After a long investigation, the U.S. federal government charged Indiana-based e-Biofuels and several executives and suppliers with 88 counts of conspiracy, wire fraud, false tax claims, false statements under the Clean Air Act, obstruction of justice, money laundering and securities fraud, for involvement in an alleged illegal biodiesel scheme that bilked victims, including investors, customers and the government, out of more than $100 million.

The U.S. Securities and Exchange Commission alleges that when Imperial Petroleum purchased Middletown, Ind.-based e-Biofuels LLC as a subsidiary in 2010, e-Biofuels’ owners falsely represented that they were producing biodiesel from soybean oil and chicken fat. E-Biofuels received significant government incentives based on its biodiesel production representations. The government alleges e-Biofuels used middlemen to buy finished biodiesel and portrayed those purchases in fake invoices as feedstock, and later sold the purchased biodiesel for double the price.

The government alleges that brothers Craig, Chad and Chris Ducey, and Brian Carmichael, operated e-Biofuels and conspired with Joseph Furando and Evelyn Katirina Pattison (aka Katirina Tracy), executives with New Jersey-based Caravan Trading Co. and Cima Green, to purchase RIN-stripped B99 from third parties, pretend that e-Biofuels produced the fuel and fraudulently resell it to customers as B100 with RINs and an available tax credit.

The government says when Imperial’s CEO Jeffrey Wilson learned that e-Biofuels was not really producing fuel he allowed it to continue, taking no corrective action. Imperial’s annual revenue increased from $1 million to more than $100 million and its stock price soared as it told investors it was in the business of environmentally friendly biodiesel production. Imperial’s stock price plummeted to less than 10 cents per share after the scheme fell apart, resulting in a loss of around $60 million. The SEC alleges that from November 2009 to January 2012, e-Biofuels created more than 52 million fraudulent renewable energy credits and $35 million in false tax credits.

Ben Evans, director of public affairs and federal communications for the National Biodiesel Board, says, “This investigation has been underway for at least two years, and we commend the EPA and other federal authorities for moving it closer to resolution.”

The SEC’s complaint filed in federal court charges Imperial Petroleum and Wilson as well as Craig and Chad Ducey and Carmichael. The complaint also charges Caravan Trading, Cima Green and Cima Energy Group and their operators Furando and Pattison (Tracy) for acting as middlemen. They allegedly provided false and misleading documents to deceive government regulators and attract investors to Imperial.

In an email sent to Biodiesel Magazine after charges were filed, Furando says the raid on Cima Green in spring 2012 “was a snipe hunt initiated by the executives at e-Biofuels to divert attention from their alleged illegal activities. Documents were taken, and we cooperated fully.” He further states, “I am taken aback by the total lack of any investigator interest in what Weaver [and Tidwell’s] or the EPA's culpability is in this situation. Attestations were all completed and e-Biofuels was approved to run as a biodiesel plant. Who dropped the ball?”

“RIN fraud, while isolated, has been incredibly damaging to the biodiesel industry and others in the fuels marketplace,” Evans says. “We have worked diligently with the EPA and the petroleum sector to address it head-on, and we believe the new regulations that are now being finalized by the EPA, as well as increased vigilance in the industry, will prevent it moving forward.”

If found guilty, the individuals charged by indictment face up to 20 years in federal prison on some counts, as well as significant fines.