The wife of a former commuter rail executive admitted in federal court that her company was fraudulently operating as a “disadvantaged’’ business, with her white husband actually running it while she worked full time for a federal agency.
The designation — reserved for female- or minority-owned companies — gave the company an advantage in securing a federal contract for more than $50,000 and put it in line for another with commuter rail operator Keolis that would have paid it $600,000 for each of several years.
Susan Madigan, president of Transit Safety Management Inc. of Georgetown, agreed to plead guilty late last month to one criminal count of lying to a state agency about the firm’s status as a disadvantaged business enterprise.
General contractors vying for federally funded transit projects are required by the US Department of Transportation to subcontract a percentage of work to disadvantaged businesses. But those owners must be running the companies on a daily basis to avoid situations in which women or minorities merely act as figureheads to win the “disadvantaged’’ designation.
Transit Safety Management was incorporated in 1995 as a consulting firm for the railroad industry, focusing on safety and operations management, according to court records. Soon after, the firm was certified as a woman-owned business.
But starting in 2005, Madigan began working full time for the Transportation Security Administration, a job she kept until last year, according to court records.
Madigan’s husband, James R. Stoetzel, who oversaw commuter rail service for the state as its general manager for several years in the 1980s, worked for his wife’s company for the past two decades.
In early 2014, the Massachusetts Bay Commuter Railroad Co., which had long provided commuter rail service for the MBTA, lost that contract to French newcomer Keolis Commuter Services. MBCR subsequently launched a legal battle to keep Keolis out. That suit questioned, in part, Transit Safety Management’s legitimacy as a minority-owned business.
Keolis had listed the company as one of the minority- and women-owned businesses it planned to use in its winning bid for the commuter rail contract. The contract required that at least 15 percent of subcontractors used by the firm be designated as disadvantaged.
The suit raised doubts about Madigan’s ability to oversee her own company while employed full time with the TSA and contended that it was in fact Stoetzel who was running the company.
Transit Safety Management’s attorney John H. Cunha Jr. declined to comment on the plea agreement until Madigan is sentenced in May.
Both Madigan and Stoetzel were listed as representatives of Transit Safety Management in Keolis’s bid filing with the MBTA. The Georgetown company was in line for a $600,000-a-year, multiyear payout to develop and manage a safety program and compliance auditing services for Keolis, according to the filing.
Once the allegations surfaced, Keolis dropped Transit Safety Management before it began the work, said Keolis spokeswoman Leslie Aun. MBCR’s claims against Keolis were ultimately rejected by the MBTA.
But a subsequent federal investigation concluded that Stoetzel had been running Transit Safety Management’s daily operations since 2005. Court documents indicate that although Stoetzel is white, the company continued to make annual claims of its disadvantaged status with the state.
Madigan resigned from the TSA in July 2015. A regional TSA spokesman declined to elaborate on the reasons for the resignation.
In addition to its contract with Keolis, Transit Safety Management completed work on several federal transit projects, including a study that looked at the feasibility of adding stations in the Springfield area for Amtrak’s Vermonter service in 2008. According to the filings, that work was done entirely by Stoetzel for contractor HDR Engineering Inc. The company was paid $52,000.
“HDR and [Transit Safety Management] bid on a number of other contracts in this manner up through at least 2013,’’ Eugenia M. Carris, assistant US attorney, said in a court filing.
As part of the plea agreement, federal prosecutors have recommended a criminal fine of $84,000 and 60 months of probation, plus associated fees. Madigan also agreed to dissolve the business.
Katheleen Conti can be reached at kconti@globe.com. Follow her on Twitter @GlobeKConti.
