Six people and three companies in the US have been charged with defrauding investors, customers and the government out of $100 million (£63 million) by exploiting a tax incentive offering credits for biofuel.
Four men from Indiana-based E-biofuels and two more from Caravan Trading Co and CIMA Green in New Jersey face 88 charges between them.
They include securities fraud, wire fraud, filing false tax claims, money laundering and conspiracy.
Prosecutors said the scheme worked by passing off 35 million gallons of the ‘B99’ biofuel-petrol blend as pure ‘B100’ biofuel. Each gallon of ‘B100’ is assigned a 38 digit ‘Renewable Identification Number’ (RIN) which can be used to claim a tax credit, adding $2 (£1.25) to the value of each gallon.
The defendants are accused of buying the lower grade fuel, before re-labelling it, assigning new RINs and selling it on to customers as if they had produced the fuel themselves.
Prosecutors said customers were cheated out of $55 million (£34 million) and the Internal Revenue Service was exposed to $35 million (£22 million) in false claims over the course of the scheme, which ran from July 2009 to May 2012.
If found guilty the six defendants could be sentenced to up to 20 years in prison, whilst the three companies accused of involvement may face fines and regulatory action.
The US Attorney for the Southern District of Indiana, Joseph Hogsett described the case as the “largest tax and securities fraud scheme in Indiana history.”
Robert G. Dreher, Acting Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division added: “Congress enacted incentives for the production of biofuels to make the United States stronger and more energy independent.
“Fraud by parties claiming such incentives threatens these important public policies. The Justice Department will vigorously prosecute those seeking to line their pockets using scams like those alleged in this indictment.”
Last week JP Morgan was fined £574 million for ‘unsafe’ energy market trading and in July Barclays was fined £298 million for allegedly rigging US energy markets.
