financial trouble and had bounced payroll checks five times over a 90-day period.
Instead of using 75% of the PPP loan to pay employees, Ugarte used nearly $127,000 of the money to make past-due lease payments on 13 Kenworth trucks, as well as purchase various truck parts.
Federal investigators claim 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 payroll.
The former Frisbu employee also claims that Ugarte deposited a nearly $61,000 insurance check for a wrecked 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 filings.
In November 2019, former Chief Magistrate Judge Paul M. Warner issued a warrant authorizing the seizure of 41 of Ugarte’s trucks, but the 2016 Freightliner and a few others were missing.
Court filings state the 2016 Freightliner had been involved in an October 2019 crash in Nevada and had been stored there since the accident. After paying storage fees, Ugarte was instructed to turn over the remaining insurance money to the FBI, but that didn’t happen.
Ugarte is scheduled to be sentenced in both cases on June 3.
A status conference in Mower’s case is set for May 13. No trial dates have been set for the other nine defendants charged in the alleged kickback scheme.
