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Thursday, July 21, 2016

Securities Fraud Related to Biodiesel Fraud Scheme Convicted in Jury Trial

U.S. Attorney Josh J. Minkler for the Southern District of Indiana announced today the guilty verdict after an eight-day jury trial of Jeffrey Wilson of Evansville, Indiana, who was charged with securities fraud related to a massive multi-state fraud scheme.  Wilson’s crimes centered on the e-biofuels biodiesel business in Middletown, Indiana, which was a wholly-owned subsidiary of Imperial Petroleum.  Wilson, the Chief Executive Officer (CEO) and President of Imperial Petroleum, was convicted in federal court before U.S. District Judge Sarah Evans Barker for the Southern District of Indiana Wednesday night for securities fraud, filing false reports with the Securities and Exchange Commission (SEC), falsely certifying reports to the SEC, lying to the company’s outside auditor and lying to federal investigators.

“Wilson’s conviction represents the end of the line for a group of fraudsters in Indiana, New Jersey and Oregon who bent and twisted programs designed to increase America’s energy independence to line their own pockets,” said U.S. Attorney Minkler.  “Wilson, as the CEO of a publicly-traded company, was obligated to tell the truth the moment he knew about fraud, instead he presented any cover up story he could to keep things going and drive up share price, while giving himself extra stock and writing himself checks from the Imperial’s coffers.”

The verdict in the securities fraud was directly related to wire fraud crimes committed by Craig Ducey, Chad Ducey of Fishers, Indiana, and Chris Ducey of North Webster, Indiana; Joseph Furando and Katirina Tracy of Park Ridge, New Jersey; and Brian Carmichael of Bend, Oregon.  The Ducey brothers, Furando, Tracy and Carmichael were charged with conspiracy to commit wire fraud, tax fraud, false statements to the Environmental Protection Agency (EPA) and other crimes in a separate indictment in September 2013.  They all pleaded guilty prior to Wilson’s trial: Carmichael in September 2013, Tracy in July 2014, Furando in April 2015 and the Ducey brothers in April 2015.

The companies CIMA Green, Caravan and e-biofuels have all pleaded guilty as well.  Carmichael is serving a five year prison sentence for his role in the fraud.  Chris Ducey has begun a six year sentence.  And Joseph Furando, the leader of the New Jersey part of the conspiracy, has been sentenced to twenty years imprisonment.  The other defendants have yet to be sentenced.

The underlying fraud involved Furando and Tracy purchasing biodiesel through their New Jersey companies CIMA Green and Caravan Trading.  The conspirators knew that this biodiesel had already been used to claim tax credits and an EPA credit associated with renewable fuel, known as a “renewable identification number” (RIN).  Furando and Tracy would sell this biodiesel to Carmichael and the Ducey brothers, who used the e-biofuels facility in Middletown, Indiana, to pretend to manufacture what they had bought and then illegally reassigned the tax credit and the RIN.  On average, the conspirators added in excess of $1.60 per gallon for doing nothing to the biodiesel other than move it around.

All told, the underlying fraud involved more than $140 million in revenue and $56 million in criminal profits.  The securities fraud case tried over the last eight days involved over $20 million in loss to investors and a $25 million attempted fraud that was foiled by a due diligence team inspecting the e-biofuels facility.

Wilson’s conviction yesterday is the final chapter in the investigation and prosecution of this complex fraud.  Wilson’s crimes began in November 2010.  On May 24, 2010, Imperial Petroleum bought e-biofuels.  Soon thereafter, if not before the acquisition, he learned that the facility was not making biodiesel as outsiders were told, but bought biodiesel from Caravan and CIMA Green.  Nevertheless, Wilson filed an Imperial Petroleum annual report with the SEC on Nov. 15, 2010, that presented the e biofuels manufacturing cover story in describing Imperial’s new acquisition.  From then on, Wilson consistently presented false information about e-biofuels to the public, to investors, to auditors and investigators.  He was convicted of counts related to relate to all of these lies.

“Yesterday's jury verdict convicting Imperial Petroleum's former CEO, Jeffrey Wilson, of multiple violations of the federal securities laws shows that executives who illegally hide material information from shareholders, like Wilson did, will be held accountable for their actions,” said Associate Regional Director Robert Burson of SEC’s Chicago Office.  “The cooperation among federal agencies that led to yesterday's verdict shows that the SEC will work with its federal partners to protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation.”

“Identifying and eliminating fraud is key to ensuring a level playing field for biofuels companies that play by the rules,” said Special Agent in Charge Jeffrey Martinez of EPA’s Criminal Enforcement Program in Indiana.  “Yesterday’s verdict shows that the EPA will stand by its federal law enforcement partners to ensure that those who blatantly ignore the law will be held to account.”

“IRS Criminal Investigation will continue to work with its law enforcement partners to investigate corporate officers who misuse their positions of trust and hold them accountable,” said Special Agent in Charge James Robnett for IRS-Criminal Investigation.  “We will continue to protect American taxpayers and our economy by vigorously pursuing individuals who prey upon the integrity of our great country.”

“The guilty verdict of CEO Jeff Wilson was the culmination of the largest tax and securities fraud scheme in Indiana history,” said Special Agent in Charge W. Jay Abbott of the Indiana FBI.  “The investigation uncovered significant fraudulent activity which included conspiracy, wire fraud, false tax claims, false statements under the Clean Air Act, obstruction of justice, money laundering and securities fraud.  This was a collaborative investigation, led by the FBI.  Partner agencies included EPA’s Criminal Investigation Division, IRS-Criminal Investigation, the Securities and Exchange Commission, U.S. Department of Agriculture and Indiana Department of Environmental Management

These cases were prosecuted by Senior Litigation Counsel Steven D. DeBrota of the U.S. Attorney’s Office, along with Senior Counsel Thomas Ballantine of the Environmental Crimes Section in the Department of Justice’s Environment and Natural Resources Division and Jake Schmidt, a Special Assistant U.S. Attorney at the U.S. Attorney’s Office and Senior Attorney for the Securities and Exchange Commission.  Also providing valuable assistance were the EPA’s Criminal Investigation Division, the Federal Bureau of Investigation, the IRS-Criminal Investigation Division and Scott Hlavacek, an accountant with the Securities and Exchange Commission.   

Topic(s): 
Securities, Commodities, & Investment Fraud
StopFraud
Updated August 10, 2016