Two Iowa Companies Sentenced in Wire Fraud Scheme Involving Ethanol Plant
Corporate Officer Defrauded Ten Victims Out of More Than $2.4 Million
Two Iowa companies were sentenced in federal court on September 21, 2022. Energae, LP, and I-Lenders, LLC, received the sentences after they each pled guilty to one count of wire fraud on December 1, 2020.
The companies’ admissions at the plea hearing, as well as evidence presented in other court proceedings, established that Darrell Smith was a broker and adviser for several investment firms. He was also a responsible corporate officer of both companies. From 2010 to 2015, Smith perpetuated a fraud scheme in which he made withdrawals of over $2.4 million in funds from ten of his investment clients’ accounts without those clients’ knowledge or authorization. In some instances the clients discovered the fraud, but in other instances they did not learn of the theft because Smith would periodically send the clients checks from an account held in the name of the companies and on which Smith falsely represented was principal or interest on an investment. Smith used the stolen funds to pay expenses related to the operation of Permeate Refining, LLC, which operated a now-defunct ethanol plant in Hopkinton, Iowa. In order to transfer funds from client accounts, Smith used authorizations purportedly signed by the client authorizing the withdrawal of funds from the investment account. He either forged his clients’ signatures on the authorizations or used pre-signed, blank authorization forms without the clients’ approval.
The companies were sentenced by United States District Court Chief Judge Leonard T. Strand. Each company was sentenced to one year of probation and ordered to make $1,056,909.68 in restitution to ten victims. The Court also imposed a $2,405,409.68 forfeiture money judgment upon each corporation. The corporations surrendered over 57 million shares of stock in another company and abandoned certain tax credits the companies claimed to possess.
The sentencing of the companies follows the sentencing of Darrell Smith and his brother, David Smith, in recent years. In 2018, Darrell Smith, of Forest City, Iowa, was sentenced to more than 14 years in federal prison upon his conviction of one count of wire fraud and one count of aggravated identity theft. In 2019, David Smith, of Pocatello, Idaho, was sentenced to two months in federal prison after pleading guilty to one count of conspiracy to obstruct, influence, and impede an official proceeding.
The case was prosecuted by Assistant United States Attorney Tim Vavricek and investigated by the Federal Bureau of Investigation, the United States Postal Service Inspection Service, Internal Revenue Service-Criminal Investigation, and the United States Department of Agriculture, Office of Inspector General.
Court file information at https://ecf.iand.uscourts.gov/cgi-bin/login.pl.
The case file number is 20-CR-2007.
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