A former Keolis official was charged with conspiring with an electrical vendor to steal more than $8 million from the commuter rail operator by falsifying invoices and scrapping copper wire for cash.
Prosecutors on Wednesday said John Pigsley, a former assistant chief engineer who managed facilities maintenance for Keolis, led the years-long scheme in concert with the electrical subcontractor, John Rafferty. The men allegedly used fake invoices for electrical services to steal more than $4 million from the commuter rail operator.
Pigsley is also accused of stealing copper wire from Keolis and selling it for scrap for more than $4.5 million.
The charges were announced as the MBTA reels from a series of crises and embarrassments, including an unplanned systemwide slowdown of subway trains last month, revelations of safety and production issues at a plant building new train cars for the T, a monthlong shutdown of the Orange Line that failed to correct track defects, and cuts to subway and bus service.
“T ridership has had to endure its fair share of both acute and chronic issues,” US Attorney Rachael Rollins said in a statement. “Today, unfortunately, we add fraud to that list.”
Pigsley pleaded not guilty to felony charges including wire fraud, tax evasion, and other financial crimes. Rafferty agreed to plead guilty last month to a conspiracy charge and will serve as a witness in Pigsley’s prosecution.
Lawyers for Pigsley and Rafferty did not respond to requests for comment.
The alleged fraud began in 2014 and continued at least until October 2021, according to Pigsley’s indictment. During those years, Rafferty bought trucks, building materials, and other goods and services for Pigsley through Rafferty’s company, LJ Electric. Then Rafferty submitted falsified invoices to Keolis for the cost of the goods — plus a commission for himself — to Keolis. Pigsley approved the invoices, prosecutors alleged in court filings.
The result was that Keolis paid Rafferty’s company more than $4 million for invented electrical services, according to the filings. The money reimbursed Rafferty for the goods and services he had already bought for Pigsley, including: nine trucks, seven Bobcat machines, doors, windows, cabinets, and countertops for Pigsley’s home, and a camper trailer, and more than $1 million of building services and materials. (Pigsley renovated two personal homes and ran a general contracting business during the years of the alleged scheme, according to the court filings.)
Meanwhile, Pigsley used his position at Keolis to buy with company money more than $4.5 million of copper wire over several years, according to the filings. He made the purchases in small quantities — less than $15,000 at a time, in some cases — to evade scrutiny, prosecutors said. Then he took the wire to a scrap yard several times a month and traded it for cash, according to the filings.
A spokesperson for the MBTA said Keolis notified the agency of the “alleged overbilling and credited the T for all of the funds identified in the alleged scheme.” The MBTA paid Keolis between $291 million and $349 million a year to run the commuter rail system during the years of the alleged scheme, according to the US attorney’s office.
A spokesperson for Keolis said that in late 2021 the company detected “project anomalies linked with the practices of an employee,” who was then investigated and fired. “We also cooperated with the authorities throughout their investigation,” the spokesperson said. Officials from the Massachusetts US attorney’s office, the FBI, and the IRS participated in the investigation, according to Rollins’s office.
Transit advocates said the alleged fraud does not rank highly among the MBTA’s problems, given the agency’s long list of safety and service issues that impact riders more directly.
“I’m focused on service delivery,” said Jim Aloisi, former secretary of transportation in the Deval Patrick administration and a board member of TransitMatters, a public transportation advocacy group. “For a transit agency . . . that’s struggling with a variety of problems, this is an unfortunate situation. It doesn’t rise to a level of gnashing my teeth over it.”
But Stacy Thompson, executive director of LivableStreets Alliance, said the T has a history of failing to oversee contracts well, leading to delays and blown budgets.
“Whether it’s with the company working on our fare collection system, the company making the new Red and Orange Line trains, if you don’t have enough oversight and consistent management, things like this are more likely to happen. There is an emerging pattern,” she said, though she cautioned that she does not know enough about the Pigsley case to say if lax oversight played a role.
Prosecutors also accused Pigsley of tax fraud. Among his alleged crimes was failing to disclose the proceeds from the scheme to the IRS. According to IRS rules, “If you steal property, you must report its [fair market value] in your income in the year you steal it, unless in the same year you return it to its rightful owner.” Pigsley failed to do that, prosecutors alleged.
Pigsley was arrested Wednesday morning, according to the US attorney’s office. On Wednesday afternoon, two officers led him, handcuffed, into a federal courtroom in South Boston.
Judge Paul Levenson agreed to release him until his trial on several conditions. One was that he can’t transfer assets of more than $1,000 without permission.
If convicted on all counts, Pigsley could face dozens of years in prison. Rafferty could be sentenced to up to five years, according to his plea agreement.