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Biofuels fraud cheated victims of $100M, feds say

Dan Human , IBJ Staff
September 18, 2013
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Federal prosecutors announced charges Wednesday connected to a Henry County biofuel refinery as part of a massive tax and securities fraud investigation, saying the operation cheated victims out of more than $100 million.

The fraud is alleged to be the biggest instance of tax and securities fraud in state history.

The U.S. Securities and Exchange Commission launched an investigation last year into E-biofuels LLC in Middletown. E-biofuels filed for bankruptcy in April 2012. Its parent company, Evansville-based Imperial Petroleum Inc., received subpoenas from the SEC and a grand jury that May, according to a regulatory filing.

Imperial had to hand over an array of documents relating to E-biofuels’ accounting, purchases and sales of biodiesel, and tax credits and other incentives received from government agencies, the filing said.

“The purpose of the subpoena is to determine whether any federal laws have been violated,” the filing said.

Charging documents released Wednesday afternoon cited 88 counts against seven people and three corporations. Charges included allegations of conspiracy, wire fraud, false tax claims, false statements under the Clean Air Act, obstruction of justice, money laundering and securities fraud.

Prosecutors allege that E-biofuels actually wasn’t producing biofuel. Instead, it was purchasing fuel and selling it to customers as its own product for a profit.

E-biofuels also fraudulently collected on about $35 million in federal tax breaks reserved for biofuel producers, according to charging documents.

Brothers Chad and Craig Ducey launched E-biofuels in 2007. The plant was supposed to produce 10 million gallons of biodiesel per year. Lawsuits against the company indicate that it did not reach that mark.

Chad Ducey is a Fishers resident and Craig Ducey lives in Fortville, according to a bankruptcy filing. Both are named as defendants in the fraud case. They, along with co-defendants Chris Ducey and Brian Carmichael, were the primary operators of E-biofuels, according to charging documents.

The four men conspired with co-defendants Joseph Furando and Evelyn Katirina Pattison—two executives with a pair of related New Jersey-based companies—to purchase lower-grade fuel from third parties and then pretend that it was high-grade fuel from the E-biofuels plant.

The government alleges that the defendants sold more than 35 million gallons of the inferior fuel between July 2009 and May 2012. Unwitting customers paid an inflated price. All told, they were defrauded of more than $55 million.

Imperial bought E-biofuels in 2010 for $3.75 million in Imperial’s thinly traded stock and $15 million in debt. In a regulatory filing from April 30, 2012, Imperial said that 99.6 percent of its revenue stemmed from E-biofuels.

The government alleges that Jeffrey Wilson, the president and CEO of Imperial, knew that E-biofuels was purchasing biodiesel from third parties instead of making its own. He hid this fact from investors, sharholders and outside auditors. He also made false statements in Imperial's annual and quarterly reports filed with the SEC.

Imperial’s accounting firm resigned in August 2012, citing concerns its auditors could not rely on the company’s financial reporting for E-biofuels, according to an SEC filing. The filing did not specify what the problems were.

Carmichael reportedly has offered to plead guilty to a charge of conspiracy to defraud the United States. If convicted, he faces up to five years in federal prison.

The six other defendants face up to 20 years in federal prisoon on some counts, as well as significant fines. The three companies indicted Wednesday also face significant fines and other regulatory action.

Story originally published at IBJ.com.
 

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  1. What is the one thing the Hoosier legal status quo hates more than a whistleblower? A lawyer whistleblower taking on the system man to man. That must never be rewarded, must always, always, always be punished, lest the whole rotten tree be felled.

  2. I want to post this to keep this tread alive and hope more of David's former clients might come forward. In my case, this coward of a man represented me from June 2014 for a couple of months before I fired him. I knew something was wrong when he blatantly lied about what he had advised me in my contentious and unfortunate divorce trial. His impact on the proceedings cast a very long shadow and continues to impact me after a lengthy 19 month divorce. I would join a class action suit.

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  4. Dear Fan, let me help you correct the title to your post. "ACLU is [Left] most of the time" will render it accurate. Just google it if you doubt that I am, err, "right" about this: "By the mid-1930s, Roger Nash Baldwin had carved out a well-established reputation as America’s foremost civil libertarian. He was, at the same time, one of the nation’s leading figures in left-of-center circles. Founder and long time director of the American Civil Liberties Union, Baldwin was a firm Popular Fronter who believed that forces on the left side of the political spectrum should unite to ward off the threat posed by right-wing aggressors and to advance progressive causes. Baldwin’s expansive civil liberties perspective, coupled with his determined belief in the need for sweeping socioeconomic change, sometimes resulted in contradictory and controversial pronouncements. That made him something of a lightning rod for those who painted the ACLU with a red brush." http://www.harvardsquarelibrary.org/biographies/roger-baldwin-2/ "[George Soros underwrites the ACLU' which It supports open borders, has rushed to the defense of suspected terrorists and their abettors, and appointed former New Left terrorist Bernardine Dohrn to its Advisory Board." http://www.discoverthenetworks.org/viewSubCategory.asp?id=1237 "The creation of non-profit law firms ushered in an era of progressive public interest firms modeled after already established like the National Association for the Advancement of Colored People ("NAACP") and the American Civil Liberties Union ("ACLU") to advance progressive causes from the environmental protection to consumer advocacy." https://en.wikipedia.org/wiki/Cause_lawyering

  5. Mr. Foltz: Your comment that the ACLU is "one of the most wicked and evil organizations in existence today" clearly shows you have no real understanding of what the ACLU does for Americans. The fact that the state is paying out so much in legal fees to the ACLU is clear evidence the ACLU is doing something right, defending all of us from laws that are unconstitutional. The ACLU is the single largest advocacy group for the US Constitution. Every single citizen of the United States owes some level of debt to the ACLU for defending our rights.

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