Two men sentenced and another pleads guilty in international biofuels fraud scheme
James Jariv, 64, of Las Vegas, Nevada, has been sentenced to ten years in prison for his role in illegal schemes to generate fraudulent biodiesel credits and to export biodiesel without providing biodiesel credits to the United States.
Jariv was also ordered to make restitution in the amount of over $6 million (appr. €5.5 million) and to forfeit between $4 to $6 million in cash and other assets.
Jariv was the second defendant to be sentenced for the scheme, with Nathan Stoliar, 64, of Australia, sentenced to two years in prison in April for his role in the conspiracy and ordered to pay more than $1.4 million in restitution and to forfeit of $4 million in cash.
In addition, in court papers unsealed last week, Alex Jariv, 28, also of Las Vegas, pleaded guilty in the scheme and his sentencing was scheduled for 18 August, 2015.
James Jariv and Stoliar both pleaded guilty to one count of conspiracy, one count of conspiracy to engage in money laundering, two counts of wire fraud, and one count of making false statements under the Clean Air Act.
Alex Jariv pleaded guilty to one count of conspiracy to commit wire fraud, make false statements, and launder monetary instruments.
‘This was an egregious scheme to defraud fuel suppliers, the United States, and a program designed to strengthen our nation’s petroleum independence and improve our air quality,’ says assistant attorney general John C. Cruden for the Justice Department’s Environment and Natural Resources Division.
The Energy Independence and Security Act of 2007 created a number of federally-funded programs that provided monetary incentives for the production and use of renewable fuels such as biodiesel in the US.
Biodiesel producers and importers can generate and attach credits known as renewable identification numbers (RINs) to the gallons of biodiesel they produce or import.
Because certain companies (such as companies that sell transportation fuel in the US) need RINs to comply with regulatory obligations, RINs have significant market value and as such they are routinely bought and sold in the marketplace.
In addition, to ensure that RINs are generated for renewable fuel used only in the US and in order to create an incentive for biodiesel in the US to be used here, anyone who exports biodiesel is required to obtain these valuable RINs for all exported gallons and provide the RINs to EPA.
Beginning around September of 2009, James Jariv and Stoliar operated and controlled a company — City Farm Biofuel in Vancouver, British Columbia, Canada — that represented itself as a producer of biodiesel from feedstocks such as animal fat and vegetable oils.
James Jariv and Stoliar also formed a company called Canada Feedstock Supply – that represented itself as City Farm’s supplier of feedstocks necessary to produce biodiesel.
James Jariv operated and controlled a company based in Las Vegas called Global E Marketing (GEM).
Using these three and other closely-held companies, the three defendants claimed to produce biodiesel at the City Farm facility and to import and sell biodiesel to GEM and then generated and sold RINs based upon this claimed production, sale and importation.
In reality, no biodiesel produced at City Farm was ever imported and sold to GEM as claimed.
Jarivs and Stoliar used GEM to claim to blend the biodiesel with petroleum diesel, allowing them to sell the RINs separately from any actual biodiesel.
Using this scheme, the three men falsely claimed to import, purchase and blend more than 4.2 million gallons of biodiesel.
They then sold the RINs, and fraudulently generated more than $7 million.
James Jariv and Stoliar also purchased and resold RIN-less B-99 biodiesel as B-100 biodiesel, which allowed them to charge substantially more for this product than if it has been accurately labeled.
They exported significant amounts of the RIN-less B-99 they bought in the US to Canada and Australia and sold the biodiesel in those countries and conspired to not acquire and provide RINs to the US for these exports as they were required to do by law.
In doing so, James Jariv and Stoliar failed to give to the United States RINs worth in excess of $34 million, keeping this money for themselves instead.
The investigation into the Jarivs’ and Stoliar’s activities was the result of collaborative work by the EPA’s Criminal Investigation Division and the FBI, with assistance from the United States Secret Service, the Internal Revenue Service-Criminal Investigations, the Department of Homeland Security and the Royal Canadian Mounted Police.