Donald Paul Holmes, Conspiracy To Commit Wire Fraud And Conspiracy To Defraud The Government, Washington 2017

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 biofuel fraud scheme. The case, investigated by a joint task force comprised of the U.S. Secret Service, the U.S. Environmental Protection Agency’s Criminal Investigation Division, and IRS Criminal Investigations, exposed a complex conspiracy to defraud biodiesel buyers and U.S. taxpayers.

Holmes, along with co-defendant Scott Johnson, CEO and founder of Gen-X, pleaded guilty to conspiracy to commit wire fraud and conspiracy to defraud the government, violating 18 U.S.C. §§ 286 and 1349. 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. Investigators determined the defendants repeatedly cycled batches of biofuel through shell companies established across the country, primarily in Florida, falsely claiming the recycled fuel was newly produced.

The operation centered around Gen-X Energy Groups and its subsidiary, Southern Resources and Commodities (SRC). Working with associates Nancy Bush-Estes, Richard Estes, Thomas Davanzo, and Robert Fedyna, the group created a network of shell companies designed to obscure the origin of the biofuel. These companies falsely documented the “fuel” as “feedstock,” allowing Gen-X to fraudulently generate RINs for fuel that was either never produced or simply re-processed. The fraudulently obtained RINs were then sold to third parties, netting the conspirators at least $42 million. Additionally, Gen-X illegally claimed approximately $4,360,700 in tax credits.

This wasn’t a victimless crime. The scheme directly impacted the integrity of the Renewable Fuel Standard (RFS) program, designed to encourage the production and use of renewable fuels. By generating fraudulent RINs, the defendants undermined the program’s effectiveness and distorted the market for legitimate biofuel producers. The IRS was also significantly impacted, losing millions in improperly claimed tax credits.

Holmes was held jointly and severally liable for a staggering $15,693,341.67 in restitution to the IRS. Other members of the conspiracy have already received significant prison sentences. Scott Johnson received 97 months, while Davanzo and Fedyna were sentenced to 121 and 135 months respectively, and ordered to pay approximately $4.4 million each. Estes and Bush-Estes received 105 and 73 months respectively, also with $4.4 million in restitution owed. Davanzo and Fedyna also forfeited $46 million in ill-gotten gains and pleaded guilty to money laundering charges under 18 U.S.C. §§ 1349 and 1956(h), while Estes and Bush-Estes pleaded guilty to a money laundering conspiracy charge under 18 U.S.C. § 1956(h).

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Key Facts

Defendant: Donald Paul Holmes
Crime: Conspiracy to commit wire fraud and defraud the government via biofuel fraud.
Location: Washington State, with operations spanning multiple states.
Year: 2018 (Sentencing) – Scheme operated 2013-2014
Losses: Over $42 million from fraudulent RIN sales and $4.36 million in fraudulent tax credits.
Statutes Violated: 18 U.S.C. §§ 286, 1349, and 1956(h)
Sentence: 78 months incarceration, 3 years supervised release, $15,693,341.67 restitution.

The case underscores the EPA’s commitment to combating fraud within the renewable fuel market and highlights the collaborative efforts of federal law enforcement agencies in dismantling complex criminal enterprises.

Source: EPA ECHO Enforcement Case Database

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