Department of Justice investigation leads to arrest

Caltrans Tip Leads to Arrest of Newspaper Advertising Contractor by CA Department of Justice

SACRAMENTO – Caltrans and the California Attorney General’s office today announced that 43 year-old Eric Blaine Hodgson, the owner of Phenix Print & Image of Elk Grove, has been arrested on 22 counts of grand theft following a California Department of Justice investigation that began after Caltrans staff discovered fraudulent invoices for print advertisements that had never actually run in local newspapers as promised.

“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,” said Attorney General Kamala D. Harris. “We will aggressively prosecute this case and seek to recover every dollar of the public’s money that was misused.”

Hodgson, as the owner of Phenix Print & Image, was hired by Caltrans to publicly advertise new construction contracts to bidders, as required by statute. Caltrans employees discovered the alleged fraud during a routine request for information and proof of publication for the construction contract advertisements. A subsequent internal review confirmed likely fraudulent activity and, as consistent with state law, the matter was turned over to the California 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,” said Caltrans Director Malcolm Dougherty. “After our staff discovered potential fraud, we immediately provided this information to the California Department of Justice.”

Hodgson was booked at the Sacramento County Jail. Paperwork, business records and computers were seized during the arrest.

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

The California Department of Justice investigation found that Hodgson defrauded Caltrans of $1.9 million by using false and fraudulent documentation.  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.

Caltrans will now 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.