Ohio Man Gets Five Years For His Role In $47 Million Biofuel Fraud Scheme

Tim Pearce | Energy Reporter

The owner of a New York-based renewable fuels trading company was sentenced to over five years in prison and fined roughly $26 million Monday for his role in a massive biofuel fraud scheme, according to the Department of Justice (DOJ).

Ohio resident Gregory Schnabel used his company GRC Fuels as cover to produce and sell fake Renewable Identification Numbers (RINs) worth over $47 million. Schnabel also defrauded the IRS out of $12 million worth of renewable fuel tax credits. He pleaded guilty to the crimes in court. (RELATED: Polygamist Brothers Charged With Laundering Half A Billion Dollars In Renewable Energy Tax Credits)

“Today’s sentencing shows that the Department of Justice will continue to vigorously prosecute those who seek to defraud the federal government and the public through unlawful renewable fuel credit schemes,” DOJ acting assistant Attorney General Jeffrey Wood said in a statement. “This sentencing serves as a powerful deterrent to those who would consider participating in similar schemes in the future.”

Under the Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS), oil refineries are required to mix a certain amount of biofuel, such as ethanol or biodiesel, in every batch of fuel produced. The EPA gives refineries a quota of biofuel to meet and tracks the amount of biofuel each uses through RINs, a 38-digit code attached to every gallon of biofuel.

Gallons of biofuel and their corresponding RINs are sold by producers to oil and gas refineries. If a refinery falls behind on its biofuel quota, it may buy RINs separately and leave the fuel to be distributed elsewhere. The purchased RINs will count toward its biofuel quota.

The market of selling RINs separate from the fuel produced has created firms such as Schnabel’s that operate on trading RINs separate from the fuel they made with. The market has also attracted fraud as biofuel producers and RIN traders forge fake RINs and sell them to oil and gas companies.

Two brothers operating a Utah-based biofuel producer and a California businessman were recently charged by a grand jury for carrying out a similar scheme that involved defrauding the IRS of $511 million worth of renewable energy tax credits.

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Tags : department of justice environmental protection agency renewable fuel standard
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