Several RIN, tax credit fraud cases move through courts in August

Three biodiesel-related cases have made justice department headlines in August. Most recently, on Aug. 27, Gregory Schnabel, the owner of GRC Fuels of Oneonta, New York—a company that bought and sold renewable fuel and RIN credits—was sentenced to serve more than five years in federal prison and to pay more than $26 million in restitution for his role in a conspiracy that generated more than $47 million in fraudulent RIN credits and $12 million in fraudulent tax credits connected to the purported production of biodiesel. 

According to the justice department, Schnabel engaged in a scheme with other co-conspirators to fraudulently claim RIN and tax credits on fuel that did not qualify for the credits, on fuel that had already been used to generate credits, and on fuel that was exported or otherwise used contrary to U.S. EPA and IRS regulations.

Schnabel bought and sold fuel and RINs from several individuals who have already pleaded guilty for their roles in the scheme, including Fred Witmer and Gary Jury, formerly of Triton Energy; Malek Jalal, formerly of Unity Fuels; and Dean Daniels, William Bradley, Ricky Smith, and Brenda Daniels, of New Energy Fuels and Chieftain Biofuels.

In 2015, the EPA issued a notice of violation (NOV) to New Energy Fuels and Chieftan Biofuels, for activity that took place in 2010-’12. Triton Energy received an NOV from EPA last year for activities that transpired in 2012-’15.

On Aug. 24, Jacob and Isaiah Kingston, CEO and CFO of Utah-based Washakie Renewable Energy, along with Lev Aslan Dermen (aka Levon Termendzhyan), owner of NOIL Energy Group out of California, were indicted for allegedly scheming to file false claims for more than $511 million in renewable fuel tax credits for WRE. Jacob Kingston is separately charged with filing nine false claims for refund on behalf of WRE in 2013.

According to the justice department, from 2010-’16, the defendants allegedly created false production records and other paperwork while rotating products through places in the U.S. and at least one foreign country to make their transactions appear legitimate. The defendants also allegedly used “burner phones” and other covert means to communicate during the scheme.

The indictment further charges that the defendants laundered part of the scheme proceeds through a series of financial transactions related to the purchase of a $3 million personal residence for Jacob Kingston. Jacob and Isaiah Kingston are separately alleged to have laundered approximately $1.72 million in scheme proceeds to buy an exotic sports car. Jacob Kingston and Lev Aslan Dermen are separately charged with money laundering related to an $11.2 million loan funded by scheme proceeds.

If convicted, the defendants each face a maximum of 10 years in prison for each money laundering count and Jacob Kingston faces a maximum of 3 years in prison for each false tax return count. They also face a period of supervised release, monetary penalties and restitution.

Earlier this month, on Aug. 8, Calvin Glover, owner of Colorado-based renewable fuel company Shintan Inc., pleaded guilty to conspiracy to impair and impede the IRS for his role in a $7.2 million biodiesel tax credit scheme.

According to court documents, Glover conspired with others to file more than $7 million in false claims for the biodiesel blenders tax credit, signing at least 23 false tax returns. After receiving the refunds checks, Glover deposited the checks into a bank account that he controlled and then transferred the proceeds to his co-conspirators.  

In response to two grand jury subpoenas issued during the investigation, Glover provided false documents and information to investigators and met with co-conspirators to concoct a false story, all intended to obstruct the IRS’s ongoing criminal investigation, according to the justice department. 

Glover faces a maximum sentence of five years in prison, in addition to supervised release, restitution and monetary penalties.