ILNews

Biofuels fraud cheated victims of $100M, feds say

Dan Human , IBJ Staff
September 18, 2013
Back to TopCommentsE-mailPrintBookmark and Share

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.
 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. I was wondering about the 6 million put aside for common attorney fees?does that mean that if you are a plaintiff your attorney fees will be partially covered?

  2. My situation was hopeless me and my husband was on the verge of divorce. I was in a awful state and felt that I was not able to cope with life any longer. I found out about this great spell caster drlawrencespelltemple@hotmail.com and tried him. Well, he did return and now we are doing well again, more than ever before. Thank you so much Drlawrencespelltemple@hotmail.comi will forever be grateful to you Drlawrencespelltemple@hotmail.com

  3. I expressed my thought in the title, long as it was. I am shocked that there is ever immunity from accountability for ANY Government agency. That appears to violate every principle in the US Constitution, which exists to limit Government power and to ensure Government accountability. I don't know how many cases of legitimate child abuse exist, but in the few cases in which I knew the people involved, in every example an anonymous caller used DCS as their personal weapon to strike at innocent people over trivial disagreements that had no connection with any facts. Given that the system is vulnerable to abuse, and given the extreme harm any action by DCS causes to families, I would assume any degree of failure to comply with the smallest infraction of personal rights would result in mandatory review. Even one day of parent-child separation in the absence of reasonable cause for a felony arrest should result in severe penalties to those involved in the action. It appears to me, that like all bureaucracies, DCS is prone to interpret every case as legitimate. This is not an accusation against DCS. It is a statement about the nature of bureaucracies, and the need for ADDED scrutiny of all bureaucratic actions. Frankly, I question the constitutionality of bureaucracies in general, because their power is delegated, and therefore unaccountable. No Government action can be unaccountable if we want to avoid its eventual degeneration into irrelevance and lawlessness, and the law of the jungle. Our Constitution is the source of all Government power, and it is the contract that legitimizes all Government power. To the extent that its various protections against intrusion are set aside, so is the power afforded by that contract. Eventually overstepping the limits of power eliminates that power, as a law of nature. Even total tyranny eventually crumbles to nothing.

  4. Being dedicated to a genre keeps it alive until the masses catch up to the "trend." Kent and Bill are keepin' it LIVE!! Thank you gentlemen..you know your JAZZ.

  5. Hemp has very little THC which is needed to kill cancer cells! Growing cannabis plants for THC inside a hemp field will not work...where is the fear? From not really knowing about Cannabis and Hemp or just not listening to the people teaching you through testimonies and packets of info over the last few years! Wake up Hoosier law makers!

ADVERTISEMENT