TUESDAY, JULY 22, 2014
Australian Man Pleads Guilty In Las Vegas To Biofuels Fraud Scheme
WASHINGTON – Nathan Stoliar, 64, of Australia, pleaded guilty in federal court in Las Vegas today to five felonies for his role in multiple schemes, worth in excess of $41 million, to generate fraudulent biodiesel credits and to export biodiesel without providing biodiesel credits to the United States as required by law.
Stoliar and another defendant had been charged in January 2014 in a 57-count indictment alleging conspiracy, wire fraud, false statements under the Clean Air Act, obstruction of justice and conspiracy to engage in money laundering. Following his indictment, Stoliar’s arrest was sought by the United States. Located in Poland, Stoliar returned in early February to the United States to surrender for arrest. Stoliar pleaded guilty Tuesday to one count of conspiracy, one count of conspiracy to engage in money laundering, two counts of wire fraud and one count of making false statements under the Clean Air Act. Stoliar is required by the plea to forfeit $4 million and pay $1 million in restitution. He faces a maximum sentence of 20 years in prison and a $500,000 fine for each count of conspiracy to engage in money laundering and wire fraud, five years in prison and a $250,000 fine for conspiracy, and two years in prison and a $250,000 fine for making false statements under the Clean Air Act.
“Stoliar and his co-conspirator perpetrated a massive fraud against a renewable fuels program created to protect our nation’s energy security and independence,” said Sam Hirsch, Acting Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “The Justice Department will continue to pursue fraudsters at home and abroad and protect the integrity of federal programs as it protects the environment.”
“By rooting out fraud, EPA is committed to achieving the environmental goals that Congress envisioned when it created the Renewable Fuel Standard,” said Cynthia Giles, the U.S. Environmental Protection Agency’s (EPA) Assistant Administrator for Enforcement and Compliance Assurance. “This case, like other recent ones, supports legitimate businesses and makes clear to potential violators that EPA and its partners will fight to protect the program’s integrity.”
“With this guilty plea, the defendant admitted that he participated in a conspiracy to defraud the United States government, specifically the EPA, and that he personally gained more than $7 million from the scheme,” said Dan Bogden, U.S. Attorney for the District of Nevada. “These types of schemes are complex and require an enormous expenditure of resources to investigate and prosecute. Because of the tremendous work of the investigators and prosecutors on this case, we were also able to seize and forfeit from the defendant millions of dollars from bank accounts, as well as real property in Nevada and California, jewelry and other assets.”
The Energy Independence and Security Act of 2007 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 credits known as “renewable identification numbers,” or RINs. to the gallons of biodiesel they produce or import. Because certain companies (such as companies that sell transportation fuel in the United States) need RINs to comply with regulatory obligations, RINs have significant market value. They are routinely bought and sold in the marketplace. In addition, to ensure that RINs are generated for renewable fuel used only in the United States, and in order to create an incentive for biodiesel in the United States to be used here, anyone who exports biodiesel is required to obtain these valuable RINs for all exported gallons and provide the RINs to EPA.
Stoliar admitted that beginning around September of 2009, he and co-defendant James Jariv 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. Stoliar and Jariv also formed a company called Canada Feedstock Supply – that represented itself as City Farm’s supplier of feedstocks necessary to produce biodiesel. Jariv operated and controlled a company based in Las Vegas called Global E Marketing (GEM). Using these three and other closely-held companies, Stoliar and his codefendants 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. Stoliar and his codefendants 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, Stoliar and his co-defendants falsely claimed to import, purchase and blend more than 4.2 million gallons of biodiesel. They then sold the RINs, and fraudulently generated more than $7 million.
The indictment also alleges that, beginning around the same time period and continuing through Dec. 31, 2013, Stoliar and Jariv, using their company MJ Biodfuel, bought over 23 million gallons of RIN-less biodiesel that had been blended with small amounts of petroleum diesel to form B-99. The defendants bought the B-99 from unrelated companies in the United States, and this B-99 had been used by other companies to generate and separate RINs from the fuel. Because B-99 cannot be used to again generate a RIN, and because it cannot be used for other tax-related incentives, B-99 sells for substantially less than 100 percent biodiesel (known as B-100). Stoliar sold some of this biodiesel to purchasers in the United States, claiming it was B-100 produced at the City Farm facility and imported into the United States. By claiming this biodiesel was B-100 and not RIN-less B-99, Stoliar marketed the fuel as eligible to be used by purchasers to generate credits and incentives, and Stoliar was able to sell the fuel for as much as $2.30 per gallon more than he otherwise would have been able.
Stoliar and his co-defendants also exported significant amounts of the RIN-less B-99 they bought in the United States to Canada. Stoliar then sold the biodiesel in Canada, and conspired with his co-defendants to not acquire and provide RINs to the United States for these exports as they were required to do by law. In doing so, Stoliar and Jariv failed to give to the United States RINs worth in excess of $34 million, keeping this money for themselves instead.
Finally, Stoliar and Jariv 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. Accounts were utilized in Canada, Nevada and Australia, and transactions between the defendants’ closely-held companies were described as other legitimate transactions involving biodiesel, when in reality they were not.
Sentencing for Stoliar has been set for is Oct. 30, 2014 in Las Vegas, Nevada. The investigation that led to today’s plea was the result of collaborative work by the EPA’s Criminal Investigation Division and the FBI, with assistance from the United States Secret Service, the Internal Revenue Service-Criminal Investigations and the Department of Homeland Security.The case is being prosecuted by Assistant Chief Wayne D. Hettenbach of the Environmental Crimes Section of the Justice Department’s Environment and Natural Resources Division, Assistant U.S. Attorney’s Crane M. Pomerantz and Daniel D. Hollingsworth of the U.S. Attorney’s Office in Nevada, and Assistant Deputy Chief Darrin L. McCullough of the Justice Department’s Criminal Division, Asset Forfeiture and Money Laundering Section, with the assistance of the Justice Department’s Office of International Affairs and the United States Attorney’s Office for the Southern District of Texas.