DOJ Tax Announces Convictions in Massive Biodiesel Tax Fraud (3/16/20)

This DOJ Tax announcement is noteworthy even though it does not involve one of the Title 26 crimes or a conspiracy to commit a Title 26 offense or an offense conspiracy to defraud the IRS:  Jury Finds Los Angeles Businessman Guilty in $1 Billion Biodiesel Tax Fraud Scheme: Four Members of Kingston Family, including the CEO and CFO of Washakie Renewable Energy, Previously Pleaded Guilty (3/16/20), here.

Key excerpts (with bold-face added by JAT):

According to evidence presented at a seven-week trial, Dermen was the owner and operator of Noil Energy Group, a California-based fuel company; SBK Holdings USA, a Beverly Hills real estate investment company; and Viscon International, a Nevada fuel additive corporation.  From 2010 to 2016, Dermen conspired with the owners and operators of Washakie Renewable Energy (Washakie), a Utah-based biodiesel company, including its Chief Executive Officer Jacob Kingston, his brother, Chief Financial Officer Isaiah Kingston, and others, including their mother, Rachel Kingston, and Jacob Kingston’s wife, Sally, to fraudulently claim more than $1 billion in renewable fuel tax credits from the IRS. 

The IRS administers refundable federal tax credits designed to increase the amount of renewable fuel used and produced in the United States. As part of their scheme, Dermen and Jacob Kingston shipped millions of gallons of biodiesel within the U.S. and from the U.S. to foreign countries and back again to create the appearance that qualifying renewable fuel was being produced and sold.  They also doctored production and transportation records to substantiate Washakie’s fraudulent claims for more than $1 billion in IRS renewable fuel tax credits and credits related to the EPA renewable fuel standard. To further create the appearance they were buying and selling qualifying fuel, the coconspirators cycled more than $3 billion through multiple bank accounts.
As a result of the fraudulent claims, the IRS paid more than $511 million to Washakie and the Kingstons that was distributed between them and Dermen. Jacob and Isaiah Kingston sent more than $21 million in fraudulent proceeds to SBK Holdings USA, Inc., Dermen’s California-based company, and sent $11 million to an associate of Dermen’s at his request. Jacob Kingston used $1.8 million of the fraud proceeds to buy Dermen a 2010 Bugatti Veyron, and they exchanged gifts including a chrome Lamborghini and a gold Ferrari.  

Dermen and Jacob Kingston also laundered $3 million through Dermen’s company, Noil Energy Group, to purchase a mansion in Sandy, Utah for Jacob Kingston and his wife Sally.  Dermen also laundered $3.5 million through his California company, SBK Holdings USA, Inc., to purchase a mansion in Huntington Beach, California.   

Throughout the scheme, Dermen assured Jacob Kingston that he and the Kingstons would be immune from criminal prosecution because they would be protected by Dermen’s “umbrella” of corrupt law enforcement personnel. Jacob and Isaiah Kingston transferred over $134 million in fraudulent proceeds to companies in Turkey and Luxembourg at Dermen’s direction, in purported payment for protection. 

The jury found Dermen guilty of conspiracy to commit mail fraud, conspiracy to commit money laundering, and money laundering concealment money laundering, and expenditure money laundering. 

High Profile Bribery Scheme Involving UN Official with Tax Charges (10/7/15)

We have another high profile criminal case for a tax crime wrapped in larger criminal conduct.  The USAO SDNY filed a criminal complaint, here, against John W. Ashe, former president of the United Nations General Assembly, and others.  See USAO SDNY Press Release, here.  The gravamen of the complaint of criminal conduct relates to bribery of a public official.  As stated in press release, certain individuals "were charged in connection with a multi-year scheme to pay more thann $1.3 million in bribes to ASHE in exchange for official actions in his capacity as UNGA President and Antiguan government official in support of Chinese individuals."   There are the standard conspiracy charges and money laundering for such conduct.  As to Ashe, the only charge is tax perjury, § 7206(1), here.  (See Counts Four and Five.)  As to Ashe's tax counts, the press release states:

ASHE’s Tax Fraud 

As alleged in the Complaint, in 2013 and 2014, while ASHE was UNGA President, he solicited and received payments from LORENZO, NG, YIN, YAN, PIAO, and others, to business accounts he personally created in the name of the President of the General Assembly.  More than $1 million of the money that ASHE solicited to allegedly support his UN Presidency ASHE then transferred to himself, primarily in the form of $25,000 monthly checks written to and by him with the memo line “salary” (notwithstanding the fact that he already received a salary from the Government of Antigua).  During these years, ASHE was also paid approximately $200,000 annually in “consulting” income from LORENZO, NG, PIAO, and YAN.  For tax years 2013 and 2014, ASHE filed tax returns that materially failed to account for the income he was deriving from his purported salary payments and his “consulting” contracts.  Specifically, for year 2013, ASHE and his wife underreported their income by approximately $462,350 and, for year 2014, they underreported his income by approximately $796,329.28.

According to a New York Times Story (Marc Santora, Somini Sengupta and Benjamin Weiser, Former U.N. President and Chinese Billionaire Are Accused in Graft Scheme (NYT 10/6/15), here (bold face supplied by JAT):

The complaint alleges a broad pattern of corruption on the part of Mr. Ashe, 61, who was accused of using the bribes to support a lavish lifestyle: spending $59,000 on hand-tailored suits in Hong Kong in 2013 and 2014, buying two Rolex watches in 2014 for $54,000, and later that year paying $40,000 to lease a new BMW X5. 

He also bought a membership at a South Carolina country club for $69,000, and solicited money to construct a $30,000 basketball court at his home in Dobbs Ferry, N.Y., according to the complaint. 

“If proven, today’s charges will confirm that the cancer of corruption that plagues too many local and state governments infects the United Nations as well,” Preet Bharara, the United States attorney in Manhattan, said at a news conference. He said that the investigation was still in its early stages, adding, “We’re looking at a lot of things, and I wouldn’t be surprised if you would see other people charged.”  

* * * *

Mr. Ashe was arrested on Tuesday morning at his home in Dobbs Ferry; he was not charged in the bribery scheme but was charged with two counts of filing false federal tax returns. The five other defendants, including Francis Lorenzo, the deputy permanent representative to the United Nations for the Dominican Republic, were charged with bribery and conspiracy counts. 

* * * * 

Offshore Enabler Nabbed in Sting Operation Sentenced (9/5/14)

DOJ Tax has announced here the sentencing of Joshua Vandyk, an investment advisor, to 30 months in prison for conspiring to launder monetary instruments.   The key excerpts (actually most of the press release) are:

Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens, were indicted by a grand jury in the U.S. District Court for the Eastern District of Virginia on March 6, and the indictment was unsealed March 12 after the defendants were arrested in Miami.  Vandyk, 34, pleaded guilty on June 12, St-Cyr, 50, pleaded guilty on June 27, and Poulin, 41, pleaded guilty on July 11.  St-Cyr and Poulin are scheduled to be sentenced on Oct. 3.

According to the plea agreements and statements of facts, Vandyk, St-Cyr and Poulin conspired to conceal and disguise the nature, location, source, ownership and control of property believed to be the proceeds of bank fraud, specifically $2 million.  Vandyk, St-Cyr and Poulin assisted undercover law enforcement agents posing as U.S. clients in laundering purported criminal proceeds through an offshore structure designed to conceal the true identity of the proceeds’ owners.  Vandyk and St-Cyr invested the laundered funds on the clients’ behalf and represented that the funds would not be reported to the U.S. government.
 
According to court documents, Vandyk and St-Cyr lived in the Cayman Islands and worked for an investment firm based there.  St-Cyr was the founder and head of the investment firm, whose clientele included numerous U.S. citizens.  Poulin, an attorney at a law firm based in Turks and Caicos, worked and resided in Canada as well as Turks and Caicos.  His clientele also included numerous U.S. citizens.  Vandyk, St-Cyr and Poulin solicited U.S. citizens to use their services to hide assets from the U.S. government, including the IRS.  Vandyk and St-Cyr directed the undercover agents to create an offshore corporation with the assistance of Poulin and others because they and the investment firm did not want to appear to deal with U.S. clients.  Vandyk, St-Cyr and Poulin used the offshore entity to move money into the Cayman Islands and used Poulin as a nominee intermediary for the transactions.

According to court documents, Poulin established an offshore corporation called Zero Exposure Inc. for the undercover agents and served as a nominal board member in lieu of the clients.  Poulin transferred approximately $200,000 that the defendants believed to be the proceeds of bank fraud from the offshore corporation to the Cayman Islands, where Vandyk and St-Cyr invested those funds outside of the United States in the name of the offshore corporation.  The investment firm represented that it would neither disclose the investments or any investment gains to the U.S. government, nor would it provide monthly statements or other investment statements to the clients.  Clients were able to monitor their investments online through the use of anonymous, numeric passcodes.  Upon request from the U.S. client, Vandyk and St-Cyr liquidated investments and transfered money, through Poulin, back to the United States.  According to Vandyk and St-Cyr, the investment firm would charge clients higher fees to launder criminal proceeds than to assist them in tax evasion.