BALTIMORE, Maryland, February 25, 2013 (ENS) – A Maryland man was sentenced Friday to 12 years and six months in prison for selling millions of dollars worth of fraudulent renewable fuel credits, which he falsely claimed were produced by his company.

U.S. District Judge William D. Quarles, Jr. sentenced Rodney Hailey, 34, of Perry Hall, Maryland, who was convicted on June 25, 2012, of eight counts of wire fraud, 32 counts of money laundering, and two counts of violating the Clean Air Act.
Hailey has been detained since the guilty verdict.

Hailey owned Clean Green Fuel, LLC, located in the Baltimore area and registered the company with the U.S. Environmental Protection Agency under the Renewable Fuel Standard program as a producer of biodiesel, a motor vehicle fuel derived from renewable resources.

biodiesel pump

Biodiesel blends are increasingly available across the United States. (Photo courtesy Oregon Dept. of Transportation)

To encourage the production of renewable fuel and lessen U.S. dependence on foreign oil, all oil companies marketing petroleum in the United States are required to produce a given quantity of renewable fuel or to purchase credits, called Renewable Identification Numbers, or RINs, from producers of renewable fuels to satisfy their renewable fuel requirements.

Renewable Identification Numbers can be sold and traded separately from the biofuels that created them. This has given rise to instances of RIN fraud, where improperly created RINs have been sold without any manufacture of corresponding biofuels.

Between March 2009 and December 2010, Hailey sold over 35 million RINs, representing 23 million gallons of biodiesel fuel, to brokers and oil companies, when in fact Clean Green Fuel had produced no fuel at all, and Hailey did not have a facility capable of producing biodiesel fuel.

The loss to the traders and major energy companies who purchased Hailey’s false RINs is more than $40 million, and the loss also extends to small biodiesel companies were unable to sell their RINs and have been forced out of business as a result of Hailey’s scheme.

Hailey made more than $9.1 million from selling the false RINs. He used the proceeds to buy luxury vehicles, including BMWs, Mercedes Benz, a Rolls Royce Phantom, a Lamborghini, Ferrari, Maserati and others, as well as real estate and more than $80,000 in diamond jewelry.

It was the cars that led to his arrest, prosecution and conviction.

When a Baltimore County police detective working with Maryland’s federal financial crimes task force received a report about the large number of luxury cars parked in front of Hailey’s house, the task force contacted EPA’s Criminal Investigation Division and began an investigation.

Two civil inspectors from EPA’s Air Enforcement Division visited Clean Green’s headquarters on July 22, 2010, to inspect Hailey’s biodiesel production facility, in response to a complaint alleging that Clean Green had been selling false RINs.

Hailey was not able to provide an exact location for the biodiesel fuel production facility, nor any records to support claims that Clean Green Fuel had produced biodiesel fuel.

When asked to explain his method of production, Hailey falsely stated that he paid employees and contractors to recover waste vegetable oil from 2,700 restaurants in the Delmarva area, a peninsula that includes parts of Delaware, Virginia and Maryland, and bring it to his production facility where he converted it to biodiesel fuel. Hailey claimed that only the drivers who picked up the oil knew the names of the restaurants, and Hailey could not provide the names of the drivers.

Judge Quarles gave Hailey a harsher sentence upon finding that he obstructed justice by concealing, selling and spending assets that were protected by court order.

The judge ordered Hailey to pay restitution of $42.2 million to over 20 companies and forfeit $9.1 million in proceeds from the fraud, including the cars, jewelry, his home and bank accounts, already seized by the government.

Hailey’s prison time will be followed by three years of supervised release.

“When invalid renewable fuel credits are ‘produced’ and sold, it undermines the integrity of an important program designed by Congress to reduce the nation’s dependence on foreign oil and to grow the nation’s renewable energy industry,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance.

“Today’s sentence shows that there are serious consequences, including jail time, for defrauding the renewable fuels program for personal gain,” said Giles.

“Any government program that is based on trust is vulnerable to a fraudster like Rodney Hailey,” said U.S. Attorney Rod Rosenstein. “The only thing Rodney Hailey’s Clean Green Fuel business produced was the dirty money he used to fund his lavish lifestyle.”

The EPA has proposed a voluntary quality assurance program to verify that RINs generated under the Renewable Fuel Standard program have been validly generated. EPA anticipates this will promote greater liquidity in the transfer and use of RINs, helping to make the program more efficient and effective.

Copyright Environment News Service (ENS) 2013. All rights reserved.