Four sentenced in $23 million biodiesel production fraud

By Land Line staff | 9/10/2015

A federal judge ordered four Florida residents to serve prison time and pay restitution for their parts in concocting a scheme to produce and distribute bogus biodiesel fuel.

The defendants Dean Daniels, 52; his wife Brenda Daniels, 45; Richard Smith, 57; and William Bradley, 58, all of Florida, pleaded guilty to conspiracy to commit wire fraud and to defraud the United States. They were sentenced Aug. 27 in U.S. district court in Ohio. Dean Daniels also pleaded guilty to offering a hazardous material for transport without providing or affixing proper placards.

Dean Daniels was sentenced to 63 months incarceration, Bradley was sentenced to 51 months incarceration, Smith was sentenced to 41 months incarceration, and Brenda Daniels was sentenced to 366 days incarceration.

According to court documents, the defendants profited by unjustly generating and selling biodiesel credits (RINs) and unjustly claiming biodiesel tax credits for the production and blending of fuel that was not actually biodiesel. In total, the defendants sold over $15 million worth of fraudulent biodiesel RINs, and another $7 million in tax credits from the IRS.

The defendants were all employees and officers of New Energy Fuels LLC, a business in Waller, Texas, that claimed to process animal fats and vegetable oils into biodiesel. The defendants subsequently relocated, operating a similar scheme at Chieftain Biofuels LLC in Logan, Ohio.

According to a news release from the U.S. Attorney’s office, the defendants would purchase low-grade feedstock and perform minimal processing to produce a low-grade fuel. Although the fuel was not biodiesel, the defendants would represent to the EPA that it was. They would generate fraudulent biodiesel RINs and sell them to various third parties. 

The defendants also made false claims to the IRS in order to obtain the biodiesel tax credit that they were not eligible to receive, the release stated. Throughout 2009, 2010 and 2011, refundable tax credits were available for renewable fuel producers. If companies complied with IRS regulations, they could earn $1 per gallon of biodiesel. However, it was illegal to claim this tax credit unless the biodiesel was produced, blended and sold in compliance with rules and regulations.

In addition, New Energy Fuels’ production process generated substantial hazardous by-products. Dean Daniels arranged for an employee of New Energy Fuels to transport the wastes off-site at night. That employee, Lonnie Perkins, previously pleaded no-contest in Texas to several charges related to the dumping of hazardous waste in and around the city of Houston.

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