Founder and Former CEO of Sustainable Fuel Company Pleads Guilty to Multimillion Dollar Embezzlement and Investor Fraud Scheme
A California man pleaded guilty Wednesday to a multiyear conspiracy to engage in commodities price manipulation.
According to court documents and statements made in court, Emilio Jose Heredia Collado, 49, of Lafayette, was employed as a trader at Company A, an oil trading company, and later at Company B, a multinational commodity trading company, after it had acquired Company A. Between approximately September 2012 and August 2016, Heredia conspired with other employees at Company A, and later at Company B, to manipulate the price of fuel oil bought from, and sold to, a particular counterparty, Company C, through private, bilateral contracts.
“The defendant and his co-conspirators unlawfully manipulated the fuel oil market for their own gain by creating artificial prices that undermined the legitimate forces of supply and demand in one of our nation’s key commodity markets,” said Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division. “This prosecution demonstrates the department’s commitment to working with our law enforcement partners to identify and prosecute individuals who would seek to manipulate commodities benchmark prices while trading in the open market.”
“Individuals profiteering, through the manipulation of daily price assessments of a valuable commodity, fuel oil, prior to the purchasing or selling of it, goes against the most fundamental concepts of a supply-and-demand market economy,” said Assistant Inspector in Charge Raimundo Marrero of the U.S. Postal Inspection Service Criminal Investigation Group. “These fraudulent practices have no place in the international marketplace. This guilty plea showcases the U.S. Postal Inspection Service’s tenacity to hold individuals accountable for their dishonest actions and the resolve to continue to protect consumers and businesses. To criminals out there, the U.S. Postal Inspection Service and our federal partners will ensure your criminal endeavors are brought to justice.”
Heredia and his co-conspirators sought to unlawfully enrich themselves, Company A, and Company B by increasing profits and reducing costs on the fuel oil contracts with Company C. The price terms of the contracts were set by reference to the daily benchmark price assessment published by S&P Global Platts (Platts) for intermediate fuel oil 380 CST at the Port of Los Angeles (Los Angeles 380 CST Bunker Fuel) on a certain day or days plus or minus a fixed premium. As part of the price manipulation conspiracy, Heredia directed his co-conspirators to submit orders to buy and sell (bids and offers) to Platts during the daily trading “window” for the Platts Los Angeles 380 CST Bunker Fuel price assessment with the intent to artificially push the price assessment up or down.
For example, if Company A or Company B had a contract to buy fuel oil from Company C, Heredia directed his co-conspirators to submit offers during the Platts “window” for the express purpose of pushing down the price assessment and hence the price of fuel oil bought from Company C. The bids and offers were not submitted to Platts for any legitimate economic reason by Heredia’s and his co-conspirators, but rather for the purpose of artificially affecting the Platts Los Angeles 380 CST Bunker Fuel price assessment so that the benchmark price, and hence the price of fuel oil that Company A or Company B bought from, and sold to, Company C, did not reflect legitimate forces of supply and demand.
The U.S. Postal Inspection Service is investigating the case.
Acting Principal Assistant Chief Avi Perry and Trial Attorney Matthew F. Sullivan of the Justice Department’s Fraud Section are prosecuting the case.
The Criminal Division’s Fraud Section plays a pivotal role in the Justice Department's fight against white collar crime around the country and is the national leader in prosecuting fraud and manipulation in the U.S. commodity markets.