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    United States Attorney's Office
    Central District of California

    Thom Mrozek
    Public Affairs Officer

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    Release No. 11-108

    August 5, 2011


    LOS ANGELES – Two men who owned companies they claimed had technology to remove oil waste from contaminated soils were sentenced this week to four-year prison terms for tax fraud for diverting company funds to themselves and concealing the income from the Internal Revenue Service.

    David J. Feuerborn, 51, of Camarillo, was sentenced this morning 48 months in federal prison.

    Thomas R. Jennings, 55, of Anaheim Hills, was sentenced Monday to 48 months in federal prison.

    Both men were sentenced by United States District Judge S. James Otero after they were convicted earlier this year by a federal jury on conspiracy and tax fraud charges. Judge Otero remanded both men into custody on Monday, when both were originally scheduled to be sentenced. In addition to the prison terms, Judge Otero ordered the men to pay $1,074,248 in restitution – $842,965 to be paid to the IRS, and $231,283 to be paid to the California Franchise Tax Board.

    For roughly the past decade, Jennings and Feuerborn owned and operated a series of companies they claimed had developed technology that could separate oil from dirt and other materials without producing any hazardous waste. They claimed they were in the process of patenting a revolutionary chemical solution that, when used in conjunction with specialized machinery, could quickly and efficiently remove oil from huge volumes of contaminated soil. All of the companies had names that were variants of ESS, such as Environmental Soil Sciences in Camarillo, ESS Environmental in Placentia, and Environmental Services and Support in Anaheim

    Evidence presented during a two-week trial in United States District Court earlier this year showed that Jennings and Feuerborn used a bank account under a name very similar to an ESS vendor to funnel to themselves several million dollars that they used for their own personal benefit, including the purchase of numerous cars, motorcycles, and recreational vehicles, as well as country club payments and interior design work at their residences.

    In addition to funneling money to themselves through this bogus account, Jennings and Feuerborn also paid themselves large management fees – typically $15,000 each per month – for running ESS. Jennings and Feuerborn instructed ESS’s accountant to falsely characterize these payments as “loans,” a designation that was designed to make the payments appear to be non-taxable.

    “In short, [the] defendants concealed millions of dollars of personal income from the IRS by fraudulently disguising such income as the business expenses of defendants’ company, ESS, and by falsely characterizing their salaries as ‘shareholder loans,’” prosecutors wrote in sentencing papers filed with the court. “In doing so, [the] defendants also defrauded investors by claiming that ESS was spending millions
    more dollars on the development of its purported oil-separation technology than it actually was; in fact, [the] defendants spent these unreported millions on themselves and their families.”

    ESS never generated any significant revenue or profits, and investors lost everything they put into the company, prosecutors said in court documents.

    Jennings and Feuerborn received substantial income that they failed to report to the IRS. Jennings received at least $1 million, and Feuerborn received at least $2 million, none of which was reported to the IRS.

    The federal jury that convicted Jennings and Feuerborn found both of them guilty of conspiracy to defraud the United States. Jennings was found guilty of four counts of subscribing to false tax returns, and Feuerborn was found guilty of four counts of tax evasion.

    The investigation into Jennings and Feuerborn was conducted by IRS - Criminal Investigation in Los Angeles.


    ReleaseNo. 11-108
    Return to the 2011 Press Release Index