Pasco, WA – Hector Garza and his companies, HTG Trucking and Freedom Fuel, have been sentenced for their involvement in a complex fraud scheme related to renewable energy credits, federal prosecutors announced. The case, stemming from the 2013 collapse of Gen-X Energy Group Inc., reveals a conspiracy to falsely claim the production of renewable fuel, generating illicit profits and tax refunds.
Garza, along with his wife Tammy Garza and others, participated in a scheme that falsely inflated the amount of renewable fuel produced at Gen-X facilities in Pasco and Moses Lake, Washington. Between January and April of 2013, the conspirators claimed production of hundreds of thousands of renewable energy credits, selling them for over $296,000. Simultaneously, they filed false claims with the Internal Revenue Service (IRS) requesting $284,546 in excise credit refunds. Investigators found that much of the fuel reported as produced was either never made or was repeatedly re-processed to artificially inflate credit generation.
The core of the scheme involved HTG Trucking and Freedom Fuel. These companies were used to “round trip” the same fuel material back and forth between Gen-X’s Moses Lake plant and the Garzas’ businesses in Othello. This constant movement allowed the conspirators to generate fraudulent renewable energy and tax credits with each cycle, effectively creating money from nothing. Tammy Garza pleaded guilty to aiding and abetting the use of false statements related to the fraudulently obtained credits.
Broader Conspiracy Unravels
This sentencing marks the latest chapter in a multi-year investigation into the fraudulent activities of Gen-X Energy Group. Scott Johnson, the former CEO of Gen-X, received a 97-month prison sentence in June 2017 for his role in the scheme. Donald Holmes, the former vice president, was sentenced to 78 months in December 2017. In June 2018, Jin Chul “Jacob” Cha, of Tustin, California, was sentenced to 51 months. The investigation demonstrates a widespread effort to defraud both the renewable energy market and the U.S. Treasury.
Sentencing and Penalties
On January 23, 2020, Hector Garza Jr. was sentenced to two years in prison, followed by a three-year term of supervised release. Tammy Garza received a four-month prison sentence and one year of supervised release. Both HTG Trucking LLC and Freedom Fuel Inc. were placed on probation for three years. U.S. District Judge Stanley A. Bastian ordered all defendants to pay restitution of $284,546 to the U.S. Treasury and a $100,000 fine. The guilty pleas were originally entered on June 6, 2019.
Key Facts
- Defendant(s): Hector Garza, Tammy Garza, HTG Trucking LLC, Freedom Fuel Inc.
- Location: Pasco, Moses Lake, Othello, Washington
- Years Active: 2013 (fraudulent activity), 2019 (guilty pleas), 2020 (sentencing)
- Statutes Violated: 18 U.S.C. 286 (Conspiracy to Defraud the United States), 42 U.S.C. 7413(c)(2)(A) (Clean Air Act violations related to fraudulent renewable fuel credits)
- Financial Impact: Over $296,000 in fraudulent renewable energy credit sales; $284,546 in false IRS claims.
- Penalties: Hector Garza – 2 years prison, 3 years supervised release; Tammy Garza – 4 months prison, 1 year supervised release; Companies – 3 years probation; Restitution of $284,546 and $100,000 fine.
The case was investigated by the Environmental Protection Agency’s Criminal Investigation Division and prosecuted by the U.S. Attorney’s Office for the Eastern District of Washington. Authorities warn that this case highlights the vulnerability of renewable energy credit programs to fraudulent schemes and underscores the importance of rigorous oversight and enforcement.
Source: EPA ECHO Enforcement Case Database
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