Brothers plead guilty in $145 million biofuels fraud scheme
INDIANAPOLIS (April 29, 2015) – Three Indiana brothers pleaded guilty in a multi-state scheme that defrauded biodiesel buyers and taxpayers of millions of dollars.
Chad Ducey, 39, Fishers; Chris Ducey, 48, North Webster; and Craig Ducey, 44, Fishers operated E-biofuels LLC from a facility in Middletown, Ind. In addition, Craig Ducey pleaded guilty to a $58.9 million securities fraud scam related to the case. Federal prosecutors say they sold more than 35 million gallons of biodiesel to customers for more than $145 million by falsely claiming the fuel was eligible for federal renewable incentives when they were fully aware that wasn’t the case.
Investigators said the brothers resold biodiesel from New Jersey that had already been used to claim biodiesel incentives. They claimed the fuel had been made at the Middletown facility and used the scam to clear huge profit margins. Over two years, they sold $145 million in fuel, realizing more than $55 million in gross profits.
The plant operated in Middleton from 2007 through 2012, producing biodiesel used in diesel engines and made from renewable resources like soybean oil and waste grease from restaurants. The Energy Independence and Security Act allows properly manufactured biodiesel to get a $1 per gallon tax credit and another credit called a Renewable Identification Number (RIN) that petroleum refiners and importers have to comply with in order to satisfy federal regulations.
The brothers pleaded guilty to conspiracy, false claims against the Internal Revenue Service, wire fraud and lying to the EPA and IRS. Federal prosecutors said Chad Ducey had a third-party engineer submit false reports to justify production at E-biofuels. The reports said the company used a chemical process called transesterification to produce the fuel. In fact, the company was reselling biodiesel produced by other facilities to claim the tax credits.
The Ducey brothers face up to 20 years in prison and large fines. In addition, they’ll be required to pay back money to U.S. taxpayers, truck stop companies, fuel traders and others. Craig Ducey will have to pay restitution to the victims of the securities fraud. The co-conspirators will also have to forfeit $7.5 million in money, jewelry, artwork, cars and homes purchased through the scheme.
Co-conspirators Joseph Furando and Katirina Pattison, who operated New Jersey-based businesses CIMA Green and Caravan Trading Company, have already pleaded guilty for their involvement in the scheme.