by: Sam Klemet
An Indiana company allegedly schemed investors and tax payers out of millions of dollars. Federal authorities filed fraud charges Wednesday against seven people in the case.
E-Biofuels is accused of pretending to have produced third party purchased fuel at its Middletown, Indiana plant and reselling it as a more expensive, higher grade fuel.
The plant was used as a facade to make investors and customers believe production was happening locally.
"There is no question this facility could have made bio diesel,” said attorney Steve DeBrota. ”They chose not to and we allege they chose instead to pursue fraud as a mechanism to make money.”
The Middletown, Indiana based company bought the better fuel from a third party, blended it down, and repackaged it to sell it under the pretense that it was originally produced in Central Indiana.
The indictment alleges that for almost four years Craig, Chad, and Chris Ducey along with Brian Carmichael conspired with New Jersey companies to sell 35-million-gallons of the lesser B99 fuel at an inflated B100 price which is about twice as much.
Customers that purchase the higher grade pay more because they can receive federal tax credits for doing so.
"No question though that the tax payers got hit by that extra claim, because the IRS did pay out funds twice for the same gallon of fuel," said DeBrota.
In 2010, E-Biofuels was purchased by Imperial Petroleum of Evansville and its president and CEO Jeffrey Wilson went along with the fraud scheme.
"It puts out what we allege to be a really massive fraud and personal profiting by the people we charged," said DeBrota. "You’ll see funds flowing from victims buying things like Ferraries, jewelry this was a massive fraud, leading to massive benefit by the individuals we’ve charged and the companies we charged.”
The indictment also states that Joseph Furando, who ran one the New Jersey based companies that purchased the lesser B99 fuel, used money to purchase a Pablo Picasso painting.
U.S Attorney Joe Hogsett says customers were defrauded of more than $55-million and the IRS lost as much as $35-million in false claims.
"These people believed that they and their businesses were entitled to a free ride on the back of the tax payers and on the back of unsuspecting customers" he said.
The defendants made their initial appearance in court Wednesday.
They face 88 counts of federal criminal activity and up to 20 years in prison for some of the counts.
The companies face fines and regulatory action.
Hogsett said the case is “the largest tax and securities fraud scheme in Indiana history.”