3 Charged in $500M Fuel Tax Scheme

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

OAKHURST, N.J. (DTN) -- A federal grand jury sitting in the District of Utah late last week indicted the chief executive officer and chief financial officer of Utah-based biodiesel company Washakie Renewable Energy and a California businessman with laundering proceeds of a mail fraud scheme, which obtained over $511 million in renewable fuel tax credits from the Internal Revenue Service, the U.S. Attorney's Office District of Utah announced.

According to the indictment, Jacob Kingston was CEO and Isaiah Kingston was CFO of WRE and each held a 50% ownership interest in the company. WRE has described itself as the "largest producer of biodiesel and chemicals in the intermountain west."

Jacob Kingston, Isaiah Kingston and Lev Aslan Dermen aka Levon Termendzhyan, owner of California-based fuel company NOIL Energy Group, allegedly schemed to file false claims for renewable fuel tax credits, which caused the IRS to issue over $511 million to WRE. Jacob Kingston is separately charged with filing nine false claims for refund on behalf of WRE in 2013.

The IRS administered tax credits designed to increase the amount of renewable fuel used and produced in the United States.

From 2010 through 2016, as part of their fraud to obtain the fuel tax credits, the defendants allegedly created false production records and other paperwork routinely created in qualifying renewable fuel transactions along with other false documents. To make it falsely appear that qualifying fuel transactions were occurring, the defendants rotated products through places in the U.S. and through at least one foreign country. The defendants also allegedly used 'burner phones' and other covert means to communicate during the scheme.

The indictment further charges that the defendants laundered part of the scheme proceeds through a series of financial transactions related to the purchase of a $3 million personal residence for Jacob Kingston. Jacob and Isaiah Kingston are separately alleged to have laundered approximately $1.72 million in scheme proceeds to purchase a 2010 Bugatti Veyron. Jacob Kingston and Lev Aslan Dermen are separately charged with money laundering related to an $11.2 million loan funded by scheme proceeds.

If convicted, the defendants each face a maximum of 10 years in prison for each money laundering count and Jacob Kingston faces a maximum of three years in prison for each false tax return count. They also face a period of supervised release, monetary penalties and restitution.

(CZ)

Brian Milne