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3 brothers plead guilty to massive biofuels scam

April 29, 2015

Three brothers have pleaded guilty to participating in a biofuels scam that federal investigators are calling “one of the largest tax and securities fraud schemes in Indiana history.”

Chad Ducey, 39, of Fishers entered a guilty plea Tuesday for his role in fraudulently selling $145 million in biofuel to claim federal energy incentives, the U.S. Attorney’s Office announced Wednesday morning. His two brothers, Chris Ducey, 48, of North Webster, and Craig Ducey, 44, of Fishers, pleaded guilty last week for their roles in the same multi-state scheme.

The trio pleaded guilty to conspiracy, making false claims against the Internal Revenue Service, wire fraud and lying to the Environmental Protection Agency and the IRS.

The brothers face up to 20 years in prison and large fines on some of the charges, and will be required to provide restitution to their victims, who include U.S. taxpayers, truck stop companies, fuel traders and others.

Craig Ducey also pleaded guilty to a related $58.9 million securities fraud, which investigators say victimized more than 625 investors and shareholders of Imperial Petroleum, a publicly-traded company and the parent company of E-Biofuels LLC in Middletown.

Investigators say E-Biofuels, which was operated by the Ducey brothers, sold truck stops and service stations 35 million gallons of fuel over the course of two years, charging prices well above what it was worth by claiming it was pure biofuel they made from renewables such as animal fats and vegetable oils.

Under the Energy Independence and Security Act, properly manufactured biodiesel was eligible for a $1-per-gallon tax credit and other incentives. The Duceys collected those incentives by claiming E-Biofuels manufactured the fuel.  

The fuel, however, was an altered biofuel obtained from co-conspirators in New Jersey that had already been used to claim federal renewable energy incentives.

Investigators say those involved in the scam realized more than $55 million in gross profit from the fuel sales.

The New Jersey co-conspirators, Joseph Furando and Katirina Pattison, already pleaded guilty for their involvement in the scheme, which included the companies they operated: CIMA Green and Caravan Trading Co.

Although the E-Biofuels plant was capable of producing pure biofuel, prosecutors said it was rarely in operation during the scam, which allegedly ran from July 2009 to May 2012.

Prosecutors say Craig Ducey also will have to pay restitution to the victims of the securities fraud.

And all of the co-conspirators will have to forfeit $7.5 million in seized funds as well as jewelry, artwork, cars and homes they purchased with funds obtained through the scheme.

“This investigation resulted in the disruption of one of the largest tax and securities fraud schemes in Indiana history,” said FBI Special Agent in Charge W. Jay Abbott in a written statement. “The FBI, with federal partners, identified and investigated a group who manipulated and utilized federal governmental programs to line their pockets by fraud. This type of fraudulent activity is not a victimless crime – it harms the American people and the economy.”
 

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