Brothers Plead Guilty| to $145M Biofuel Scheme

     (CN) – Three Indiana brothers pleaded guilty to perpetrating what a prosecutor called “one of the largest tax and securities fraud schemes in Indiana history,” a multi-state scheme to defraud biodiesel buyers and U.S. taxpayers.
     Chad Ducey, of Fishers, Indiana, entered his plea in the Indianapolis Federal Court on Tuesday. His brother, Chris and Craig, pleaded guilty to their roles in the same scheme last week, the U.S. Justice Department said.
     In addition, Craig Ducey pleaded guilty to a related $58.9 million securities fraud, which victimized over 625 investors and shareholders of Imperial Petroleum, a publicly-traded company and the parent company of the brothers’ E-biofuels in Middletown, Indiana.
     According to prosecutors, the Ducey brothers sold over 35 million gallons of biodiesel to customers for more than $145 million by falsely claiming that the fuel was eligible for federal renewable energy incentives, when they knew it was not.
     “This investigation resulted in the disruption of one of the largest tax and securities fraud schemes in Indiana history,” said Special Agent in Charge W. Jay Abbott for FBI’s Indianapolis division. “The FBI, with federal partners, identified and investigated a group who manipulated and utilized federal governmental programs to line their pockets by fraud. They deceived customers, shareholders, and the American public.”
     Biodiesel is a fuel that can be used in diesel engines and that is made from renewable resources, including soybean oil and waste grease from restaurants.
     Under the Energy Independence and Security Act, properly manufactured biodiesel was eligible for a one dollar per gallon tax credit as well as another valuable credit called a Renewable Identification Number (RIN) that petroleum refiners and importers must comply with to satisfy their federal renewable fuel obligations.
     The Ducey brothers admitted they knew that E-biofuels was fraudulently reselling biodiesel that they obtained from co-conspirators in New Jersey, which had already been used to claim biodiesel incentives.
     By falsely claiming to have made it themselves in Indiana, the Ducey brothers and their co-conspirators created a second set of invalid incentives, which they passed on to their customers.
     Prosecutors said the conspirators realized huge per gallon profits through this scheme, sometimes in excess of $12,000 per truckload.
     Over the course of approximately two years, the co-conspirators fraudulently sold more than 35 million gallons of fuel for a total cost of over $145 million. The co-conspirators and their companies realized more than $55 million in gross profits, at the expense of their customers and U.S. taxpayers, the Justice Department said.
     The Ducey brothers pleaded guilty to conspiracy, false claims against the Internal Revenue Service (IRS), wire fraud and lying to the EPA and the IRS. Their New Jersey co-conspirators, Joseph Furando and Katirina Pattison, have also pleaded guilty for their involvement in the scheme, along with the companies they operated, CIMA Green and Caravan Trading Company, both previously located in Park Ridge, New Jersey.
     The Ducey brothers face up to 20 years of imprisonment on some of the charges, as well as fines and the requirement that they provide full restitution to the victims of this crime.
     Craig Ducey will also have to pay restitution to the victims of the securities fraud. The co-conspirators will also have to forfeit $7.5 million in seized funds, jewelry, artwork, cars and homes they purchased with the funds obtained through the scheme.
     With the Ducey’s pleas, U.S. District Judge Sarah Evans Barker vacated the jury trial scheduled to begin on May 11, 2015.

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