Three Companies and Seven People Charged by US Government for $100 Million Securities Fraud Scam in Biofuel Business
On Wednesday, September 18th, federal prosecutors announced that a former Henry County, Indiana biofuel company’s owners and executives, along with two execs from a New Jersey biofuels company, would be charged with securities fraud for false claims regarding biofuels taxes and legislation. Allegedly, the biofuel scam cheated victims out of $100 million total.
The securities fraud allegations are the largest in Indiana’s history.
The US Securities and Exchange Commission launched an investigation last year, after an Indiana-based company named E-biofuels LLC – based in Middletown – went bankrupt in April. Parent company Imperial Petroleum, Inc – based in Evansville – received subpoenas from the SEC and a grand jury the following month.
Imperial Petroleum bought E-biofuels in 2010, claiming that the company would use raw agricultural products like chicken fat and vegetable oil to produce high-quality biofuel. The company was supposed to produce 10 million gallons of biofuel per year, but the company reportedly fell short of that. Prosecutors allege that E-biofuels was not actually producing biofuels, but instead buying low-quality biofuel on the cheap from a New Jersey producer, then selling the biofuel at a much higher cost.
According to Wednesday’s filing, E-biofuels fraudulently collected $35 million in federal tax breaks, cheated consumers of at least $55 million between 2009 and 2012, and defrauded investors in the company.
Defendants include Chief Executive Officer Jeffrey Wilson from Imperial Petroleum; Craig and Chad Ducey, who started E-biofuels in 2007; Chris Ducey and Brian Charmichael, who were the primary operators of E-biofuels; and Joseph Furando and Evelyn Katirina Pattinson, two executives from New Jersey-based companies that sold E-biofuels low-grade biofuel, and allegedly knew about the conspiracy.
The defendants face 88 counts including securities fraud, wire fraud, filing false tax claims, money laundering and conspiracy. If found guilty, the six individuals face up to 20 years in federal prison; the companies face fines and regulatory action.
“The Renewable Fuel Standard Program was designed to achieve greenhouse gas emission reductions, promote energy independence and expand our nation’s renewable fuels sector,” said Cynthia Giles, assistant administrator for enforcement at the Environmental Protection Agency in a statement.
“Congress enacted incentives for the production of biofuels to make the United States stronger and more energy dependent,” said Robert G. Dreher, acting assistant attorney general for the Justice Department’s Environmental and Natural Resources Division. “Fraud by parties claiming such incentives threatens these important public policies,” he said in a statement today.
“Imperial Petroleum and its executives outright lied to investors about how their company turned a profit,” Robert Burson, associate director of the SEC’s Chicago regional office, said today in a statement. “When their illegal scheme collapsed, investors paid the price.”
Wilson entered a plea of not guilty on Thursday, September 19th, and his attorney, Thomas Farlow, said on his behalf: “We deny the government’s allegations and we expect to be exonerated.”
Carmichael offered to plead guilty to charges of conspiracy to defraud the United States, but not securities fraud.
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