LINCOLN, Neb. (DTN) -- Five different people were sentenced to prison for their roles in a $1 billion biofuels tax conspiracy with sentences ranging from six to 40 years, according to court documents filed in a federal court in Utah.
Lev Aslan Dermen, aka Levon Termendzhyan, 56, was sentenced to 40 years; Jacob Kingston, 46, was sentenced to 18 years; Isaiah Kingston, 42, was sentenced to 12 years; Rachel Kingston, 67, was sentenced to seven years; and Sally Kingston, 45, was sentenced to six years in prison.
According to court documents and testimony from Dermen's 2020 trial in the U.S. District Court for the District of Utah, from 2010 to 2018 Dermen conspired with Jacob and Isaiah Kingston, their mother, Rachel Kingston, Jacob Kingston's wife, Sally Kingston, and others, to fraudulently claim more than $1 billion in refundable renewable fuel tax credits.
The IRS paid out more than $511 million in credits to Washakie Renewable Energy, a Utah biodiesel company owned by Jacob and Isaiah Kingston. The Kingstons distributed the fraud proceeds among themselves and Dermen, according to court records.
The Renewable Fuel Standard program requires producers or importers of renewable fuel to generate fuel credits called renewable identification numbers, or RINs, for the amount and type of renewable fuel they produce or import.
The Washakie conspirators purchased biodiesel that had been produced by another producer that already claimed the biodiesel tax credit and RINs.
According to the EPA, the conspirators exported the biofuel to foreign countries and then doctored transport documents to disguise and import biodiesel as a feedstock.
"Washakie used this false paperwork to claim it produced biodiesel from the feedstock to support its filing of fraudulent claims for EPA RINs and IRS biofuel tax credits," EPA said in a news release. "Throughout the fraud Washakie, with other co-conspirators, fraudulently generated millions of EPA RINs that were then sold for approximately $65 million."
At a later time, Dermen and the Kingstons purchased millions of gallons of biodiesel and routed it though the U.S. shipping system to create the appearance that qualifying fuel was being produced and sold by Washakie.
The company then applied for and was paid by the IRS more than $300 million for its claimed 2013 production and more than $164 million for its claimed 2014 production.
"Evidence at Dermen's trial showed that to further create the appearance of legitimate business transactions Dermen and the Kingstons schemed to cycle their and other co-conspirators' fraud proceeds in more than $3 billion in financial transactions through multiple bank accounts," EPA said.
"Throughout the scheme, Dermen falsely assured Jacob Kingston that Kingston and his family would be protected by Dermen's 'umbrella' of corrupt law enforcement and immune from criminal prosecution."
In exchange, Jacob and Isaiah Kingston transferred more than $134 million in fraudulent proceeds to companies in Turkey and Luxembourg. Those funds were subsequently laundered internationally and through the U.S. financial system.
MONEY USED FOR LAVISH PURCHASES
Money from the fraudulent claims were distributed to Dermen and the Kingstons and used to make lavish purchases in the United States, Turkey and Belize.
"Dermen's associates in Turkey bought and rebuilt a 150-foot yacht named 'Queen Anne,'" according to EPA.
"The Queen Anne was seized by the government in Beirut, Lebanon in 2021, and then sold in Cyprus for $10.1 million. Dermen also caused Jacob Kingston to send more than $700,000 on behalf of Dermen to purchase land in Belize for a planned casino, for which the government is seeking forfeiture."
EPA said the government also is seeking the forfeiture of other assets in Turkey related to the fraud proceeds sent there.
Jacob and Isaiah Kingston sent more than $21 million in fraud proceeds to SBK Holdings USA Inc., Dermen's California-based company.
Jacob Kingston used $1.8 million of the fraud proceeds to buy a 2010 Bugatti Veyron for Dermen as a gift, EPA said, and Dermen gifted a chrome Lamborghini and a gold Ferrari to Jacob Kingston. Dermen and Jacob Kingston also laundered $3 million through Dermen's company, NOIL Energy Group, to purchase a mansion in Sandy, Utah, for Jacob and Sally Kingston.
According to court records, the Kingston defendants sent more than $35 million of their share of the fraud proceeds to extended family and companies they owned.
Dermen also laundered $3.5 million through SBK Holdings USA Inc. to purchase a mansion in Huntington Beach, California, according to EPA. The government now seeks forfeiture of the residence as well as a couple dozen other parcels of real property.
"The significant sentences imposed by the court reflect the breathtaking scope of the defendants' nearly decade-long tax fraud scheme -- one of the largest ever," said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department's Tax Division.
"Dermen and members of the Kingston family cost law-abiding taxpayers more than $500 million and attempted to steal double that. They also sought to cover their tracks by cycling billions-of-dollars in transactions through the banking system and using fuel purchases and oil tankers to give the illusion their plant was actually producing and selling biodiesel fuel eligible for IRS credits."
Todd Neeley can be reached at firstname.lastname@example.org
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