WASHINGTON — Five individuals were sentenced this week to prison for their roles in a $1 billion biofuel tax conspiracy: Lev Aslan Dermen, aka Levon Termendzhyan, 56, was sentenced to 40 years; Jacob Kingston, 46, was sentenced to 18 years; Isaiah Kingston, 42, was sentenced to 12 years; Rachel Kingston, 67, was sentenced to seven years; and Sally Kingston, 45, was sentenced to six years.
According to court documents and testimony from Dermen’s 2020 trial, from 2010 to 2018, Dermen conspired with Jacob and Isaiah Kingston, their mother, Rachel Kingston, Jacob Kingston’s wife, Sally Kingston, and others, to fraudulently claim more than $1 billion in refundable renewable fuel tax credits. The IRS ultimately paid out more than $511 million in credits to Washakie Renewable Energy (“Washakie”), a Utah biodiesel company owned by Jacob and Isaiah Kingston. The Kingstons distributed the fraud proceeds among themselves and Dermen.
The Renewable Fuel Standard (RFS) program is a national policy that requires a certain volume of renewable fuel to replace or reduce the quantity of petroleum-based transportation fuel, heating oil or jet fuel. The RFS program requires producers or importers of renewable fuel to generate fuel credits, known as Renewable Identification Numbers (RINs), in proportion to the amount and type of renewable fuel they produced or imported. Congress adopted the RFS program to reduce the nation's dependence on foreign oil, help grow the nation's renewable energy industry and achieve significant greenhouse gas emissions reductions. Congress also later mandated the availability of refundable tax credits for the production of renewable fuel in the United States.
In one of the schemes perpetrated by the Washakie conspirators, they purchased biodiesel, (which had been produced by others who had already claimed the tax credit and RINs). The conspirators exported the biofuel to foreign countries. The conspirators then doctored transport documents to disguise and import the biodiesel as “feedstock.” Washakie used this false paperwork to claim it produced biodiesel from the feedstock to support its filing of fraudulent claims for EPA RINs and IRS biofuel tax credits. Throughout the fraud Washakie, with other co-conspirators, fraudulently generated millions of EPA RINs that were then sold for approximately $65 million.
Later, Dermen and the Kingstons conspired to purchase millions of gallons of biodiesel and rotate it though the U.S. shipping system to create the appearance that qualifying fuel was being produced and sold by Washakie. Washakie applied for and was paid by the IRS over $300 million for its claimed 2013 production and over $164 million for its claimed 2014 production. Evidence at Dermen’s trial showed that, to further create the appearance of legitimate business transactions, Dermen and the Kingstons schemed to cycle their and other co-conspirators’ fraud proceeds in more than $3 billion in financial transactions through multiple bank accounts.
Throughout the scheme, Dermen falsely assured Jacob Kingston that Kingston and his family would be protected by Dermen’s “umbrella” of corrupt law enforcement and immune from criminal prosecution. In exchange, Jacob and Isaiah Kingston transferred over $134 million in fraudulent proceeds to companies in Turkey and Luxembourg that were subsequently laundered internationally and through the U.S. financial system.
Money from the fraudulent claims were distributed to Dermen and the Kingstons and used to make lavish purchases in the United States, Turkey, and Belize. Dermen’s associates in Turkey bought and rebuilt a 150-foot yacht named “Queen Anne.” The Queen Anne was seized by the government in Beirut, Lebanon in 2021, and then sold in Cyprus for $10.1 million. Dermen also caused Jacob Kingston to send more than $700,000 on behalf of Dermen to purchase land in Belize for a planned casino, for which the government is seeking forfeiture. The government is also seeking the forfeiture of other assets in Turkey related to the fraud proceeds sent there. Jacob and Isaiah Kingston sent more than $21 million in fraud proceeds to SBK Holdings USA, Inc., Dermen’s California-based company. Jacob Kingston used $1.8 million of the fraud proceeds to buy a 2010 Bugatti Veyron for Dermen as a “gift,” and Dermen gifted a chrome Lamborghini and a gold Ferrari to Jacob Kingston. Dermen and Jacob Kingston also laundered $3 million through Dermen’s company, NOIL Energy Group, to purchase a mansion in Sandy, Utah for Jacob and Sally Kingston.
The Kingston defendants sent over $35 million of their share of the fraud proceeds to their extended family and companies they owned.
Dermen also laundered $3.5 million through SBK Holdings USA, Inc., to purchase a mansion in Huntington Beach, California. The government now seeks forfeiture of this residence as well as a couple dozen other parcels of real property that were purchased with the Kingstons’ share of the proceeds.
“The defendants sought to illegally and fraudulently profit from a program that was designed to help reduce greenhouse gas emissions,” said Acting Assistant Administrator Larry Starfield for EPA’s Office of Enforcement and Compliance Assurance. “This case sends a clear message that EPA and our law enforcement partners will aggressively prosecute these crimes and violators will pay a heavy price.”
“The significant sentences imposed by the Court reflect the breathtaking scope of the defendants’ nearly decade-long tax fraud scheme – one of the largest ever,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division. “Dermen and members of the Kingston family cost law-abiding taxpayers more than $500 million and attempted to steal double that. They also sought to cover their tracks by cycling billions-of-dollars in transactions through the banking system and using fuel purchases and oil tankers to give the illusion their plant was actually producing and selling biodiesel fuel eligible for IRS credits. Tax Division prosecutors and IRS-CI Special Agents not only unraveled this scheme – they uncovered, traced and recovered millions in proceeds secreted in Turkey, the United States and elsewhere.”
“Today’s verdict further demonstrates that the EPA and its law enforcement partners are committed to protecting the integrity of programs such as EPA’s Renewable Fuel Standard and the IRS’ Refundable Renewable Fuel Tax Credit,” said Robert Marsden, EPA Acting Special Agent in Charge. “These programs are a critical part of tackling climate change and achieving the greenhouse gas reductions Congress intended.”
The Environmental Protection Agency’s Criminal Investigation Division, IRS-Criminal Investigation, and the Defense Criminal Investigative Service (DCIS) of the Department of Defense Office of the Inspector General investigated the case. The case was prosecuted by the Department of Justice Tax Division with assistance from the United States Attorney’s Office for the District of Utah.
from EPA News Releases https://ift.tt/gt6lq7B