Four Sentenced for Biodiesel RIN Fraud
STREATOR, Ill. (DTN) -- Dean Daniels, 52; Richard Smith, 57; Brenda Daniels, 45; and William Bradley, 58, all of Florida, pleaded guilty and were sentenced Thursday, Sept. 27, in U.S. district court for charges related to a scheme involving the false production of biodiesel, according to a news release issued by the U.S. Department of Justice.
Dean Daniels was sentenced to 63 months incarceration, Bradley 51 months, Smith 41 months, and Brenda Daniels was sentenced to 366 days handed down by Senior U.S. District Court Judge James L. Graham.
According to court documents, the defendants profited by unjustly generating and selling biodiesel credits known as Renewable Identification Numbers and unjustly claiming biodiesel tax credits for the production and blending of fuel that was not actually biodiesel.
The Renewable Fuel Standard mandates blending of biofuels into petroleum fuel. The RINs are used to comply with the mandates by refiners, blenders and importers.
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In total, the defendants sold over $15 million worth of fraudulent biodiesel RINs.
"The fraud perpetrated by the defendants threatens these important public policies," said Assistant Attorney General Cruden for the DOJ's Environment and Natural Science Division.
The defendants were all employees and officers of New Energy Fuels LLC, a business in Waller, Texas, that claimed to process animal fats and vegetable oils into biodiesel. The defendants subsequently relocated, operating a similar scheme at Chieftain Biofuels LLC in Logan, Ohio.
The defendants would purchase low-grade feedstock and perform minimal processing to produce a low-grade fuel. The fuel was not biodiesel; however, the defendants would represent to the EPA that they had produced biodiesel. They would generate fraudulent biodiesel RINs and sell them to various third parties. Biodiesel RINs cannot be generated unless the biodiesel produced meets industry standards.
The defendants also made false claims to the IRS in order to obtain the biodiesel tax credit that they were not eligible to receive.
Throughout 2009, 2010 and 2011, refundable tax credits were available for renewable fuel producers. If companies complied with IRS regulations, they could earn $1 per gallon of biodiesel. In total, the defendants claimed over $7 million in false biodiesel tax credits.
In addition, New Energy Fuels' production process generated substantial hazardous by-products. Defendant Dean Daniels arranged for an employee of New Energy Fuels to transport the wastes offsite at night. That employee, Lonnie Perkins, previously pleaded no-contest in Texas to several charges related to the dumping of hazardous waste in and around the city of Houston.
"The criminal activity by these defendants has real consequences," said Acting Special Agent in Charge Martinez. "The defendants manipulated and utilized federal governmental programs to line their pockets by fraud. These guilty pleas demonstrate EPA's commitment, working closely with our partners at the Department of Justice, to pursue these criminal cases vigorously."
(BM/AG)
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