By Lucy Schroeder
A man convicted of fraudulently claiming biodiesel tax credits—the largest case of tax fraud in Indiana—is now appealing his six-year sentence.
Chad Ducey was sentenced in December after he pleaded guilty to fraudulently earning $55 million in profits over the course of two years. This was accomplished through a tax fraud and environmental crime scheme involving biodiesel tax incentives.
He is serving time in the Federal Correction Institute of Terra Haute in Indiana.
Ducey waived most appeals with his guilty plea, said Steve DeBrota, a senior litigation counsel for the U. S. Attorney’s Office.
DeBrota said he speculates that Ducey may be appealing on the grounds that his sentence is too high.
Ducey’s lawyer did not respond to phone or email messages.
Ducey, along with his brother Craig Ducey, Jeffery Wilson and a group of co-conspirators with the company E-biofuels and their parent company claimed they sold biodiesel that had been made in their own facility, according to a press release from the U.S. Department of Justice.
The Department of Energy provided a tax credit of $1 for every gallon of biodiesel sold—making biodiesels more competitive with petroleum products on the market. This tax credit expired at the end of 2016, according to the U.S. Department of Energy Alternative Fuels Data Center.
Biodiesel is a renewable fuel made from biological products such as vegetable oils or animal fats. It burns cleaner than traditional petroleum diesel fuel, according to the Alternative Fuels Data Center.
The managers at E-biofuels realized that instead of making their own fuel and selling it, they could make a greater profit by purchasing biofuels at a reduced price, thanks to the tax credit. They then claimed the fuel had been manufactured by their own company, re-certified it and sold it, DeBrota said.
“They turned off the plant at a certain point because they were losing money on it,” DeBrota said.
Wilson, the chief executive officer, directed that the E-biofuels managers move more biodiesel with fraudulent tax credits instead of producing it legitimately, according to the press release. Wilson and Craig Ducey then convinced investors that the company was making millions of gallons of fuel from chicken fat and other raw materials.
Chad Ducey’s role in the scheme involved persuading an outside engineer that E-biodiesel was legitimately producing biodiesel, though he was aware that the facility had not been, according to the Justice Department press release.
The ploy deceived customers and investors who didn’t know the business was running illegitimately, DeBrota said. By accepting federal tax incentives, this operation had a wide-reaching effect by defrauding all who paid U. S. taxes, he said.
The fraudsters were caught thanks to a whistleblower who had worked as a field supplier and reported the crime to the Securities and Exchange Commission, DeBrota said.
DeBrota said the prosecution was satisfied with the sentence.
“These programs depend on voluntary compliance,” DeBrota said, “and it’s important that they be held accountable so people that are violating the law know that there’s a hammer connected with it.”
This case was also significant because the chief executive officer was held responsible, DeBrota said.
The fact that people who are taking advantage of the process are getting caught validates the safeguards that are in place, said Jessica Robinson, director of communications for the National Biodiesel Board, a trade association that works to advance America’s sustainable biofuel industry.
“It really demonstrates that the checks and balances that look out for this situation are working,” Robinson said.
Biodiesel is a $2.9 billion market and was responsible for 64,000 U.S. jobs in 2016, according to a study by LMC International, a private market analysis company.
“Our government has always said that it makes sense to provide affordable access to energy because it drives economic growth and development,” Robinson said.
With biodiesel, we are getting environmental and economic benefit, she said. So it is important for the government to continue to provide incentives for the industry to stay competitive and retain jobs.