Two men are under indictment by a federal grand jury in Las Vegas for offenses involving the badly audited federal renewable fuels program that passed out taxpayer money for the production of biofuels. The 57-count indictment against James Jariv, 63, of Las Vegas, and Nathan Stoliar, 64, of Australia, includes allegations of conspiracy, wire fraud, false statements under the Clean Air Act, obstruction of justice and conspiracy to engage in money laundering.
President Bush’s Energy Independence and Security Act of 2007, aka EISA, created a number of federally-funded programs that provided money for the production of biodiesel and to encourage biodiesel use in the United States, among other renewable fuels.
Biodiesel producers and importers could generate and attach credits known as “renewable identification numbers” or RINs to biodiesel they produced or imported. However, since certain companies need RINs to comply with badly conceived regulations mandating the use of certain amounts of biofuels even though the market demand was not and still isn’t there, RINs have come to have significant value. In essence, a bad government regulation, however well-intentioned or ill thought out, now requires businesses to pay for credits because the government regulation can’t be met.
Moreover, in order to create an incentive for biodiesel in the United States to be used in the United States, anyone who exports biodiesel is required to obtain these now expensive RINs and provide them to EPA. The market price charged for exported biodiesel therefore includes the value an exporter is required to spend to acquire these RINs
The latest fraud, allegedly netted the two defendants more than $37 million, in an indictment that revealed was week following Jariv’s initial appearance in federal court in Las Vegas, which followed his arrest on Tuesday. Stoliar resides in Australia.
The indictment alleges that beginning around June of 2009, the two defendants, James Jariv and Nathan Stoliar, operated and controlled a company — City Farm Biofuel in Vancouver, British Columbia, Canada — that held itself out as a producer of biodiesel from “feedstocks” such as animal fat and vegetable oils. Jariv also operated and a company based in Las Vegas, Nevada, called Global E Marketing.
The government alleges that these defendants claimed to produce biodiesel at the City Farm facility, claimed to import and sell biodiesel to Global E Marketing, and then generated and sold RINs based upon this claimed production, sale and importation.
In reality, little to no biodiesel produced at City Farm was ever imported and sold to Global E Marketing as claimed. The indictment alleges that the defendants’ scheme allowed them to generate approximately $7 million in RINs that were fraudulent, which were sold to companies that needed them.
The indictment also alleges that, beginning around the same time and continuing through 2013, the defendants, using their company MJ Biodfuels, bought more than 23 million gallons of RIN-less biodiesel that had been blended with small amounts of petroleum diesel, known as B99, from companies in the United States. The defendants sold some of this biodiesel to purchasers in the United States, claiming it was pure biodiesel, known as B100, produced at the City Farm facility and imported into the United States.
By claiming this biodiesel was B100 and not RIN-less B99, the defendants were able to claim the fuel was eligible to be used to generate credits and incentives, and were able to sell the fuel for significantly more than they otherwise would have been able.
The defendants also exported the RIN-less B99 they bought in the United States to Canada, and then sold the biodiesel in Canada, and conspired not to acquire and provide RINs for these exports to the United States, as they were required to do, but instead to keep the money they received from the sales for themselves. The indictment alleges that, in doing so, the defendants failed to give to the United States RINs worth in excess of $30 million, keeping this money for themselves instead.
The indictment alleges that the defendants created false records and made false statements to conceal their fraudulent claims of biodiesel production, importation, sale and fraudulent RIN generation. Moreover, the indictment alleges that the defendants engaged in a conspiracy to launder the proceeds of their crimes, using foreign banks and complex financial transactions to conceal the illegal nature of the funds they received, and to attempt to protect these funds from government enforcement.
The United States also seized and restrained the assets contained in a number bank accounts used by the defendants, as well as several pieces of real and personal property in Las Vegas, Nevada.
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