Md. man found guilty of selling fraudulent renewable credits

Source: John McArdle, E&E reporter • Posted: Tuesday, June 26, 2012

BALTIMORE — A federal jury this afternoon convicted a 33-year-old Maryland man of selling $9 million worth of fraudulent renewable energy credits to brokers and oil companies and then using the money to go on “an orgy of conspicuous consumption” that included the purchase of luxury cars and high-end jewelry.

Rodney Hailey of Perry Hall, Md., sat with downcast eyes as the jury announced it had convicted him on all 42 counts, including fraud, money laundering and violations of the Clean Air Act. His sentencing has been set for Oct. 11 and he’ll be held behind bars until then.

Just minutes after his client was led away in handcuffs, Hailey’s lawyer said outside the courtroom that he planned to appeal the verdict. Hailey could face decades behind bars and be forced to pay back the millions of dollars he made after being convicted on 32 money laundering counts, eight wire fraud counts and two counts of violating the Clean Air Act.

In closing statements this morning, federal prosecutors painted Hailey as a “one-man wrecking ball” whose brazen scheme has done irreparable damage to the renewable fuel industry, injured the oil companies that bought the fake energy credits and harmed the American people who never received the environmental benefits the credits represented.

Assistant U.S. Attorney Tonya Kelly repeatedly pointed across the courtroom at Hailey as she described to the jury of eight men and six women how he “sold his fairy tale to every single person he came in contract with” until his own greed became too much for his lies to hide.

In his own closing statement, Hailey’s attorney, Joseph Lee Evans, argued that his client had become the scapegoat for a much larger scheme that the brokers and oil companies were in on.

If anything, Evans said, the hours of testimony proved that the government made a mistake in trying to pin the entire scheme on Hailey as opposed to crooked brokers who were more than happy to turn a blind eye to obviously questionable renewable energy credits.

“The wire fraud scheme charged here is not the scheme that actually happened,” Evans said.

Evans also argued that the case demonstrated gross negligence on the part of the government. “EPA screwed up big time” by putting a young and inexperienced staffer in charge of the program that Hailey was charged with abusing, he said.

But Evans said the government had no interest in pursuing that case because, for political and public relations reasons, U.S. EPA wants to see Hailey take all the blame rather than expose just how broken the renewable energy credit system is.

Under the 2005 Energy Policy Act, the federal government instituted a new program that was meant to encourage the use of biodiesel fuel by requiring that oil companies either produce a certain amount of renewable fuel or purchase credits called renewable identification numbers (RINs) from producers of renewable fuels

During the time he was involved in the program, Hailey sold 35 million RINs representing 23 million gallons of fuel that he indicated had been produced by his company, Clean Green Fuel, through the recovery and conversion of vegetable oil from restaurants on the Delmarva Peninsula.

In 41 sales between late 2009 and 2010, Hailey made more than $9.1 million by selling those RINs under the renewable fuel standard program.

But throughout that time period, Assistant U.S. Attorney Stefan Cassella said, Hailey was “doing absolutely nothing … except spending money.”

Among the nearly two dozen cars that Hailey allegedly used the sale proceeds to purchase were a $377,000 Bentley, a $238,000 Lamborghini and a $170,000 Ferrari. Charging documents also show a $644,000 home bought during that time and $81,000 in jewelry purchases.

Early in the trial, Hailey’s defense had argued that if Hailey really was the “fast talking con man” that the prosecution said he was, he would have done a better job at hiding his many lavish purchases. But Cassella argued that that defense was a non starter.

“There is no prize for being the least clever criminal on the block,” he said.

Those purchases began attracting the attention of local officials at the same time EPA investigators began taking a closer look at Clean Green Energy. By July 2010, EPA investigators showed up at Hailey’s offices to inspect his facilities. Hailey first claimed that his production plant had moved and then that he had sold off all his equipment at the new site but that he could not remember who he sold the equipment to.

The government presented witnesses who worked near Hailey’s production facility as well as witnesses from the biofuel industry to demonstrate that Hailey could not possibly have produced the amount of fuel he claimed.

In the end, Cassella said, Hailey went through “an orgy of conspicuous consumption, a botched attempt to cover it up with the EPA, and then it all comes crashing down.”

As he waited for the jury’s verdict outside the federal district courtroom in downtown Baltimore this afternoon, Hailey declined to comment on his case.

In a statement after the verdict, Ben Evans, spokesman for the National Biodiesel Board — the biodiesel trade association — said Hailey’s scheme “has caused immeasurable damage to an industry and a government policy that are working for the public good — to improve our environment, create U.S. jobs and boost our energy security.”

“It’s costing biodiesel producers thousands of dollars in added expenses and in some cases putting their businesses at risk of failing,” said Evans, who is no relation to Hailey’s attorney. “And it’s costing well-intentioned petroleum companies as well. Mr. Hailey came in and defrauded all of them, and we’re happy that he won’t have the opportunity to do that again. Moving forward, the biodiesel industry is coming together around common-sense safeguards that will prevent this kind of thing from happening in the future.”