http://www.natlawreview.com/article/rin-prosecutions-where-fraud-meets-environmental-protection-once-again
RIN Prosecutions: Where Fraud Meets Environmental Protection . . . Once Again crown jakarta capital eco management news
On February 22, 2013, Rodney Hailey, the owner of Clean Green Fuel LLC, was sentenced to 151 months (or 12.5 years) in prison, and ordered to pay $42 million in restitution, for selling $9 million in fraudulent renewable fuel credits (RFCs) after being convicted in June 2012 of numerous federal crimes, including wire fraud, money laundering and violations of the Clean Air Act.
Most environmental criminal prosecutions contain allegations that support the government’s themes of “lying, cheating, or stealing” to help spice up the underlying regulatory violations that can often be seen as boring or overly-technical to a jury. However, in prosecutions related to EPA’s Renewable Fuel Standard (RFS) program, the underlying fraud allegations play the starring role.
According to the Indictment, and the evidence presented at trial, Hailey engaged in a massive, two-year fraud scheme whereby he generated and sold over 32 million RINs to roughly 20 companies. These RINs represented 23 million gallons of non-existent fuel, and the sale netted Hailey over $9 million, which he spent lavishly.
While the Hailey/Clean Green Fuel case did not involve any environmental discharges or permit violations, it does offer important lessons for the more traditional environmental prosecutions.
The RFS program has similar components to other regulatory programs that require accuracy in applications, reporting or related certifications. The most common examples that typically arise include: 1) false information within permit applications, discharge reports or self-reporting; 2) altering or diluting sampling data; 3) bypassing treatment or monitoring equipment or; 4) providing false information to inspectors. The Hailey case is a reminder that material misstatements made to governmental agencies, at any step in the regulatory process, can result in a criminal prosecution.
Like many other environmental programs, the RFS program allows participants to obtain financial gains. Such systems can be readily abused, due to the difficulty of immediate verification. In any regulatory scenario where the lies (or less than candid conduct) either generate revenue or reduce operating costs, the risks of prosecution increase.In response to the sentencing, the U.S. Attorney, Rod Rosenstein noted that “[a]ny government program that is based on trust is vulnerable to a fraudster like Rodney Hailey.”
EPA’s RFS program was created as part of the Energy Policy Act of 2005, which was passed to reduce the nation’s dependence on foreign oil, to help bolster the nation’s renewable energy industry, and to achieve significant reductions in greenhouse gas emissions. The RFS program requires non-renewable fuel refiners and importers to purchase credits (or “renewable identification numbers,” known as RINs) from renewable fuel producers.
Given the susceptibility to fraud and abuse, EPA has pursued enforcement actions against renewable fuel producers and importers (such as Clean Green Fuel) that generated invalid RINs, and has issued numerous notices of violations to those “obligated parties” who used the invalid RINs. Unfortunately, many traditional refiners have become unwitting victims of fraudulent RIN credit schemes, which subject them to separate EPA civil investigations and enforcement. More specifically, EPA has issued notices and proposed penalties on “obligated parties” to pressure refiners to engage in better due diligence to verify the validity of the RINs. These actions have sparked controversies and an on-going debate surrounding relative responsibilities, liabilities, and appropriate standards of due diligence and compliance. Recently, EPA has also proposed changes to the RFS regulations in hopes of addressing these programmatic vulnerabilities.
RIN Prosecutions: Where Fraud Meets Environmental Protection . . . Once Again crown jakarta capital eco management news