Date: April 5, 2023 Contact: newsroom@ci.irs.gov Boston, MA — The former Assistant Chief Engineer of Facilities for Keolis Commuter Services (Keolis) and the former general manager of a Massachusetts-based electrical company have been charged in a scheme to defraud Keolis of over $8 million. John P. Pigsley was indicted by a federal grand jury on five counts of wire fraud, one count of conspiracy to commit wire fraud, six counts of tax evasion, one count of filing a false tax return and four counts of structuring financial transactions to evade reporting requirements. Pigsley was arrested this morning and will appear in federal court in Boston at 1:45 p.m. today. John Rafferty of Hale’s Location, N.H., has been charged by an Information and has agreed to plead guilty to one count of conspiracy to commit wire fraud. “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. Today, unfortunately, we add fraud to that list. The criminal conduct alleged here specifically involves the Commuter Rail – the entity Keolis operates for the T – and two men who lied to, cheated and stole from Keolis,” said United States Attorney Rachael S. Rollins. “We allege that the defendants stole over $8 million from Keolis, and that Pigsley did so while an employee of the organization. The $8 million they stole could have been used to ensure significantly safer, faster and more reliable transportation for riders. Instead, these men lined their pockets for their own selfish gain. It is my hope that this prosecution holds these alleged criminals accountable.” "The serious accusations against John Pigsley are particularly troubling as he breached the trust he was given as a senior lead with Keolis,” said Joleen D. Simpson, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigations in Boston. “These allegations represent an egregious breach of the trust that had been placed in Keolis through its operation of the MBTA. The Special Agents of IRS Criminal Investigation are committed to protecting the integrity of our system of taxation by investigating individuals who violate the tax laws." “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,” said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division. “Their alleged actions demonstrate both a disdain for the rule of law, and a clear-cut case of greed. Today’s arrests should be a warning to others that the FBI and our partners are committed to investigating and bringing to justice anyone who abuses their positions of trust to fraudulently siphon off public funds.” “Today’s announcement should serve as notice that we are committed to thwarting and unravelling complex fraud schemes involving millions of taxpayer dollars used to maintain MBTA commuter rail systems,” said U.S. Department of Transportation, Office of Inspector General’s Special Agent-in-Charge Christopher A. Scharf. “We will continue working with our Federal and prosecutorial partners to pursue those who deceitfully manipulate business contracting and accounting practices for personal gain.” According to the charging documents, Keolis has operated the MBTA commuter rail system since 2014 under an annual contract of $291–$349 million. Between 2014 and November 2021, Pigsley was employed as Keolis’ Assistant Chief Engineer of Facilities and was responsible for the maintenance of MBTA Commuter Rail Facilities and their engineering operations, including handling corrective repair and project management for assets and maintenance and ordering and approving his subordinates’ orders of electrical supplies from outside vendors for Keolis. Pigsley also operated a separate construction company called Pigman Group. Rafferty was the general manager of LJ Electric, Inc., an electrical supply vendor to which Keolis paid over $17 million between 2014 through 2021. Between July 2014 and November 2021, Pigsley and Rafferty allegedly defrauded Keolis of over $4 million through a false LJ Electric invoicing scheme. Specifically, it is alleged that Rafferty purchased vehicles, construction equipment, construction supplies and other items for Pigsley, Pigman Group and others, and Pigsley directed Rafferty to recover the cost of these items by submitting false and fraudulent LJ Electric invoices to Keolis. The fraudulent LJ Electric invoices included a percentage profit that Rafferty allegedly kept for himself. It is further alleged that Rafferty spent more than $3 million on items for Pigsley and others – including: at least nine trucks; construction equipment including at least seven Bobcat machines; at least $1 million in home building supplies and services; and a $54,000 camper– for which Keolis paid Rafferty more than $4 million based on false LJ Electric invoices. In addition to the false invoicing scheme, it is alleged that Pigsley directed Keolis to purchase copper wire which he then stole and sold to scrap metal businesses, keeping the cash proceeds for himself. To conceal the theft, it is alleged that Pigsley personally picked up the copper wire orders from vendors or had the orders delivered to his Beverly home. Pigsley allegedly then personally transported the wire to scrap yards where he traded it for thousands of dollars in cash several times a month and sometimes more than once a day. According to the charging documents, Pigsley obtained more than $4.5 million in cash by stealing and scrapping the copper wire. It is further alleged that Pigsley defrauded the IRS by failing to withhold and pay federal income taxes on income he received from the LJ Electric invoicing scheme and from scrapping copper wire. Pigsley also allegedly filed a false tax return for the tax year 2016. Additionally, Pigsley is alleged to have deposited over $1.9 million in cash into his bank accounts between 2014 and 2021, and to have structured some of those deposits to evade currency transaction reporting requirements applicable to financial institutions. With respect to the Indictment charging Pigsley, the charges of wire fraud and wire fraud conspiracy provide for a sentence of up to 20 years in prison, up to three years of supervised release and a fine of up to $250,000. The charge of tax evasion provides for a sentence of up to five years in prison, up to three years of supervised release and a fine of up to $250,000. The charge of filing a false tax return provides for a sentence of up to three years in prison, up to one year of supervised release and a fine of up to $250,000. The charge of aggravated structuring provides for a sentence of up to 10 years in prison, up to three years of supervised release and a fine of up to $250,000. With respect to the Information filed against Rafferty, the charge of conspiracy to commit wire fraud provides for a sentence of up to five years in prison, up to three years of supervised release and a fine of up to $250,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case. U.S. Attorney Rollins, IRS-CI SAC Simpson, FBI SAC Bonavolonta, and DOT-OIG SAC Scharf made the announcement today. Assistant U.S. Attorneys Kristina E. Barclay and Elysa Q. Wan of Rollins’ Public Corruption & Special Prosecutions Unit are prosecuting the cases. The details contained in the charging documents are allegations. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
