The Division of Criminal Justice obtained a five-count state grand jury indictment yesterday afternoon charging Gordon Fuller, 71, of Plainfield, the former chief operating officer of the Morristown and Erie Railway, Inc. (M&E), and a former project manager, Willard Phillips, 60, of Langhorne, Pa., with conspiracy (2nd degree), misconduct by a corporate official (2nd degree), theft by deception (2nd degree), submitting false contract payment claims (2nd degree), and tampering with public records (3rd degree). Second-degree crimes carry a sentence of five to 10 years in state prison.

The indictment is the result of an investigation by the Division of Criminal Justice Corruption Bureau. The investigation previously led to the indictment of a suspended DOT engineer, Gaudner B. Metellus, and an alleged accomplice on charges they solicited M&E to fraudulently inflate the cost of a state-funded rail project by over $700,000 and pay them $325,000 in bribes. M&E alerted the state to that alleged fraud after Fuller was terminated by the company in 2010.

“We charge that this former railway company executive exploited a state grant program that was designed to keep our freight rail network strong in New Jersey, stealing over $800,000 by collecting grant funds for work that was never performed,” said Attorney General Chiesa. “We will continue to crack down on individuals who fraudulently enrich themselves or their companies at the expense of government programs.”

“This is a good example of an investigation in which our efforts to uncover and prosecute one crime led to new leads, which we diligently pursued to charge another crime,” said Director Taylor. “I commend our detectives and attorneys for leaving no stone unturned.”

In connection with the new indictment, it is alleged that between January 2003 and August 2010, Fuller, in his role as chief operating officer, had M&E submit invoices to create and reinforce the false impression that certain work had been completed on four railroad improvement projects for which M&E received DOT grant funding. In fact, very little of the work had been performed. It is alleged that M&E fraudulently received a total of approximately $804,090 in grant funds from the DOT as a result of the false claims. Phillips allegedly participated in the fraud by submitting false claims while serving as project manager for M&E between 2003 and 2005.

Deputy Attorney General Perry Primavera presented the indictment to the state grand jury for the Division of Criminal Justice Corruption Bureau. The investigation was conducted by Detective Sgt. David Salzmann, Detective Michael Behar, Deputy Attorney General Primavera and Deputy Attorney General Anthony A. Picione, Deputy Chief of the Corruption Bureau.

The New Jersey DOT implemented the New Jersey State Rail Freight Assistance Plan in 1975 in an effort to preserve and improve the railway freight transportation network in the state. Under the program, rail lines doing business in New Jersey apply for funding to assist in various rehabilitation projects. Eligible projects receive state grants covering 70 to 90 percent of the total project cost, with the balance to be paid by the rail line.

M&E, which operates in New Jersey, Pennsylvania, and Maine, received approval in 2003 for the four projects that are at issue in the indictment. They involved proposed rehabilitation and upgrading of three sections of track in Kenville and Cedar Knolls – with related improvements such as security fencing and lighting – and replacement of a railway bridge span over the Passaic River in East Hanover. The grant program requires that no funds be disbursed until all work has been completed for a particular portion of a project. It is alleged that Fuller and Phillips knew of that requirement, but fraudulently submitted invoices for a total of $1,319,417 worth of work, creating the false impression the work was completed, when in fact only $52,745 worth of work was completed. As a result, M&E received $804,090 in grant funds it was not entitled to receive.

Second-degree crimes carry a sentence of five to 10 years in state prison and a fine of up to $150,000, while third-degree crimes carry a sentence of three to five years in prison and a fine of up to $15,000. The indictment is merely an accusation and the defendants are presumed innocent until proven guilty.

The indictment was handed up to Superior Court Judge Mary C. Jacobson in Mercer County, who assigned it to Morris County, where the defendants will be ordered to appear in court at a later date to answer the charges. The indictment is posted with this release at www.njpublicsafety.com.

Fuller is also named in a Nov. 1, 2011 indictment obtained by the Division of Criminal Justice charging him with conspiracy, insurance fraud and theft by deception, all in the second degree, as well as fourth-degree falsifying or tampering with records. That indictment alleges that Fuller fraudulently inflated an insurance claim by more than $75,000 in connection with damage to a railroad switch on M&E rail lines in Morristown caused by a truck accident in 2005. Those charges are pending.

The June 29, 2011 indictment charging Metellus, 32, of Philadelphia, Pa., a senior engineer for DOT, and his alleged accomplice Ernest J. Dubose, 31, of Boston, Mass., alleges that they solicited representatives of M&E to engage in a scheme to fraudulently inflate the cost of a project to rehabilitate the Eagle Rock Railroad Bridge in Roseland from about $693,000 to $1,421,510 in connection with an application under the state grant program.

Metellus and Dubose allegedly proposed that the company submit false invoices for rehabilitation work that would never be performed, and demanded that the company split the state grant funds with them. Metellus was responsible for confirming the need for repair work and inspecting completed work in connection with the grant program. Officials of M&E alerted the Division of Criminal Justice and cooperated in the state’s investigation. The two men were originally arrested and charged on Sept. 23, 2010. The charges in that indictment are also pending.

Attorney General Chiesa and Director Taylor noted that the Division of Criminal Justice has established a toll-free Corruption Tipline for the public to report corruption, financial crime and other illegal activities. The statewide Corruption Tipline is 1-866-TIPS-4CJ. Additionally, the public can log on to the Division of Criminal Justice Web site at www.njdcj.org to report suspected wrongdoing. All information received through the Division of Criminal Justice Corruption Tipline or Web page will remain confidential.