A Montana asphalt contractor has been sentenced to three years of probation, six months of home detention and a $27,000 fine for attempting to monopolize the cracksealing business for publicly funded highways in Montana and Wyoming.
Nathan Nephi Zito, 44, of Billings pleaded guilty in U.S. District Court in October 2022 to one count of felony attempted monopolization.
According to federal court documents, Zito contacted a rival company in January 2020 about splitting up territory in a “strategic partnership” on public cracksealing jobs they would bid on. The two companies were often sole bidders on projects.
Zito said he would bid on Montana and Wyoming projects, while the other contractor would bid on cracksealing jobs in South Dakota and Nebraska. Zito also offered to pay the other contractor $100,000 as compensation for lost business in Montana and Wyoming, according to the office of U.S. Attorney Jesse Laslovich.
Zito told the other contractor the deal would make their companies’ revenue streams more stable and their margins higher, according to court records.
After the first call, the contractor reported Zito to the Federal Highway Administration, which contacted the U.S. Department of Transportation’s Office of Investigator General. Investigators recorded calls between the two contractors from March to October 2022.
Zito eventually proposed he and the other contractor enter into a written contract on the partnership, but disguise their collusion, according to the U.S. attorney’s office. The contract also would have given Zito the option to buy the other contractor’s business even though the other contractor said he had no intentions of selling. The other contractor refused what the U.S. attorney’s office calls a “sham agreement.”
The U.S. government filed a charge of attempted monopolization against Zito in September 2022 in U.S. District Court in Billings, Montana, and Zito pleaded guilty to the felony.
The court filing said Zito had sought to “gain monopoly power for highway cracksealing services in Montana and Wyoming.” It also said about 95% of his company’s business came from cracksealing on highway projects that are publicly funded. The USDOT often funds such projects in Montana and Wyoming, and contracts typically go to the lowest bidder.
The U.S. attorney’s office sought a prison sentence of six months to a year in the case.
“If Zito had succeeded in his efforts to game the competitive bidding process, there would have been a dangerous probability he would have eliminated competition and been free to raise prices or limit production, which would have negatively impacted the American taxpayer,” said U.S. Attorney Laslovich.
Zito’s lawyer, Peter Lacny, argued for probation.
“Nathan has been severely punished by this conviction alone – he has lost his business, his career, and had his good reputation permanently tarnished,” wrote Lacny in a sentencing memorandum.
The memo said Zito had no criminal history, is remorseful and “voluntarily cooperated with investigators and quickly accepted responsibility for his conduct.”
The memo portrayed Zito as a hardworking entrepreneur. Zito founded Z&Z Asphalt in 1997 soon after graduating high school. He had worked for an asphalt paving company in high school. He used his savings from that job and a $10,000 loan co-signed by his parents to start the company.
By the time of the criminal incident, Z&Z was “one of the largest maintenance contractors in a six-state area.” The memo added that Zito was a devoted father to five children, and he was an active community volunteer.
It noted that last year he voluntarily disassociated himself from Z&Z Asphalt and from participating in any Montana DOT and USDOT publicly funded highway projects. The Z&Z website notes that Spencer Foster and co-founder Johnathan Zito are the current owners.
“This offense was Nathan’s first encounter with the criminal justice system, and it certainly will be his last,” the memo reads. “… Nathan’s personal history and characteristics indicate that this offense was a complete aberration, and that Nathan is highly unlikely to reoffend.
“…As a result, this conviction has ended the only career Nathan has ever known and caused him significant personal and professional humiliation.”
On March 29, U.S. District Court Judge Sandra Waters ordered the three years of probation, six months of house arrest and $27,000 fine.
“Defendant Zito’s sentence should serve as a deterrent for contractors tempted by greed when bidding on contracts funded with federal dollars,” said Cissy Tubbs, special agent-In-charge, USDOT Office of Inspector General, Western Region, following the sentencing.
The case was the result of a joint investigation by the Antitrust Division’s San Francisco Office, the U.S. Attorney’s Office for the District of Montana and the Department of Transportation Office of Inspector General as part of the Justice Department’s Procurement Collusion Strike Force.