OLYMPIA, WA – Nancy Bush-Estes was sentenced to 73 months in federal prison on February 17, 2017, for her role in a multi-state scheme to defraud biodiesel buyers and the U.S. government. The case, investigated by a joint task force including the U.S. Secret Service, the Environmental Protection Agency (EPA) Criminal Investigation Division, and IRS Criminal Investigations, revealed a sophisticated operation involving fraudulent biofuel credits and claims for alternative fuel tax credits.
Bush-Estes, along with five other co-conspirators including Thomas Davanzo, Robert Fedyna, Richard Estes, Scott Johnson, and Donald Holmes, exploited loopholes in the renewable fuel standards system. The scheme centered around Gen-X Energy Groups and its subsidiary, Southern Resources and Commodities (SRC), both based in Washington state. From March 2013 to March 2014, the group repeatedly cycled batches of renewable biofuels through shell companies established in multiple states, including Florida. This process allowed them to falsely claim the generation of “new” biofuel, generating fraudulent Renewable Identification Numbers (RINs).
These RINs were then illegally sold to third parties, netting the co-conspirators at least $42 million. Simultaneously, Gen-X fraudulently claimed approximately $4,360,700 in alternative fuel tax credits from the IRS based on the fabricated biofuel production. The shell companies facilitated the deception by using falsified paperwork to convert the “fuel” back into “feedstock,” effectively laundering the fraudulently obtained credits and concealing the origin of the recycled product. The entire operation was designed to create the *appearance* of legitimate biofuel production while generating illicit profits.
Federal prosecutors outlined how Davanzo and Fedyna established the network of shell companies, while Bush-Estes and others within Gen-X and SRC worked to process the fuel and generate the fraudulent documentation. Johnson and Holmes, as CEO and COO of Gen-X respectively, oversaw the operation and directed the fraudulent claims. The complexity of the scheme required careful coordination and a deliberate effort to evade detection. Prior to Bush-Estes’ sentencing, Davanzo received a 121-month prison sentence, and Fedyna a 135-month sentence, both also ordered to pay approximately $4.4 million in restitution to the IRS and forfeit $46 million in ill-gotten gains.
Bush-Estes pleaded guilty to a money laundering conspiracy charge – specifically, 18 U.S.C. § 1956(h) – acknowledging her involvement in concealing the source of the illegal funds. In addition to her 73-month prison term followed by three years of supervised release, she was held jointly and severally responsible for $4,360,724 in restitution to the IRS. The prosecution emphasized the severity of the financial impact on taxpayers and the damage to the integrity of the renewable fuel credit system.
Key Facts
- Defendant: Nancy Bush-Estes
- Crime: Biofuel Fraud and Money Laundering
- State: Washington
- Year: 2017
- Statutes Violated: 18 U.S.C. § 1956(h), as well as related statutes regarding wire fraud and fraudulent tax claims (18 U.S.C. §§ 371, 1349, 286)
- Sentencing: 73 months imprisonment, 3 years supervised release, $4,360,724 restitution
- Fraudulent RINs Generated: At least 60 million
- Total Fraudulent Proceeds: Over $46 million
The case serves as a stark reminder of the vulnerability of environmental credit programs to fraud and the commitment of federal agencies to pursue and prosecute those who exploit these systems for personal gain. Authorities continue to investigate potential related schemes and individuals involved in the illicit biofuel market.
Source: EPA ECHO Enforcement Case Database
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