SALT LAKE CITY — At the height of a nearly $500 million biodiesel fraud scheme that U.S. prosecutors allege they carried out together over four years, a Utah polygamist and a California businessman posed for pictures together in front of luxury cars and multi-million dollar homes they bought with funds from the scheme.
But on Wednesday the two men sat on opposites sides in a Salt Lake City courtroom as polygamist Jacob Kingston began testifying for the U.S. government in its case against gas station owner Lev Dermen, who has pleaded not guilty to 10 counts including money laundering and mail fraud.
Kingston agreed to testify after he pleaded guilty last year to money fraud and other charges. Prosecutors are expected to try and get Kingston to bolster their claim that Dermen helped expand the fraud scheme when he got involved two years into the scheme by using burner phones and money transfers through foreign countries such as Turkey in exchange for protection by what Dermen called his “umbrella” of law enforcement and government sources.
Kingston, 43, didn't discuss the years in which he carried out the operation with Dermen during the first few hours of questioning from prosecutors, but will likely cover that ground when he returns Thursday morning.
Assistant U.S. Attorney Richard Rolwing from the government's tax division spent Wednesday asking Kingston to explain how he used his company, Washakie Renewable Energy, to begin creating fake production records to get renewable-fuel tax credits. Instead of making its own biodiesel, as required in the program, the company bought and sold biofuels from other places, and sometimes ship fuels to and from India, Kingston explained. He said at one point he spent nine months living in Asia to resource materials and trade partners.
At the beginning of his testimony, Kingston said that he has 20 children with three different women and 14 grandchildren, but neither he nor Rolwing used the word polygamy. Kingston said he was the second-oldest of his mother and father's 13 children and said his father had more than 50 — and maybe more than 100 — children.
He explained that he is a lifelong member of northern Utah-based group called the Davis County Cooperative Society, also known as the Kingston Group. He said they practice communal living, where people share resources and report their incomes to group leaders.
Kingston said he and his legal wife, Sally Kingston, started Washakie after he earned a doctorate in mechanical engineering from the University of Utah.
Dermen's lawyers, Mark Geragos, hasn't started cross-examining Kingston. Geragos made sure polygamy would be central to the case when he said during opening statements last week that Kingston comes from an “incestuous” polygamous group that is always scheming to defraud the U.S. government in what the group calls “bleeding the beast."
A spokesman for the group, Kent Johnson, has called the allegations “categorically false."
Geragos says Dermen is a reputable businessman who has owned gas stations and a trucking company for 25 years and contended that Kingston is the real mastermind of the fraud scheme. Geragos alleges that Kingston used Dermen and his connections to Turkey to divert money elsewhere to avoid sharing proceeds of the scheme with his community, which has a male-dominated hierarchy that demands money when lower-level members make money.