Skip to main content
Press Release

Michigan Biodiesel Dealer Pleads Guilty to Tax Fraud

For Immediate Release
Office of Public Affairs
Claimed $14.2 Million in Fraudulent Biodiesel Fuel Credits

A Bloomfield, Michigan, biodiesel fuel dealer pleaded guilty today to filing a false income tax return, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division and U.S. Attorney Matthew Schneider of the Eastern District of Michigan.

According to plea documents, Chandra Yarlagadda, 54, owned and operated Alpha Bioenergy LLC (Alpha), formerly known as Naturol Bioenergy LLC, which purchased and sold biodiesel fuel. Pursuant to the Clean Air Act and related federal regulations, companies that purchase and sell biodiesel fuel are required to purchase Renewable Identification Numbers (RINs) for any volume of renewable fuel bought or sold. RINs are credits that obligated parties under the Clean Air Act, such as Alpha, to demonstrate compliance with annual standards set forth by the Environmental Protection Agency.

Yarlagadda reported income and expenses associated with Alpha on Schedules C attached to his personal income tax returns. Yarlagadda admitted as part of his plea that on the Schedules C attached to his 2009, 2010, and 2011 tax returns, he substantially overstated expenses associated with the purchase of RINs. For these three years, Yarlagadda falsely reported RIN expenses totaling more than $14.2 million, when, in fact, he was only entitled to claim approximately $80,000 in RIN expenses for those years. By claiming these inflated deductions, Yarlagadda avoided paying an additional $2.3 million in federal income taxes that was due.

U.S. District Judge Gershwin A. Drain set sentencing for March 19, 2020. Yarlagadda faces a maximum term of imprisonment of three years, as well as a term of supervised release and a fine. As part of his plea agreement, Yarlagadda agreed to pay restitution to the Internal Revenue Service (IRS) in the amount of $2,310,948.

Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Schneider thanked special agents of IRS Criminal Investigation, the U.S. Environmental Protection Agency – Criminal Investigation Division, and Homeland Security Investigations, who conducted the investigation, and Trial Attorneys Melissa S. Siskind and Sarah C. Ranney of the Tax Division who are prosecuting the case, and Assistant United States Attorney Stephen Hiyama of the Eastern District of Michigan who provided substantial assistance in this matter.

Additional information about the Tax Division and its enforcement efforts can be found on the division’s website.    

Updated October 24, 2019

Financial Fraud
Press Release Number: 19-1135