Two Sentenced for RIN Fraud

STREATOR, Ill. (DTN) -- James Jariv, 64, of Las Vegas, Nevada, was sentenced in federal court in Las Vegas Wednesday, Aug. 5, to 10 years in prison for his role in illegal schemes to generate fraudulent biodiesel Renewable Identification Numbers and to export biodiesel without providing biodiesel RINs to the United States.

Jariv was also ordered to make restitution in the amount of $6,345,830.91 and to forfeit between $4 million and $6 million in cash and other assets, an FBI news release stated.

Jariv was the second defendant to be sentenced for the scheme. Nathan Stoliar, 64, of Australia, was sentenced to two years in prison in April for his role in the conspiracy and ordered to pay more than $1.4 million in restitution and to forfeit $4 million in cash. In addition, in court papers unsealed last week, Alex Jariv, 28, also of Las Vegas, pleaded guilty in the scheme. His sentencing is scheduled for Aug. 18.

RINs are the credits used to show compliance with the renewable fuels blending mandates in the Renewable Fuel Standard.

The RFS created a number of federally-funded programs that provided monetary incentives for the production and use of renewable fuels such as biodiesel in the United States. Biodiesel producers and importers can generate and attach RIN credits to the gallons of biodiesel they produce or import. Because certain companies need RINs to comply with regulatory obligations, RINs are routinely bought and sold in the marketplace.

Beginning around September 2009, James Jariv and Stoliar operated and controlled a company -- City Farm Biofuel in Vancouver, British Columbia, Canada -- that represented itself as a producer of biodiesel from "feedstocks" such as animal fat and vegetable oils. James Jariv and Stoliar also formed a company called Canada Feedstock Supply—that represented itself as City Farm's supplier of feedstocks necessary to produce biodiesel. James Jariv operated and controlled a company based in Las Vegas called Global E Marketing.

Alex Jariv worked for and on behalf of these companies. Using these three and other closely-held companies, the three defendants claimed to produce biodiesel at the City Farm facility and to import and sell biodiesel to GEM and then generated and sold RINs based upon this claimed production, sale and importation.

"In reality, no biodiesel produced at City Farm was ever imported and sold to GEM as claimed," FBI said.

The Jarivs and Stoliar used GEM to claim to blend the biodiesel with petroleum diesel, allowing them to sell the RINs separately from any actual biodiesel.

"Using this scheme, the three men falsely claimed to import, purchase and blend more than 4.2 million gallons of biodiesel," FBI said. "They then sold the RINs, and fraudulently generated more than $7 million."

James Jariv and Stoliar failed to give to the United States RINs worth in excess of $34 million, keeping this money for themselves instead.

Finally, James and Alex Jariv and Stoliar conspired to launder the proceeds of their crimes, utilizing foreign banking institutions and complex financial transactions to promote their illegal schemes and distribute the proceeds of their crimes.

"This was an egregious scheme to defraud fuel suppliers, the United States, and a program designed to strengthen our nation's petroleum independence and improve our air quality," said Assistant Attorney General John C. Cruden for the Justice Department's Environment and Natural Resources Division.

"EPA's criminal enforcement program goes after the most egregious offenders," said Cynthia Giles, assistant administrator for Enforcement and Compliance Assurance at EPA. "For his role in undermining the Renewable Fuel Standard, developed to reduce the nation's impact on climate change and lessen our dependence on foreign oil, Mr. Jariv is going to prison."