The biggest victim of biodiesel fraud is you

Will more fraud cases exposed hurt the industry's reputation, or will they clear the air, allowing the sector to finally move forward?
By Ron Kotrba | September 25, 2013

What a week it has been in the never-boring world of biodiesel. It was May 24, 2012, when the FBI raided the offices of Cima Green in New Jersey as part of the e-Biofuels investigation. Last week, well over a year later, charges were finally filed against e-Biofuels and publicly traded parent company Imperial Petroleum, Cima Green and Caravan Trading, and certain executive individuals within those companies, for what’s been deemed the largest fraud case in Indiana history at more than $100 million. Click here to read the sordid details of the allegations. It is truly appalling though, and I think it’s safe to say that if found guilty by the judicial system, the perpetrators should be prosecuted to the fullest extent of the law. We have already seen two convicted biodiesel RIN scammers get sentenced to long, hard time in federal prison.

According to the allegations, the long list of victims include the tax payers (i.e., the government) for being bilked out of money from ill-gotten tax credits; investors in publicly traded Imperial Petroleum, the parent company of e-Biofuels; and customers who bought the biodiesel and fake RINs from e-Biofuels. But perhaps the biggest victim, a victim who’s not named in the complaints, is the biodiesel industry and the honest, hardworking individuals who play by the rules to earn a paycheck, or a small profit for the owners in the good years, in an industry with noble purposes and intents.

It is those fine people, you, who make up a gross majority of the biodiesel industry, who suffer mostly. The stigma, the regulatory hoops through which you are now made to jump to maybe get a fair price on your RINs, the ammunition these fraudsters give Big Oil and legislators in the war to dismantle RFS, these are the biggest of wounds from the unnamed victims of biodiesel fraud.

But the fraud allegations last week didn’t stop at the e-Biofuels scandal. Biodiesel Magazine reported another fraud case out of Atlanta. Biodiesel project developer FOGFuels and owner Paul Marshall, along with other companies owned by him, were charged by the U.S. Securities and Exchange Commission for securities fraud. As an investment adviser for his other companies, Marshall is alleged to have misappropriated at least $2 million of investor money for personal expenses, luxurious vacations and his children’s private school tuition. Marshall is also alleged to have taken $100,000 from an advisory client who invested in FOGFuels, a company that had landed a contract with the city of Atlanta to lease land next to one of the city’s wastewater treatment facilities where FOGFuels would establish a trap grease collection site and biodiesel production center, but Marshal used the money for his personal use. Last spring, I wrote an article about FOGFuels, titled, City of FOG, shortly after the company landed the contract with the city. I asked then-CFO Kevin Olson, who, according to the company’s website is no longer with FOGFuels, how the company intended to finance its plans. All he said was, “We have a number of different options.”

The e-Biofuels investigation has been looming over the industry for a very long time, and it is good to finally see it progress to the point where charges have actually been filed. Will the publicity gained from the e-Biofuels case harm the biodiesel industry’s reputation even further, or since this case has been going on quietly for so long, will the culmination of charges filed allow the U.S. biodiesel industry to move forward with one less fraud case hanging over its head?