Richard Smith, Biodiesel Production Fraud, Ohio 2015

LOGAN, OH – Richard Smith, along with three co-conspirators, has been sentenced to 41 months in federal prison for his role in a multi-million dollar biodiesel production fraud scheme. The sentencing, handed down on August 27, 2015, in the Southern District of Ohio, concludes a case that exposed a deliberate effort to exploit federal incentives designed to promote renewable energy.

Smith, along with Dean Daniels, Brenda Daniels, and William Bradley, operated through New Energy Fuels LLC in Texas and later Chieftain Biofuels LLC in Logan, Ohio. The group falsely claimed to be producing biodiesel from animal fats and vegetable oils, generating and selling Renewable Identification Numbers (RINs) and claiming tax credits despite producing a substandard fuel that didn’t meet industry standards. The scheme spanned from 2009 to 2011, during which time refundable tax credits of $1 per gallon were available for renewable fuel producers.

Federal investigators found that the defendants purchased low-grade feedstock and performed minimal processing, resulting in a fuel that did not qualify as biodiesel. Despite this, they fraudulently represented the fuel to the Environmental Protection Agency (EPA) as legitimate biodiesel, allowing them to illegally generate and sell over $15 million in fraudulent RINs. Furthermore, the defendants claimed over $7 million in false biodiesel tax credits from the Internal Revenue Service (IRS).

The operation wasn’t limited to financial fraud. Authorities also discovered that New Energy Fuels generated significant hazardous waste during its production process. Dean Daniels directed an employee to illegally dispose of this waste at night in the Houston, Texas area. That employee, Lonnie Perkins, previously pleaded no contest to charges related to illegal dumping.

Senior U.S. District Court Judge James L. Graham sentenced Dean Daniels to 63 months, William Bradley to 51 months, Richard Smith to 41 months, and Brenda Daniels to 366 days in prison. In addition to their prison terms, the court ordered all four defendants to pay a combined $23 million in restitution. The case highlights the EPA and Department of Justice’s commitment to combating fraud within the Renewable Fuel Standard program and ensuring the integrity of environmental regulations.

Assistant Attorney General John C. Cruden emphasized the severity of the crime, stating the defendants “threatened these important public policies” intended to bolster energy independence. Acting Special Agent in Charge Jeffrey Martinez of the EPA’s Criminal Enforcement Program added that the guilty pleas demonstrate the agency’s dedication to vigorously pursuing criminal cases involving the manipulation of federal programs.

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Key Facts

Defendant: Richard Smith, Dean Daniels, Brenda Daniels, William Bradley
Crime: Conspiracy to commit wire fraud and defraud the United States. Dean Daniels also pleaded guilty to offering a hazardous material for transport without proper placards.
Location: Logan, Ohio (and Waller, Texas)
Year: 2015
Statutes Violated: 18 U.S.C. 371 (Conspiracy to commit fraud)
Penalties: Sentences ranged from 366 days to 63 months incarceration, and $23 million in restitution.
Fraud Amount: Over $15 million in fraudulent biodiesel RINs sold, and over $7 million in false tax credits claimed.

The investigation involved collaborative efforts from the Houston Police Department, the Department of Justice, the EPA, the IRS, and the Department of Transportation’s Office of Inspector General.

Source: EPA ECHO Enforcement Case Database

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