Maryland man gets 12 years in prison for biodiesel fraud scheme

22 February 2013 21:47  [Source: ICIS news]

HOUSTON (ICIS)--A 34-year-old Maryland man was sentenced on Friday to more than 12 years in prison for selling $9.0m (€6.8m) in fake renewable fuel credits.

Rodney Hailey, the head of Clean Green Fuels, had been convicted in June in US District Court of selling the renewable identification numbers (RIN) without producing a gallon of biodiesel.

Judge William Quarles Jr enhanced Hailey’s sentence upon finding that Hailey had obstructed justice by concealing, selling and spending assets that were protected by court order.

The judge ordered Hailey to pay about $42.2m in restitution to more than 20 companies and forfeit $9.1m in proceeds from the fraud, including cars, jewellery, his home and bank accounts. He also faces three months of supervised release upon the end of his prison term.

Hailey’s conviction was on eight counts of wire fraud, 32 counts of money laundering and two counts of violating the Clean Air Act.

“When invalid renewable fuel credits are ‘produced’ and sold, it undermines the integrity of an important program designed by Congress to reduce the nation’s dependence on foreign oil and to grow the nation’s renewable energy industry,” said Cynthia Giles, assistant administrator for the US Environmental Protection Agency’s (EPA) Office of Enforcement and Compliance Assurance.

“[Friday’s] sentence shows that there are serious consequences, including jail time, for defrauding the renewable fuels program for personal gain," she added.

Hailey operated Clean Green Fuel in the Baltimore, Maryland, area and registered the company with the EPA under the Renewable Fuel Standard (RFS) program as a producer of biodiesel.

All oil companies that market petroleum in the US are required to produce a given quantity of renewable fuel or to purchase credits, called RINs, from producers of renewable fuels to satisfy their renewable fuel requirements. 

Federal prosecutors showed at trial that between March 2009 and December 2010, Hailey engaged in a massive fraud scheme, selling more 35m RINs representing 23m gallons of biodiesel to brokers and oil companies. But Clean Green Fuel produced no fuel, as Hailey did not even have a facility capable of producing biodiesel. 

The problem of RIN fraud is one that the EPA and oil companies have been dealing with since the program’s inception, as companies other than Clean Green Fuels have been alleged by the EPA to have done what Hailey’s company did.

The EPA has taken a buyer-beware approach to RINs, so fuel companies can be found liable for owning invalid credits – even if they had purchased them in good faith.

However, the EPA recently proposed a voluntary quality assurance program to verify that RINs generated under the RFS programme have been validly generated. 

The National Biodiesel Board has said that the invalid RINs made up a small percentage of the total number of RINs in 2011 – less than 1% of the total RINs and about 6.5% of the biodiesel RINs.

Meanwhile, the American Petroleum Institute (API) has said that "the invalid RINs are jeopardising the success of the entire renewable fuels standard”.

($1 = €0.76)

Additional reporting by Al Greenwood

By: Jeremy Pafford
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