Two Men Charged in Las Vegas with Biofuels Fraud Scheme
Two men have been indicted by a federal grand jury in Las Vegas for offenses involving the federal renewable fuel program that allegedly netted them more than $37 million, the Justice Department announced last week. The 57-count indictment against James Jariv and Nathan Stoliar includes allegations of conspiracy, wire fraud, false statements under the Clean Air Act, obstruction of justice and conspiracy to engage in money laundering.
The Energy Independence and Security Act of 2007 created a number of federally-funded programs that provided monetary incentives for the production of biodiesel and to encourage biodiesel use in the United States. Biodiesel producers attach credits known as “renewable identification numbers” or RINs to biodiesel they have produced. Because certain companies need RINs to comply with regulatory obligations, RINs have significant market value. In addition, in order to create an American incentive for biodiesel, anyone who exports biodiesel is required to obtain these valuable RINs and provide them to the EPA.
The government alleges that beginning around June 2009, the two defendants operated a Canadian company, City Farm Biofuel, that claimed to produce biodiesel from feedstocks such as animal fat and vegetable oils. According to the government, the defendants claimed to produce biodiesel at the City Farm facility, claimed to import and sell biodiesel to another defendant-owned company, Global E Marketing, and then generated and sold RINs based upon this claimed production, sale and importation. In reality, little to no biodiesel produced at City Farm was ever imported and sold to Global E Marketing, allowing them to generate approximately $7 million in RINs that were fraudulent.
Additionally, the government alleges that the defendants, using their company MJ Biofuels, bought over 23 million gallons of RIN-less biodiesel that had been blended with small amounts of petroleum diesel, known as B99. The defendants sold some of this biodiesel to purchasers in the United States, claiming it was pure biodiesel that had been produced at the City Farm facility. By claiming that this biodiesel was pure and not RIN-less B99, the defendants were able to claim the fuel was eligible to be incentivized, and were able to sell the fuel for significantly more than they otherwise would have been able. The defendants exported the RIN-less B99 to Canada and conspired not to acquire and provide RINs for these exports to the U.S. as they were legally required, but instead kept the money they received for themselves, pocketing funds in excess of $30 million.
An indictment is only a charge and is not evidence of guilt. All defendants are presumed innocent and are entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.
The Chanler Group is actively engaged in the review and analysis of incentive-based renewable energy programs to determine potential benefits to our clients. Global energy consumption continues to increase each year and, with this increase, the demand for safe, clean, and unlimited energy is on the rise. The Federal and State governments promote this interest through a variety of financially-beneficial incentives. Our understanding of these laws allows us to guide homeowners, businesses, and/or developers through the various ways to take advantage of these incentive-based benefits. With the appreciation that renewable energy laws and regulations are constantly changing, The Chanler Group is committed to investing in its understanding and practice of this area of law.