Two indicted for RIN fraud surrounding alleged UCO biodiesel production

In Pennsylvania, David Dunham, 35, of Bethlehem, PA, and Ralph Tommaso, 46, of Warren, NJ, were charged by indictment, with engaging in a multi-million dollar conspiracy to defraud individuals and the United States in a green energy scam involving used cooking oil, announced United States Attorney Zane David Memeger.  The defendants are charged with conspiracy, providing false statements to the government, wire fraud, tax fraud, and obstruction of an IRS audit and a U.S. Department of Agriculture examination.

From 2010 through 2012, in Wind Gap, Allentown, Bethlehem, and elsewhere, Dunham and Tommaso operated, respectively, the companies Smarter Fuel, Inc. (Smarter Fuel) and Environmental Energy Recycling Corporation, LLC (EERC), coordinating the activities of these companies, and then formally merging under the umbrella of Greenworks Holdings, LLC (Greenworks).  According to the 101-count indictment, the defendants falsely claimed to have produced and sold renewable fuel for which they misappropriated approximately $50 million in payments, subsidies, and other benefits.  Dunham and Tommaso allegedly defrauded government programs intended to encourage the production of renewable fuel as an alternative to traditional fossil fuel.  By claiming credits for renewable fuel they never produced, and that otherwise did not qualify, Duhnam and Tommaso stole tens of millions of dollars from the United States government.  It is further alleged that Dunham and Tommaso stole millions more by fraudulently claiming and generating tradable credits that they sold to unsuspecting purchasers who believed these credits satisfied their legal obligation to introduce a certain quantity of renewable fuel per year.

The defendants, through their companies, collected used cooking oil from restaurants and other food service locations, sometimes processing it to remove hard particles, water, and other waste.  They then sold this cleaned cooking oil primarily to renewable fuel producers that used it as a “feedstock” ingredient in their production process.

Dunham and Tommaso did not sell their cleaned used cooking oil as a final fuel, but allegedly fraudulently claimed otherwise, applying for and receiving government subsidies for every gallon of cleaned used cooking oil that they produced, plus more.  Their claims vastly exceeded their actual production.  In 2010, Dunham and Tommaso allegedly claimed subsidies and other payments on more than 17.5 million gallons of product, when they produced less than six million gallons.  In 2011, Dunham and Tommaso allegedly claimed subsidies and other payments of more than 18 million gallons, when they only produced about 7.5 million gallons.  Of the cleaned used cooking oil they did produce, the vast majority did not qualify for credit or subsidy.  The defendants’ allegedly fraudulent claims included more than one million gallons of the wastewater that was the byproduct of their processes to clean debris and pollutants from used cooking oil, the non-fuel sales of their product as a feedstock ingredient to be used by biofuel producers in buyers’ production of biofuel, and transactions that existed on paper only, where the defendants did not produce or even possess the product for which they generated subsidies.

The indictment alleges that Dunham and Tommaso provided false information and altered and forged documents and records to government and private auditors in an effort to conceal their fraud.  They allegedly directed employees to alter the documentation of obviously unqualified sales and change them to show sales that qualified for subsidies and other payments.