Railway Company Executive Sentenced to Prison

TRENTON –

Railway Company Executive Sentenced to Prison for Attempting to Steal Over $75,000 by Falsifying Insurance Claim

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A former chief operating officer of a Morristown-based freight railway company was sentenced to prison Thursday for attempting to steal over $75,000 by falsely inflating an insurance claim that the company filed in connection with damage to a railroad switch caused by a truck accident.

Gordon Fuller, 77, of Plainfield, N.J., the former chief operating officer of the Morristown and Erie Railway, Inc. (M&E), was sentenced to five years in state prison by Superior Court Judge Salem Vincent Ahto in Morris County. On Oct. 17, Fuller was found guilty following a jury trial of charges of conspiracy (2nd degree), insurance fraud (2nd degree), attempted theft by deception (2nd degree), and falsifying or tampering with records (4th degree).

Deputy Attorneys General Anthony Robinson and Melissa Simsen tried the case and handled the sentencing for the Division of Criminal Justice. The charges stemmed from an investigation by the Division of Criminal Justice Corruption Bureau, which also resulted in a second indictment charging Fuller and a former project manager for M&E, Willard Phillips, 65, of Langhorne, Pa., with defrauding the New Jersey Department of Transportation of over $800,000 by submitting false claims for grant funds for work on railway improvements that was never performed. The charges in that indictment are pending. The Morris County Prosecutor’s Office assisted in the investigation of the fraudulent insurance claim.

“A theft committed in the boardroom is sometimes harder to detect than one committed on the street, but our trial lawyers skillfully proved this corporate defendant’s guilt beyond a reasonable doubt,” said Attorney General Porrino. “This prison sentence sends a strong message to other crooked corporate officials who might consider engaging in insurance fraud or any other type of financial fraud.”

“Fuller used his authority as chief operating officer of this railway company to pressure subordinates into participating in his attempt to steal over $75,000 from an insurance company,” said Director Elie Honig of the Division of Criminal Justice. “We have zero tolerance for insurance fraud, which ultimately imposes higher costs on all premium payers.”

The state presented testimony and evidence at trial that Fuller, as chief operating officer, had M&E submit a fraudulently inflated claim and false supporting documents to New Jersey Manufacturers in connection with an accident on March 4, 2005, in which a truck went off the road in a snow storm and became stuck on a railroad switch on tracks owned by M&E in Morristown, N.J. New Jersey Manufacturers was the insurance company for the paper company that owned the truck involved in the accident.

The initial invoice prepared by M&E for the damaged switch was for $29,000, but Fuller ordered that the invoice be falsely inflated prior to submission to the insurer. Ultimately, M&E submitted a fraudulent invoice for $144,307 to New Jersey Manufacturers.

At Fuller’s direction, employees of M&E reported to New Jersey Manufacturers that initial repairs on the switch were ineffective and caused a train derailment resulting in the need for additional repairs. Those reports were false. In reality, little damage was caused by the truck and there was no derailment. The work orders submitted by M&E in support of the claim listed work performed by M&E employees on the damaged switch, but some of the listed employees told investigators they did not work on the switch on the dates in question, while others were no longer even with the company at the time. The insurance company learned of the fraud, denied the claim, and alerted the Morris County Prosecutor’s Office. The prosecutor’s office conducted an initial investigation and referred the case to the Attorney General’s Office.

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