Elk Grove Newspaper Advertising Contractor Accused of $1.9M Fraud

A newspaper advertising contractor based in Elk Grove has been accused of 22 counts of grand theft and defrauding the state transportation agency of $1.9 million, California Department of Justice and Caltrans officials announced Wednesday.

Eric B. Hodgson, 43, the owner of Phenix Print & Image in Elk Grove, allegedly used the state funds to pay off a mortgage, make purchases of toys and comics, and to take "exotic trips," state officials said.

Hodgson was booked at 10:19 a.m. April 24 at Sacramento County Jail on an arrest warrant and his bail was listed as $1 million, according to inmate records.

The Elk Grove businessman allegedly contracted for print advertisements that never actually ran in local newspapers as promised, Justice and Caltrans officials said in a statement distributed Wednesday.

"My office's investigation found that this individual defrauded California taxpayers by failing to do the work he was paid for under his contract with the state," Attorney General Kamala D. Harris said in the statement. "We will aggressively prosecute this case and seek to recover every dollar of the public's money that was misused."

Hodgson could not be reached to comment for this report.

Hodgson, as owner of Phenix Print & Image, was hired by Caltrans to publicly advertise new construction contracts to bidders, as required by statute, Justice and Caltrans officials said.

"Caltrans employees discovered the alleged fraud during a routine request for information and proof of publication for the construction contract advertisements," Justice and Caltrans officials said.

An internal review confirmed alleged fraudulent conduct and the matter was turned over to the state Department of Justice for further investigation.

"Caltrans expects contractors to deliver services as promised, and if we find evidence of fraud or abuse we notify law enforcement," Caltrans Director Malcolm Dougherty said in the same statement. "After our staff discovered potential fraud, we immediately provided this information to the California Department of Justice."

Paperwork, business records and computers were seized during the investigation, according to Justice and Caltrans officials.

"The investigation of invoices submitted by Phenix found two print advertising contracts, awarded in 2008 and 2009, that totaled more than $1.8 million," state officials said. "Caltrans terminated a third contract, awarded to Phenix in 2011 for more than $800,000, before any invoices were paid."

State Department of Justice investigators found Hodgson defrauded Caltrans of $1.9 million by using false and fraudulent documentation, according to Justice and Caltrans officials.

"He instead used the money to pay off a mortgage, make purchases of toys and comics, and pay for exotic trips for him and his company staff," Justice and Caltrans officials said.

Caltrans intends to cooperate with the courts and prosecution to seek restitution.

In June 2012, the California Public Contract Code (section 10140) was amended to allow Caltrans to publish public notices to prospective construction contract bidders on the Caltrans website, rather than in local newspapers, Justice and Caltrans officials said.