Baltimore, Maryland - U.S. District Judge William D. Quarles, Jr. sentenced Rodney R. Hailey, age 34, of Perry Hall, Maryland, today to 151 months in prison followed by three years of supervised release in connection with a scheme in which he sold $9 million in renewable fuel credits which he falsely claimed were produced by his company, Clean Green Fuel, LLC. Judge Quarles enhanced Hailey’s sentence upon finding that he obstructed justice by concealing, selling and spending assets that were protected by court order. Judge Quarles also ordered that Hailey pay restitution of $42,196,089.78 to over 20 companies, and forfeit $9.1 million in proceeds of the fraud including cars, jewelry, his home and bank accounts already seized by the government in partial satisfaction of such $9.1 million judgment.
Hailey was convicted on June 25, 2012, of eight counts of wire fraud, 32 counts of money laundering and two counts of violating the Clean Air Act. He has been detained since the guilty verdict.
The sentence was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge David G. McLeod, Jr. of the Environmental Protection Agency’s (EPA) Criminal Investigation Division; Postal Inspector in Charge Gary R. Barksdale of the U.S. Postal Inspection Service - Washington Division; Special Agent in Charge Thomas J. Kelly of the Internal Revenue Service - Criminal Investigation, Washington, D.C. Field Office; Special Agent in Charge Thomas Muskett of the EPA Office of Inspector General - Office of Investigations - Washington Field Office; U.S. Marshal for Maryland Johnny Hughes; and Chief James W. Johnson of the Baltimore County Police Department.
“Any government program that is based on trust is vulnerable to a fraudster like Rodney Hailey,” said U.S. Attorney Rod J. Rosenstein. “The only thing Rodney Hailey’s ‘Clean Green Fuel’ business produced was the dirty money he used to fund his lavish lifestyle.”
“Congress created the Renewable Fuel Standard program to ensure that transportation fuel sold in this country contains a requisite amount of renewable fuel to promote a cleaner and healthier environment,” said David G. McLeod, Jr., Special Agent in Charge of EPA’s criminal enforcement program in Maryland. "The joint investigation into the defendant’s so-called biodiesel operation revealed no evidence that biofuel ever existed. Today’s sentence demonstrates that those who blatantly thumb their nose at the law in order to make money illegally will be prosecuted.”
“Ultimately, Mr Hailey’s greed has deprived him of his freedom as well as his personal property,” said Thomas J. Kelly, Special Agent in Charge, IRS Criminal Investigation, Washington DC Field Office. “Today’s sentence reaffirms that IRS Criminal Investigation, in cooperation with our law enforcement partners, is committed to ‘following the money trail’ to ensure that those who engage in these illegal activities are vigorously investigated and brought to justice.”
According to evidence presented at the six day trial, Hailey owned Clean Green Fuel, LLC, located in the Baltimore area. Hailey registered Clean Green Fuel with the EPA as a producer of bio-diesel fuel, a motor vehicle fuel derived from renewable resources. In order to encourage the production of renewable fuel and lessen the nation’s dependence on foreign oil, all oil companies that market petroleum in the U.S. are required to produce a given quantity of renewable fuel or to purchase credits, called renewable identification numbers (RINs), from producers of renewable fuels to satisfy their renewable fuel requirements.
Between March 2009 and December 2010, Hailey engaged in a massive fraud scheme, selling over 35 million RINs (representing 23 million gallons of bio-diesel fuel) to brokers and oil companies, when in fact Clean Green Fuel had produced no fuel at all and Hailey did not have a facility capable of producing bio-diesel fuel.
Federal law enforcement agents investigated the scheme after a Baltimore County police detective working with Maryland’s federal financial crimes task force received a report about a large number of luxury cars parked in front of Hailey’s house. The financial crimes task force contacted the EPA’s Criminal Investigation Division and initiated a criminal investigation.
Two civil inspectors from EPA’s Air Enforcement Division visited Clean Green’s headquarters on July 22, 2010, to inspect Hailey’s bio-diesel production facility, in response to a complaint alleging that Clean Green had been selling false RINs. Hailey was not able to provide an exact location for the bio-diesel fuel production facility, nor any records to support claims that Clean Green Fuel had produced bio-diesel fuel. When asked to explain his method of production, Hailey falsely stated that he paid employees and contractors to recover waste vegetable oil from 2,700 restaurants in the “Delmarva” area and bring it to his production facility where he converted it to bio-diesel fuel. Hailey claimed that only the drivers who picked up the oil knew the names of the restaurants, and Hailey could not provide the names of the drivers.
Hailey made over $9.1 million from selling the false RINs. The loss to the traders and major energy companies who purchased Hailey’s false RINs is over $40 million, but the loss also extends to small bio-diesel companies which, as a result of Hailey’s scheme, were unable to sell their RINs and have been forced out of business.
Hailey used the proceeds of the scheme to purchase luxury vehicles, including BMWs, Ferraris, Bentleys, a Mercedes Benz, a Rolls Royce Phantom, a Lamborghini, a Maserati and others, as well as real estate and more than $80,000 in diamond jewelry. In all of these transactions, Hailey generally used cash or checks drawn on accounts he controlled to make the purchase, including a check for $645,330.15 to buy his home in Perry Hall.
For their work in this investigation, United States Attorney Rod J. Rosenstein praised the members of the Maryland Financial Crimes Task Force, including the U.S. Marshals Service, the Baltimore County Police Department and IRS - Criminal Investigation; and the EPA Criminal Investigation Division, U.S. Postal Inspection Service, and EPA Office of Inspector General - Office of Investigations. Mr. Rosenstein thanked Assistant United States Attorneys Tonya N. Kelly and Stefan Cassella, who prosecuted the case.