The owners of a Utah biofuels company fraudulently obtained $511 million in renewable energy tax credits, a federal grand jury indictment says.
Jacob Kingston, 42, Washakie Renewable Energy CEO, and his brother, Isaiah Kingston, 38, the chief financial officer, are held in the Weber County Jail for the U.S. Marshals Service.
The Kingstons and a California businessman, Lev Aslan Dermen, are charged with felony counts including money laundering and fraud.
The indictment, unsealed Friday in U.S. District Court in Salt Lake City, said the three schemed to have Washakie and front companies file false claims for refundable fuel tax credits from 2010 to 2016.
The Kingstons pleaded not guilty Friday.
Jacob Kingston used some of the money to buy a $3 million home in Sandy, and he and his brother together bought a million-dollar Bugatti Veyron sports car, the indictment said.
The Kingstons — sons of polygamist leader John Daniel Kingston — created Washakie in 2007 and the company built a huge biofuels production plant near Plymouth in Box Elder County.
They billed Washakie, which has its headquarters in Salt Lake City, as the leading producer of biofuels in the West. The company advertised heavily on Utah television stations and lined up a potential tax increment development deal with Box Elder County to help fund a plant expansion.
In December 2017, Washakie and Jacob Kingston lost a civil court battle with LifeTree, a global biofuels trading company.
LifeTree won a judgment worth $32 million after a New York jury decided Washakie and Kingston were liable for fraudulently defaulting on a $90 million biofuels contract. Now, LifeTree is battling in Salt Lake City federal court for access to Kingston’s personal assets to pay the judgment.
In the new criminal indictment, prosecutors allege the Kingstons and Dermen falsified sales invoices and accounting records, plus production records, blending tickets, bills of lading and other paperwork routinely created in qualifying for renewable fuel transactions.
They rotated fuels between various places in the United States and elsewhere, including Panama, to make it appear that transactions involving the purchase and sale of feedstock and biofuels products were taking place, the indictment said.
It said the three disguised the credit payments received from the government as payments related to a loan payable to a company controlled by Dermen, who also is known as Levon Termendzhyan.
The tax credits, administered by the Internal Revenue Service, are designed to increase the amount of renewable fuel used domestically. The tax credits were refundable regardless of whether the taxpayer owed other taxes, and were paid by U.S. Treasury check, according to the indictment.
Reached by phone Monday, Scott C. Williams, an attorney listed in court records as representing Isaiah Kingston against the indictment, said he had he had not yet familiarized himself with the case and had no comment.