FOR IMMEDIATE RELEASE
FRIDAY, OCTOBER 12, 2001(202) 514-2007
WWW.USDOJ.GOVTDD (202) 514-1888
THREE ADMIT GUILT IN SCHEME TO FALSIFY LAB
RESULTS ON REFORMULATED GASOLINE
WASHINGTON, D.C. The president and operations manager of a Houston-based gasoline blending company pleaded guilty today to participating in a conspiracy to falsify lab results on hundreds of millions of gallons of reformulated gasoline (RFG), the Justice Department announced. Those pleading guilty before Judge Harold A. Ackerman in Federal District Court in Newark, New Jersey are Waldo "Wally" Schroeder, 53, of Houston, president of BMS; Mark Schroeder, 43 of The Woodlands, Texas, BMS operations manager; and Blending, Marketing and Service, Inc.(BMS), a Houston-based fuel-blending company. The three guilty pleas represent the latest in the government's prosecution of a long-running scheme to falsify laboratory reports on multimillion gallon batches of gasoline involving employees and executives of Caleb Brett, a New Jersey testing laboratory, and BMS, a company specializing in blending, buying, selling and trading petroleum products.
The scheme was designed to make it appear that the fuel met cleaner-burning standards of the federal Environmental Protection Agency (EPA) when, in fact, it did not.
The result, according to the indictment, was that the defendants were enriched by the scheme and the fuel was distributed into commerce without meeting standards for reformulated gasoline.
The criminal activity took place between 1991 and February 1997. An investigation was launched in February 1997, when, under the EPA's Voluntary Disclosure Program, Caleb Brett advised the EPA of improper activities at its Linden, NJ facility.
In September 2000, Caleb Brett entered a corporate guilty plea to conspiracy in federal court in Newark. At the same time, three of the testing laboratory's supervisors pleaded guilty to charges related to the conspiracy to falsify reports to the EPA. Three other supervisors from Caleb Brett's Linden facility pleaded guilty to related charges in September 1999. RFG is a cleaner-burning gasoline required by federal law to be used in nine major U.S. metropolitan areas that have the worst ozone air pollution problems.
The parts of the country in which RFG is the only type of gasoline permitted to be sold include the eastern seaboard from Virginia to Maine. RFG has also been required by local initiative in other areas. Gasoline vapors and vehicle exhaust produce ozone, a major component of smog. According to EPA, the RFG program, created by 1990 amendments to the Clear Air Act, has significantly reduced levels of ozone, toxic air emissions and carbon monoxide.
"This scheme was designed to defeat the very purpose of the RFG program," said Acting Assistant Attorney General John Cruden. "It allowed hundreds of millions of gallons of gasoline to be introduced into the market place that were environmentally substandard for the sole purpose of enriching the defendants."
Independent testing laboratories such as Caleb Brett are employed by buyers and sellers of petroleum products to determine whether those products meet federal and state regulatory standards and commercial qualitative and quantitative requirements.
Between November 1994 and January 1997, the Caleb Brett Linden facility analyzed in excess of 400 batches of RFG for BMS, with the typical batch ranging in volume from 1.2 million gallons to 6.2 million gallons, according to the indictment.Court documents and statements from defendants at guilty pleas reveal that when samples of RFG blended by BMS and analyzed in the Caleb Brett Linden laboratory did not meet the EPA's requirements, data was routinely changed in order to make it appear that the RFG met the requirements. Defendants who previously pleaded guilty admitted that the so-called "off-spec" RFG was sold to major retailers and then sold to the motoring public.
The defendants pleaded guilty to Count Two of an indictment that was returned by a federal grand jury in January 2001. That count details 63 instances between November 1994 and December 1996 in which Caleb Brett employees, at the request of Mark Schroeder and Waldo Schroeder, allegedly falsified test results on RFG sold by BMS to various purchasers.
In each instance, test parameters were allegedly altered for oxygen or benzene content and other fuel parameters on batches totaling more than 220 million gallons of fuel received at the Shell Sewaren and IMTT Bayonne terminals.
The Indictment also alleged that the defendants requested Caleb Brett employees to falsify test results, including octane, for conventional gasoline. Still awaiting trial in the case is Richard Kaminski, Caleb Brett's former President, who is charged with the same conspiracy as the Schroeders and BMS, as well as a second conspiracy count and one count of making a false statement to federal agents.
His trial is scheduled to begin on November 29, 2001. Mark Schroeder and Waldo Schroeder each pleaded guilty to Count Two of the indictment, conspiracy, which carries a maximum penalty of five years in prison and a $250,000 fine.BMS pleaded guilty to the same count, but as a corporation faces a maximum penalty of $500,000 and could also be put on probation. Under U.S. Sentencing Guidelines, the court would, upon conviction, determine the actual sentences based on a formula that takes into account the severity and characteristics of the offenses and the defendants' criminal histories, if any. Parole has been abolished in the federal system.
Under Sentencing Guidelines, defendants who are given custodial terms must serve nearly all that time. The investigation was carried out by Special Agents of the EPA Criminal Investigation Division, under the direction of Special Agent in Charge William Lometti of Region II in New York; and U.S. Postal Inspectors in Newark, under the direction of Postal Inspector in Charge Kevin J. Burke. The government was also assisted in the prosecution by New York State's Department of Environmental Conservation. The United States is represented by Assistant Chief Andrew D. Goldsmith and Trial Attorney Stacey H. Mitchell of the Environmental Crimes Section of the U.S.Department of Justice.