3 brothers plead guilty in $145M scheme to sell fake credits
Source: Amanda Peterka, E&E reporter • Posted: Thursday, April 30, 2015
Chad Ducey, 39, pleaded guilty yesterday, DOJ said. His brothers, Chris Ducey, 48, and Craig Ducey, 44, pleaded guilty last week.
“This wide ranging criminal conspiracy sought to undermine the biofuels program and its positive benefits to our nation’s economy and environment,” Assistant Attorney General John Cruden said in a statement. “This case should send a strong message that we are watching this market very closely and we won’t allow lawbreakers to pursue profits at the expense of our nation’s interests.”
In September 2013, the Securities and Exchange Commission first filed a complaint against Imperial Petroleum and subsidiary E-Biofuels LLC for the alleged scheme. At the time, Indiana officials called it the largest tax and securities fraud scheme in their state’s history.
According to DOJ’s Environment and Natural Resources Division, E-Biofuels operated a biodiesel manufacturing plant in Middletown, Ind., between 2007 and 2012. Biodiesel is an advanced biofuel made from soybean oil, animal fats and used cooking grease, and can be used by refiners to obtain credit through the renewable fuel standard (RFS) program.
The Ducey brothers admitted to obtaining biodiesel from co-conspirators in New Jersey — which had already been used to get credit under the RFS program — and then reselling it for additional credit through E-Biofuels. They claimed to have produced the fuel at the Middletown facility, generating false reports to justify their production.
DOJ said that the co-conspirators at times made more than $12,000 per truckload of biodiesel coming into the Middletown plant. In all, they allegedly sold the 35 million gallons of fuel for more than $145 million, and their companies received more than $55 million in gross profits.
The brothers pleaded guilty to conspiracy, false claims against the IRS, wire fraud, and lying to U.S. EPA and the IRS. In addition, Craig Ducey last week pleaded guilty to the nearly $60 million securities fraud, which affected more than 625 investors and shareholders in Imperial Petroleum.
According to the Justice Department, the brothers face large fines and up to 20 years in prison for the charges. In addition, they will have to forfeit $7.5 million worth of jewelry, artwork, cars and homes that were purchased with the profits of the scheme. The department said that Craig Ducey will also be compelled to pay restitution to the investors who were victims in the security fraud.
Other members and companies involved in the scheme in New Jersey have already pleaded guilty.