Contractor Charged With Using Substandard Materials on Highway Projects

United States Attorney Pat Meehan announced that George Smith, Jr., was charged with mail fraud in connection with a scheme to defraud the Federal Highway Administration and the Pennsylvania Department of Transportation.

The information alleges that from September 2002 through April 2005, defendant Smith, doing business as “Statewide Hi-Way Safety, Inc.,” engaged in a fraudulent scheme to defraud the Federal Highway Administration and the Pennsylvania Department of Transportation by using substandard construction materials on federally funded highway projects in components of highway guide rails in Pennsylvania. The Pennsylvania highways involved in this case are parts of Route 63 in Philadelphia County, Route 322 in Chester County, and Route 100 in Montgomery County.

“Our main concern is the potential risk that substandard materials might pose to motorists,” said Meehan. “In this case, the defendant knowingly used substandard materials on projects designed to protect hundreds of thousands of motorists.”

As a result of defendant falsely certifying that the materials met contract specifications, when in fact, they did not, the Federal Highway Administration, which funds the Pennsylvania Department of Transportation on certain highway projects including those charged, suffered a loss of approximately $683,303.

Richard H. Hogg, P.E., a Deputy Secretary of Highway Administration for the Pennsylvania Department of Transportation, stated “The Department is aware of deficiencies in materials supplied by Statewide Hi-Way Safety, Inc., and is aggressively pursuing both a debarment action against this company and more importantly, aggressively inspecting and obtaining assurances that all possible safety concerns have been addressed in order to protect the traveling public.”

This case is being prosecuted as part of a National Procurement Fraud initiative. In October 2006, Deputy Attorney General Paul J. McNulty announced the formation of a National Procurement Fraud Task Force designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in government contracting activity for national security and other government programs. The Procurement Fraud Task Force is chaired by Assistant Attorney General Alice S. Fisher for the Criminal Division and includes United States Attorneys' Offices, the FBI, the U.S. Inspectors General community and a number of other federal law enforcement agencies. This case, as well as others brought by members of the task force, demonstrate the Department of Justice's commitment to helping ensure the integrity of the government procurement process.

If convicted, the defendant faces a possible maximum sentence of 20 years
imprisonment, a $250,000 fine, 3 years supervised release, and restitution of approximately $683,303.

The case was investigated by the United States Department of Transportation, Office of Inspector General, with assistance from the Pennsylvania Office of Inspector General. The case has been assigned to Assistant United States Attorney Seth Weber.