A U.S. District Judge today sentenced Rodney R. Hailey of Perry Hall, Maryland to nearly 12 years and six months in prison, followed by three years of supervised release, for selling $9 million in renewable fuel credits that he falsely claimed were produced by his company, Clean Green Fuel, LLC. Hailey, age 34, was convicted in June of 2012 on eight counts of wire fraud, 32 counts of money laundering, and two counts of violating the Clean Air Act. He has been in jail since the guilty verdict.
Hailey made more than $9.1 million from selling the bogus credits, and used the proceeds of the scheme to purchase luxury vehicles, including BMWs, a Mercedes Benz, a Rolls Royce Phantom, a Lamborghini, a Ferrari, a Maserati and others, as well as real estate and more than $80,000 in diamond jewelry. In all of these transactions, Hailey generally used cash or checks drawn on accounts he controlled to make the purchase, including a check for $645,330.15 to buy his home in Maryland.
The judge, William D. Quarles, Jr, “enhanced” Hailey’s sentence (My kind of guy; who says judges don’t have a sense of humor?) upon finding that he obstructed justice by concealing, selling and spending assets that were protected by court order. Quarles also ordered Hailey to pay restitution of $42.2 million to 20 companies and forfeit $9.1 million in proceeds from the fraud, including the cars, jewelry, his home and bank accounts, which were already seized by the government.
Federal law enforcement agents investigated the scheme after a Baltimore County police detective working with Maryland’s federal financial crimes task force received a report about the large number of luxury cars parked in front of Hailey’s house. The financial crimes task force contacted EPA’s Criminal Investigation Division and initiated a criminal investigation.
According to evidence presented at the six-day trial, Hailey owned Clean Green Fuel, LLC, located in the Baltimore area. Hailey registered Clean Green Fuel with EPA under the Renewable Fuel Standard (RFS) program as a producer of bio-diesel fuel, a motor vehicle fuel derived from renewable resources.
To encourage the production of renewable fuel and lessen the nation’s dependence on foreign oil, all oil companies that market petroleum in the U.S. are required to produce a given quantity of renewable fuel or to purchase credits, called renewable identification numbers – RINs – from producers of renewable fuels to satisfy their renewable fuel requirements.
Between March 2009 and December 2010, Hailey engaged in a massive fraud scheme, selling more than 35 million RINs (representing 23 million gallons of bio-diesel fuel) to brokers and oil companies, when in fact, Clean Green Fuel had produced no fuel at all and Hailey did not have a facility capable of producing bio-diesel fuel.
Two civil inspectors from EPA’s Air Enforcement Division visited Clean Green’s headquarters in July of 2010 to look at Hailey’s bio-diesel production facilit in response to a complaint alleging that Clean Green had been selling false RINs. Hailey was not able to provide an exact location for the bio-diesel fuel production facility, nor any records to support claims that Clean Green Fuel had produced bio-diesel fuel.
When asked to explain his method of production, Hailey falsely stated that he paid employees and contractors to recover waste vegetable oil from 2,700 restaurants in the “Delmarva” area, a peninsula that includes parts of Delaware, Virginia and Maryland, and bring it to his production facility where he converted it to bio-diesel fuel. Hailey claimed that only the drivers who picked up the oil knew the names of the restaurants, and Hailey could not provide the names of the drivers.
EPA recently proposed a “voluntary quality assurance” program to verify that RINs generated under the RFS program have been validly generated. EPA expects that this will promote greater liquidity in the transfer and use of RINs, helping to make the RFS program more “effective.”
