Ducey Brothers Plead Guilty To $145 Million Biofuels Fraud Scheme

Three Indiana men have pleaded guilty for their role in a multi-state fraud scheme involving the sale of biodiesel fuels and federal tax incentives according to a statement released by the U.S. Attorney's Office for the Southern District of Indiana. Chad Ducey, 39, and Craig Ducey, 44, of Fishers, along with Chris Ducey, 48, of North Webster pleaded guilty in federal court last week. Here's how the U.S. Attorney's Office described the scheme from which the Ducey brothers derived $55 million in gross profits:

The Ducey brothers operated E-biofuels LLC, from a facility in Middletown, Indiana. As part of the scheme, they sold over 35 million gallons of biodiesel to customers for more than $145 million by falsely claiming that the fuel was eligible for federal renewable energy incentives, when they knew it was not. In addition, Craig Ducey pleaded guilty to a related $58.9 million securities fraud, which victimized over 625 investors and shareholders of Imperial Petroleum, a publicly-traded company and the parent company of E-biofuels, announced Assistant Attorney General John C. Cruden of the Justice Department’s Environment and Natural Resources Division and U.S. Attorney Josh J. Minkler of the Southern District of Indiana . . .

“This investigation resulted in the disruption of one of the largest tax and securities fraud schemes in Indiana history,” said FBI Special Agent in Charge W. Jay Abbott. “The FBI, with federal partners, identified and investigated a group who manipulated and utilized federal governmental programs to line their pockets by fraud. They deceived customers, shareholders, and the American public. This type of fraudulent activity is not a victimless crime – it harms the American people and the economy.”

From 2007 through 2012, E‑biofuels had a biodiesel manufacturing plant in Middletown. Biodiesel is a fuel that can be used in diesel engines and that is made from renewable resources, including soybean oil and waste grease from restaurants. Under the Energy Independence and Security Act, properly manufactured biodiesel was eligible for a one dollar per gallon tax credit as well as another valuable credit called a Renewable Identification Number (RIN) that petroleum refiners and importers must comply with to satisfy their federal renewable fuel obligations.

The Ducey brothers admitted that they knew that E-biofuels was fraudulently reselling biodiesel that they obtained from co-conspirators in New Jersey, which had already been used to claim biodiesel incentives. By falsely claiming to have made it themselves in Middletown, the Ducey brothers and their co-conspirators created a second set of invalid incentives, which they passed on to their customers. They realized huge per gallon profits through this scheme, sometimes in excess of $12,000 per truckload. Over the course of approximately two years, the co-conspirators fraudulently sold more than 35 million gallons of fuel for a total cost of over $145 million. The co-conspirators and their companies realized more than $55 million in gross profits, at the expense of their customers and U.S. taxpayers . . .

According to the press release, the brothers pleaded guilty to charges of conspiracy, false claims against the IRS, wire fraud and lying to EPA and IRS officials. They face up to 20 years in prison, large fines and restitution for the victims of their scheme. They've already forfeited assets valued at $7.5 million, including cash, jewelry, artwork, cars and homes they purchased with the funds they derived from the scheme.

Craig Ducey (left) and Chad Ducey (right) with W