Three Representatives of the Imperial Petroleum Sentenced for Their Role in Defrauding Biodiesel Purchasers and Shareholders
The government’s prosecution of fraud cases against it sometimes results not only in fines but in prison sentences as well. This was the case when last month two men – Jeffrey Wilson and Craig Ducey – were sentenced to 120 months and 74 months, respectively, for their part in a multi-million dollar fraud scheme involving biodiesel tax credits, renewable fuel credits and shares of Imperial Petroleum, Inc. The defendants were the last to be sentenced from a group of seven charged co-conspirators. The others were sentenced at prior hearings on the same charges. The fraud charges arose from lies the government alleges that the defendants told in the course of their dealings with investors, auditors and the Securities and Exchange Commission (SEC) while working for Imperial Petroleum. Wilson – President and CEO of Imperial Petroleum – was in charge of drafting and certifying the accuracy of Imperial’s quarterly and annual reports. Wilson made those reports available to the public through filings with the SEC. He was also alleged to have lied to the company’s independent auditor in order to keep him from learning of the scheme. Earlier in 2016, he was convicted for his role in the fraud. In 2015, Craig Ducey – his co-conspirator – admitted to committing related crimes. It was through his willingness to cooperate with federal prosecutors that Wilson was indicted. Wilson was given a lower sentence for his cooperation.
“Biodiesel has the potential to make the nation’s transportation sector more sustainable, while decreasing our dependence on foreign energy sources, but only if done right,” said Assistant Attorney General Cruden at the time. “The defendants’ fraud in these cases not only cheated customers, investors and taxpayers; it set renewable fuel efforts back for the entire nation. At a time when Americans should have been working together to have clean, sustainable and safe energy, the defendants chose to line their own pockets. Prison is the appropriate consequence.” The government showed at Wilson’s trial that the securities fraud began when he learned that e-biofuels LLC – a company Wilson arranged for Imperial Petroleum to buy – was faking paperwork in order to claim incentives for biofuel that it was not making. This resulted in e-biofuel’s managers fraudulently claiming millions in federal tax rebates and other incentives. Despite the fact that their e-biofuels facility was dormant and not actually producing biodiesel fuel, Wilson and Ducey told investors, auditors and the SEC that it was making millions of gallons of raw materials. This action defrauded buyers and investors. Chad Ducey was sentenced on separate charges involving wire, tax fraud and environmental crimes. (He was not charged with securities fraud.)
The government also alleged that Wilson, Ducey and others worked to establish “beachheads” in Texas. These beachheads were fuel transload facilities that would be used to disguise the transfer of biodiesel to e-biofuels customers from Texas fuel terminals where it would be purchased. In other words, a beachhead would be a facility used to disguise the fact that biodiesel fuel was not actually being made at e-biofuels. “Imperial Petroleum’s top executive played a key role in this massive scheme to deceive investors,” said Regional Director David Glockner of the SEC Chicago Regional Office. “The SEC was pleased to participate in a multi-agency effort to hold him accountable.”
The wire fraud, tax fraud, securities fraud and environmental crime investigation was the culmination of hearings begun back in 2012. Agents of the FBI, the Environmental Protection Agency’s (EPA) Criminal Investigation Division, IRS-CI and the SEC began meeting with a whistleblower then. The testimony given by a whistleblower corroborated the government’s evidence against Wilson, Ducey, et al. Special agents from the FBI, EPA and IRS pursued this matter for over a year and interviewed almost 100 witnesses. The government’s strategy was to approach targets of the investigation and to seek pre-indictments plea agreements with them. This strategy resulted in several indictments and convictions against other suspects in the case.