Renewable Fuel Trader Pleads Guilty to Conspiracy

The owner of a company that buys and sells renewable fuel and fuel credits pleaded guilty in U.S. District Court for the Southern District of Ohio to conspiracy for his role in a scheme that generated over $47 million in fraudulent EPA renewable fuels credits, and over $12 million in fraudulent tax credits connected to the purported production of renewable fuel.

The plea entered by the defendant, Gregory Schnabel, before U.S. Magistrate Judge Norah King was announced by Acting Assistant Attorney General Jeffrey H. Wood for the Justice Department’s Environment and Natural Resources Division; U.S. Attorney Benjamin C. Glassman for the Southern District of Ohio; Special Agent in Charge Ryan L. Korner of the Internal Revenue Service (IRS) Criminal Investigation; Acting Special Agent in Charge John K. Gauthier, of the Environmental Protection Agency (EPA), criminal enforcement program in Ohio; and the Special Agent in Charge W. Jay Abbott of the Federal Bureau of Investigation’s Indianapolis Division.

“The defendant helped orchestrate a massive scheme to defraud the U.S. government, American taxpayers and his company’s competitors,” said EPA Administrator Scott Pruitt. “This case shows that EPA and its law enforcement partners are serious about ensuring a level playing field for businesses that follow the law and punishing those who break the rules in the name of personal gain.”

“The Department of Justice vigorously prosecutes those who defraud the federal government through unlawful RFS schemes like the one at issue in this case,” said Acting Assistant Attorney General Wood.  “We applaud the work of the DOJ and EPA law enforcement team that sought and obtained justice in this case.”

“This case is another example that environmental programs are not immune from fraud,” U.S. Attorney Glassman said. “We will continue to catch and hold accountable those who attempt to defraud government programs of any sort.”

“Today’s charges send a strong message that there are serious consequences for activity that defrauds the economy and taxpayers,” said Special Agent in Charge Abbott. “I commend the excellent cooperation between the prosecutors, agents and other investigators who worked tirelessly to uncover this fraudulent scheme and expose the perpetrators who were manipulating the system for their own gains.”

“Gregory Schnabel pleaded guilty to participating in a conspiracy relative to a massive fraudulent fuel tax credit scheme for which he has agreed to pay over $13 million in restitution to the IRS,” said Special Agent in Charge Korner.  “These tax credits were created in support of the production of various renewable fuels and fuel mixtures, they were not created to be a slush fund for thieves and fraudsters.”

According to his plea, Schnabel, owner of GRC Fuels of Oneonta, New York, engaged in a scheme with other co-conspirators to fraudulently claim EPA renewable fuels credits (also known as “RIN” credits) and tax credits on fuel that did not qualify for the credits, on fuel that had already been used to generate credits, and on fuel that was exported or otherwise used contrary to EPA and IRS regulations.

Schnabel bought and sold fuel from several individuals who have already pleaded guilty for their roles in the scheme, including:

• Fed Witmer and Gary Jury, formerly of Triton Energy, who pleaded guilty in the Northern District of Indiana to conspiracy, fraud, and false statements;
• Malek Jalal, formerly of Unity Fuels, who pleaded guilty in the Southern District of Ohio to conspiracy and obstruction of justice; and
• Dean Daniels, William Bradley, Ricky Smith, and Brenda Daniels, of New Energy Fuels and Chieftain Biofuels, who pleaded guilty in the Southern District of Ohio to conspiracy.

This case is being prosecuted by Assistant U.S. Attorney J. Michael Marous for the Southern District of Ohio, and Trial Attorney Adam Cullman and Senior Trial Attorney Jeremy Korzenik of the Environment and Natural Resources Division.  The prosecution is the result of an investigation by the IRS, EPA-CID, and the FBI.