Ducey Brothers And Others Use Subsidized Biofuel Industry As A Scheme To Defraud Taxpayers and Investors

How many times does this have to repeat itself before the government gets out of the business of picking winners and losers by funneling billions of our tax dollars into energy-related businesses for the sake of promoting green energy? U.S. Attorney Joe Hogsett announced charges today against three brothers and a handful of other charlatans who allegedly used the cover of operating a biodiesel plant that was supposed to be making diesel fuel from animal fat and vegetable oils to defraud the government and investors. Three brothers, Chad, Chris and Craig Ducey, along with Brian Carmichael used E-Biofuels in Middletown, Indiana as a front company to defraud taxpayers and investors out of more than $100 million through a series of criminal acts, including wire fraud, tax fraud, money laundering, securities fraud and making false statement under the federal Clean Air Act. Hogsett claims the case against those charged represents the largest tax and securities fraud claim in Indiana history.

What enticed the accused into committing their crimes, 88 charges in total, is a federally-funded program under the Energy Independence and Security Act of 2007, which provides valuable tax credits to persons who manufacture pure biodiesel to blend with petroleum diesel. The Ducey brothers and Carmichael are accused of conspiring with a New Jersey couple, Joseph Furando and Evelyn Katirina Pattison, who would purchase biodiesel fuel from third parties and then fraudulently resell it as pure biodiesel with the available tax credit. Although E-Biofuels had a refinery in Henry County where it could produce its own biodiesel fuel, it produced no fuel. Instead, it operated as a pass-through facility for fuel purchased elsewhere.

The government claims E-Biofuels delivered mislabeled fuel to customers in one of three ways. In some cases, it transported the fuel from fuel terminals to its facility in Middletown where it was unloaded into a holding tank. It would then be reloaded into tanker trucks and delivered to unsuspecting customers with paperwork that fraudulently identified it as pure biodiesel fuel. In other cases, it simply flipped a load by picking up the paperwork at the facility without unloading it and delivering it as pure biodiesel fuel. In the most egregious circumstance, it delivered so-called phantom loads directly to customers from fuel terminals to customers. The customers were paying an inflated price for fuel they believed was pure biodiesel fuel.

According to the government, the principals of E-Biofuels sold their company to Evansville-based Imperial Petroleum in 2010, which knowingly perpetuated the fraud. Imperial Petroleum's president, Jeffrey Wilson, was included in today's indictments. The principals are accused of hiding from investors, outside auditors and shareholders the fact that they were purchasing biodiesel fuel from third parties rather than producing their own from animal fat and other feedstocks as they were representing. The principals pocketed $35 million in tax credits before the company filed for bankruptcy in April, 2012. The six face up to 20 years in prison if found guilty of the charges. Carmichael has agreed to plead guilty to one charge in exchange for his cooperation in order to receive a sentence of up to five years in prison. Prosecutors claim the charged individuals paid themselves large salaries, took lavish gambling trips to Las Vegas, and purchased expensive artwork, jewelry and automobiles.

According to campaign finance records, Craig Ducey, a Fishers resident, contributed over $25,000 to the National Republican Congressional Committee when he first prepared to launch E-Biofuels in 2007. His brother Chad, also a Fishers resident, contributed over $700 to the campaign committee of former Gov. Mitch Daniels. Chad and Craig also co-founded 8CD, LLC, a business that breeds bulls for use in rodeo bull riding competitions. The photo below from the company's website shows Chad and Craig with their families and business partner, Jim Carrigan. Chad Ducey also is part of the leadership team of a local beer brewery, Scarlett Lane Brewing Company, in Fishers with several others, including his wife, Monica.