SEATTLE, WA – Donald Paul Holmes, former Vice President and COO of Gen-X Energy Groups, was sentenced to 78 months in federal prison on December 20, 2017, for his role in a multi-million dollar biodiesel fraud scheme. The case, investigated by a joint task force including the U.S. Secret Service, the U.S. Environmental Protection Agency (EPA) Criminal Investigation Division, and IRS Criminal Investigations, exposed a complex conspiracy to defraud biodiesel buyers and U.S. taxpayers.
Holmes, along with co-defendant and Gen-X CEO Scott Johnson, pleaded guilty to conspiracy to commit wire fraud and conspiracy to defraud the government. The scheme, operating between March 2013 and March 2014, involved the fraudulent generation of Renewable Identification Numbers (RINs) – unique serial numbers assigned to renewable fuels – and the subsequent illegal claiming of alternative fuel tax credits from the Internal Revenue Service (IRS). Prosecutors detailed how Gen-X and its subsidiary, Southern Resources and Commodities (SRC), repeatedly cycled batches of renewable biofuels through a network of shell companies established by co-conspirators Thomas Davanzo and Robert Fedyna.
The operation hinged on falsely claiming that re-processed fuel constituted *new* biofuel production, allowing Gen-X to generate fraudulent RINs and collect tax credits they were not entitled to. These RINs were then sold to third parties, netting the conspirators at least $42 million. In addition, Gen-X illegally received approximately $4,360,700 in tax credits based on the fraudulent fuel claims. The shell companies, located across the country including two in Florida, were used to disguise the re-processing as legitimate production, masking the fraudulent activity from regulators and the IRS.
Holmes was held jointly and severally liable for $15,693,341.67 in restitution to the IRS, reflecting the scale of the financial damage caused by the scheme. His sentencing follows those of other key figures involved. Scott Johnson received a 97-month sentence, while Davanzo and Fedyna were sentenced to 121 and 135 months respectively, and ordered to pay approximately $4.4 million in restitution and forfeit $46 million in ill-gotten gains. Richard and Nancy Estes, also involved in the conspiracy, received sentences of 105 and 73 months respectively, and were similarly held liable for the IRS restitution.
Key Facts
- Defendant: Donald Paul Holmes
- Crime: Conspiracy to commit wire fraud and conspiracy to defraud the government through fraudulent biodiesel credits.
- Location: Washington State, with operations spanning multiple states.
- Year: 2018 (sentencing) – Scheme operated 2013-2014.
- RINs Generated: At least 60 million fraudulent RINs.
- Financial Impact: Over $42 million in fraudulent RIN sales and $4.36 million in fraudulent tax credits.
- Statutes Violated: 18 U.S.C. §§ 286, 1349
- Penalties: Holmes sentenced to 78 months imprisonment, 3 years supervised release, and $15,693,341.67 restitution.
The case underscores the EPA’s commitment to combating fraud within the renewable fuel market and highlights the significant financial and environmental risks associated with such schemes. The investigation demonstrates the effectiveness of interagency collaboration in unraveling complex criminal enterprises and bringing perpetrators to justice. GrimyTimes will continue to follow developments related to environmental crime and financial fraud.
Source: EPA ECHO Enforcement Case Database
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