Tuesday | 18 November, 2014 | 10:07 am

Railcar CEO settles fraud allegations with $21 million

By Corinna Petry

November 2014 - Gregory Aziz, chairman and CEO of National Steel Car Ltd., has settled securities fraud allegations by agreeing to pay $21 million in damages to the Retirement Systems of Alabama (RSA) and to reimburse the Alabama Securities Commission and Colbert County District Attorney’s Office for its investigation.

District attorney Bryce Graham and commission director Joseph Borg announced the settlement Nov. 14.

Aziz was charged a year ago with 11 counts of securities fraud after failing to pay interest on a $350 million loan from the RSA. The loan was meant to aid National Steel Car in building a railcar plant that would employ 2,200 people. 

To induce RSA to make the loan, Aziz represented that: he could build the plant for $350 million; he owned a debt-free railcar manufacturing company in Canada worth over $200 million; he had access to an unused, $100 million line of credit; and that he owned the unencumbered rights to the patents necessary to build numerous types of railcars in Alabama. 

According to both the original indictment and the settlement, Aziz failed to disclose to RSA that he knew, before breaking ground, that the plant would cost well above $350 million; that National Steel Car had incurred more than $100 million in long-term debt; that it no longer held the line of credit; and had granted liens on the railcar patent rights that would require him to obtain permission from a third party to build the railcars in Alabama. 

Because Aziz failed to come clean with the facts to RSA, the fund had to spend an additional $215 million to complete the railcar plant in 2007. In 2010, after the recession stalled the railcar market, RSA took ownership of 100 percent of the stock in the plant from Aziz.

A forensic audit and the criminal investigation conducted by the securities commission reflects $554 million was spent to build the plant, buy equipment and make the plant completely ready to construct railcars. 

Aziz and related parties were to receive $3.6 million to oversee construction but the audit revealed Aziz actually received $11.4 million. The $21 million paid to RSA in damages reimburses the fund for all sums paid to Aziz plus $10 million in damages.

Also, as Aziz has agreed to forfeit all right, title and interest in the railcar plant, prosecutors agreed to dismiss all charges against Aziz.

Aziz was arrested in Chicago late last year and extradited to Alabama. He spent 12 months confined on an ankle bracelet in Colbert County, during which he negotiated the settlement agreement.

National Steel Car continues to produce railcars in Hamilton, Ontario.

The Colbert County plant was leased to Navistar Inc. in 2011, and makes trucks, buses and diesel engines there. Navistar subleased 25 percent of the space to FreightCar America Inc., which can build up to 7,000 railcars a year in the plant, according to RSA’s 2013 annual report.

Photo: Kansas City Southern

MM Cover0917 digital

vert-current-linewhiteJanuary 2018


Renewing and rebuilding harbors and marine structures smooths pathways for internal shipping, international trade.


MM digitaal archive banner 330

Instagram - @ModernMetalsMag

Modern Metals on Twitter


TrendPublishing 6 16 mm

Instagram Icon Large twitter facebook linkedin rss

MM Cover0917 preview FFJ Cover0917 preview mm 0917 brandingcovers2 3 2 Consumables 0917