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April 6, 2023

Two charged with stealing $8.5M from MBTA contractor

Photo | Courtesy | MassDOT An MBTA commuter rail train

A former top official at Keolis Commuter Services pleaded not guilty to a slew of federal charges Wednesday after prosecutors alleged that he and another man stole more than $8 million from the company that operates the MBTA's commuter rail system.

Prosecutors accused John Pigsley, 58, of using his position as Keolis assistant chief engineer of facilities to defraud the company of millions of dollars meant for repairs and maintenance in a years-long scheme alongside his personal friend John Rafferty, 69, who worked as general manager at LJ Electric, one of Keolis's largest electrical suppliers.

In a pair of indictments, prosecutors alleged that Rafferty repeatedly made purchases on Pigsley's behalf, ranging from Bobcat machines to home construction materials for Pigsley's outside contracting work, then submitted fraudulent invoices to Keolis.

Pigsley, who handled orders of electric supplies for Keolis, approved the falsified invoices, effectively using company dollars to cover the purchases he personally sought -- plus a 10 to 30 percent inflation as profit for Rafferty -- by disguising them as legitimate expenses for equipment and services that prosecutors say were "never delivered to Keolis."

Over a more than seven-year period, Pigsley and Rafferty allegedly defrauded Keolis of more than $4 million using false LJ Electric invoices.

Prosecutors also allege that Pigsley used his position at Keolis to purchase far more copper wire than the commuter rail operator needed, which he resold to scrap businesses to personally pocket more than $4.5 million.

Announcing the charges, U.S. Attorney Rachael Rollins said the money allegedly stolen "could have been used to ensure significantly safer, faster and more reliable transportation for riders" at a time when the MBTA is grappling with massive service and safety challenges.

"There is perhaps no single state agency that impacts the daily lives of the millions of people who live and work in the greater Boston area more than the MBTA. Over the last few years, T ridership has had to endure its fair share of both acute and chronic issues," Rollins said in a statement. "Today, unfortunately, we add fraud to that list."

Joseph Bonavolonta, special agent in charge of the FBI's Boston Division, added that the alleged actions by Pigsley and Rafferty "demonstrate both a disdain for the rule of law, and a clear-cut case of greed."

"These men are accused of crossing the line from fixing our broken rail system to defrauding it when they devised a plan to pad their paychecks by stealing more than $8 million that was meant for repairs and routine maintenance at a time when overall needs on the commuter rail are so deep, funding sources are so strained, and the need for better service is so crucial," Bonavolonta said in a statement.

A Keolis spokesperson said the company became aware of the alleged wrongdoing about a year and a half ago.

"In late 2021, our enhanced financial controls and project management oversight identified project anomalies linked with the practices of an employee. We took immediate action to investigate and ultimately suspended and then terminated the employee," spokesperson Alana Olsen Westwater said in a statement. "We also cooperated with the authorities throughout their investigation. Our priority was to ensure that our partners at the MBTA were not harmed in any way, and we reimbursed them for any related goods and services. We remain committed to transparency with the MBTA and to delivering our contract safely, reliably and with integrity."

"We have and will continue to take measures to prevent, detect and report fraudulent activity," Westwater said. "Because this is an active criminal law enforcement matter, Keolis cannot comment further at this time."

A grand jury indicted Pigsley on five counts of wire fraud, one count of conspiracy to commit wire fraud, six tax evasion counts, one count of filing a false tax return and four counts of structuring financial transactions to evade reporting requirements.

Pigsley appeared in federal court in Boston on Wednesday, where he pleaded not guilty and was released on conditions and a personal recognizance bond, according to online court records.

An attorney listed for Pigsley did not immediately respond to requests for comment Wednesday.

Rafferty, a resident of Hale's Location, New Hampshire, agreed to plead guilty to one count of conspiracy to commit wire fraud.

Pigsley, a Beverly resident whom prosecutors say was also known as "Big John," previously worked for Keolis's predecessor and started as the company's assistant chief engineer of facilities around 2014.

That year, the MBTA awarded Keolis a roughly $2.7 billion base contract to operate the dozen commuter rail lines linking Boston with communities to the north, west and south. The company will remain in that role through June 30, 2025 or June 30, 2026 under a contract extension the Baker administration executed.

Prosecutors allege the fraud began as soon as July 2014 and continued into late 2021, several months before Keolis fired Pigsley.

Purchases that Rafferty made for Pigsley and the Pigman Group, his construction company, allegedly included at least $1 million in home building materials and services, at least nine trucks, at least seven Bobcat machines each worth more than $70,000, more than $110,000 in doors and windows for home construction, $20,000 worth of countertops and tiles and $10,000 in window treatments for Pigsley's home, and a $54,000 camper vehicle.

The duo allegedly maintained regular written communication about their scheme. Prosecutors detailed several examples in the indictment of Pigsley, recounting instances in which he forwarded Rafferty invoices or quotes for personal purchases.

In October 2017, Pigsley allegedly forwarded a notice that he was the highest bidder on a Bobcat E45 Mini Excavator to Rafferty with a note that read, "This ok?"

"Should be fine What can we use to bill that much I need to do some ballasts and lamps for other stuff now," Rafferty responded, according to the indictment. Within a day, Rafferty allegedly emailed Pigsley a trio of fraudulent LJ Electric invoices for electrical contactors, ballasts and lamps -- which prosecutors say were never delivered to Keolis -- collectively totaling more than $23,000.

On top of the fraudulent invoices, prosecutors allege that Pigsley stole and resold copper wire Keolis purchased at his direction, earning himself more than $4.5 million.

He started as early as 2016, placing multiple orders for industrial gauge copper wire from multiple suppliers including LJ Electric. Prosecutors say Pigsley kept each invoice below $15,000 to avoid the need to solicit multiple bids or additional authorization, and later, he awarded fixed cost contracts for wire to Rafferty's company.

"Keolis did not inventory or otherwise track copper wire purchases, and often vendors delivered legitimate copper wire purchases directly to Keolis's work sites. Pigsley was therefore able to hide his theft of the copper wire by either personally picking up copper wire orders from vendors, or by having copper wire orders delivered to his Beverly home," the indictment said. "Pigsley then personally transported the copper wire to scrap metal businesses, trading the wire for thousands of dollars in cash several times a month, and sometimes more than once a day."

Some of the charges against Pigsley deal with allegedly falsified tax returns that did not include his income from the scrapped copper wire or invoices.

Prosecutors say he deposited nearly $2 million in cash into his personal bank accounts and accounts for the Pigman Group between 2014 and 2021. He allegedly kept individual deposits below the $10,000 threshold that banks must report to the U.S. Treasury, in some cases making multiple deposits per day that added up to significantly more than $10,000.

The next hearing in Pigsley's case is scheduled for May 22.

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