879 F.3d 795 (7th Cir. 2018), 17-1076, United States v. Wilson
|Citation:||879 F.3d 795|
|Opinion Judge:||Ripple, Circuit Judge.|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Jeffrey J. WILSON, Defendant-Appellant.|
|Attorney:||Steven D. DeBrota, Bob Wood, Jake A. Schmidt, Attorneys, OFFICE OF THE UNITED STATES ATTORNEY, Indianapolis, IN, Erika B. Kranz, Attorney, DEPARTMENT OF JUSTICE, Environment & Natural Resources Division, Washington, DC, for Plaintiff-Appellee. John A. Goodridge, Attorney, Evansville, IN, for Defe...|
|Judge Panel:||Before Wood, Chief Judge, and Ripple and Hamilton, Circuit Judges.|
|Case Date:||January 12, 2018|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Wilson was the Director, Chairman of the Board, President, and CEO of Imperial, which acquired e-Bio, which ran a fraud scheme, "Alchemy." It involved purchasing biodiesel from a third party and reselling it as though it had been produced by e-Bio, to take advantage of government incentives for renewable-energy production without expending production costs. Wilson was convicted of 21 counts:... (see full summary)
Argued September 14, 2017
[Copyrighted Material Omitted]
Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:13-cr-00190-SEB-TAB-1— Sarah Evans Barker, Judge.
Steven D. DeBrota, Bob Wood, Jake A. Schmidt, Attorneys, OFFICE OF THE UNITED STATES ATTORNEY, Indianapolis, IN, Erika B. Kranz, Attorney, DEPARTMENT OF JUSTICE, Environment & Natural Resources Division, Washington, DC, for Plaintiff-Appellee.
John A. Goodridge, Attorney, Evansville, IN, for Defendant-Appellant.
Before Wood, Chief Judge, and Ripple and Hamilton, Circuit Judges.
Ripple, Circuit Judge.
A grand jury indicted Jeffrey Wilson, in a twenty-one-count indictment, with the following offenses: (1) fraud in connection with the purchase or sale of securities, in violation of 15 U.S.C. § § 78j(b) and 78ff, and 17 C.F.R. § 240.10b-5 (Count 1); (2) fraud in the offer or sale of securities, in violation of 15 U.S.C. § § 77q(a) and 77x, and 18 U.S.C. § 2 (Count 2); (3) material false statements in required Securities and Exchange Commission (" SEC" ) filings, in violation of 15 U.S.C. § 78ff and 18 U.S.C. § 2 (Counts 3-9); (4) wrongful certification of annual and quarterly reports by a corporate officer, in violation of 18 U.S.C. § 1350(c)(1) (Counts 10-14); (5) material false statements by a corporate officer to an accountant, in violation of 15 U.S.C. § § 78m(b)(5) and 78ff, 17 C.F.R. § § 240.13b2-2(a) and 240.13b2-2(b), and 18 U.S.C. § 2 (Counts 16-17 and 19-20); and (6) false statements to Government investigators, in violation of 18 U.S.C. § 1001 (Count 21).
A jury convicted Mr. Wilson on all charges. He then filed a motion under Federal Rule of Criminal Procedure 29(c) for acquittal on all counts, contending that the Government had failed to present evidence sufficient to prove his guilt beyond a reasonable doubt. The district court denied the motion. It then sentenced Mr. Wilson to 120 months imprisonment for Counts 1, 3-14, 16-17, and 19-20, and to 60 months imprisonment for Counts 2 and 21, all to run concurrently. The court also imposed 18 months supervised release per count, each to be served concurrently. The court ordered Mr. Wilson to pay $16,468,769.73 in restitution and a $1,900 assessment.
Mr. Wilson now appeals and renews his challenge to the sufficiency of the evidence. He contends that the Government failed to prove beyond a reasonable doubt that he had the requisite mens rea to commit the charged offenses. After hearing oral argument and carefully examining the record, we cannot accept this argument. None of Mr. Wilsons contentions reach the high threshold of showing that a reasonable jury could not have found him guilty. When viewed in the light most favorable to the prosecution, the evidence adequately supports the jurys finding that Mr. Wilson acted knowingly and willfully when making false statements to investors, regulators, an outside accountant, and Government agents. It also supports the reasonable inference that Mr. Wilson was aware of and participated in a fraudulent
tax scheme called " Alchemy." Accordingly, we affirm the judgment of the district court.
Mr. Wilson was the Director, Chairman of the Board, President, and Chief Executive Officer of a public company called Imperial Petroleum, Inc. (" Imperial" ) from May 2010, to November 2011. In May 2010, Imperial acquired e-Biofuels, LLC (" e-Bio" ), a biofuel company owned previously by Craig Ducey, Chad Ducey, and Brian Carmichael. Craig and Chad are brothers; Carmichael is related to them by marriage. A third brother, Chris Ducey, handled transportation logistics for e-Bio.
Prior to its acquisition by Imperial, e-Bio had developed a fraud scheme called Alchemy. It involved purchasing biodiesel from a third party and then reselling it to customers as though it had been produced originally by e-Bio. This scheme was profitable because it allowed the company to take advantage of government incentives for renewable-energy production without actually expending production costs. The relevant incentives are renewable identification numbers (" RINs" ) and the blenders tax credit.
RINs are essentially labels used by the Environmental Protection Agency (" EPA" ) to track renewable fuel production and consumption. Biodiesel producers can generate and attach a certain number of RINs to each gallon of biodiesel that they manufacture, using EPA-approved procedures, at EPA-registered facilities.3 Producers can sell this RIN-valued fuel to petroleum fuel refiners and importers. These customers must obtain and retire a certain number of RINs in order to meet annual regulatory obligations. This system creates a market for RIN-valued biodiesel— i.e., biodiesel that has not yet had its RINs retired.
The blenders tax credit is a $1/gallon credit; it is granted to the taxpayer that first blends biodiesel with any amount of petroleum diesel. Before biodiesel is blended, it is known as B100, which indicates that it is 100 percent biodiesel. Biodiesel is often blended with a small amount of petroleum diesel. This process results in a product known as B99, which is approximately 99 percent biodiesel and, more importantly, already has been used to claim the tax credit.
Because of these two separate government incentives, RIN-valued B100 is more valuable to biodiesel purchasers than RIN-less B99. The conspirators behind Alchemy profited by purchasing RIN-less B99 and then reselling it as RIN-valued B100. To avoid suspicion, e-Bio used a third-party company, Caravan Trading (" Caravan" ), as a middleman. Caravan was owned by Joseph Furando. Caravan would purchase
RIN-less B99 at low cost and then resell it to e-Bio along with fake invoices describing the biodiesel as feedstock (e.g., soybean oil or chicken fat). Feedstock is used to create biodiesel, so e-Bio would pretend that it had used this " feedstock" to produce B100 in its own plant. E-Bio generated RINs for this fake B100, which was actually B99 with no legitimate RIN value. The company profited by selling this product at the price of RIN-valued B100.
To carry out this plan, e-Bio hired truck drivers to pick up the RIN-less B99 from Caravans fuel terminals and deliver it to the e-Bio plant. There, it was pumped into storage tanks and later transferred to another truck for delivery to e-Bios customers. E-Bio furnished drivers delivering this product with paperwork reciting that the fuel they were carrying was RIN-valued B100, produced at the e-Bio plant. To cut down transportation costs, e-Bio eventually had truck drivers carry the biodiesel directly from Caravans fuel terminals to e-Bios customers. The company would fax fake paperwork, including false bills of lading, to the drivers while they were en route in order to make it appear as if the fuel had been produced at (and delivered from) the e-Bio plant. These deliveries were called " Ghost Loads," because the drivers of those loads were never seen at the e-Bio plant.
While negotiating the acquisition of e-Bio, Craig informed Mr. Wilson that the e-Bio plant was not producing biodiesel from feedstock and that it was purchasing fuel from Caravan. Shortly after Imperial acquired e-Bio, Craig emailed Mr. Wilson a spreadsheet entitled " e-Biofuels make versus buy cost 6-16-2010.xls" (the " Make vs. Buy spreadsheet" ).5 This spreadsheet compared the cost of making biodiesel from scratch versus the profit of buying it from Caravan. At one point, Mr. Wilson asked Craig how e-Bio could increase its output under the latter option, and Craig told Mr. Wilson that e-Bios main customer would purchase as much biodiesel as e-Bio could sell.
The parties disputed at trial the degree of Mr. Wilsons involvement in e-Bios business. The evidence showed that the Duceys continued to oversee many of e-Bios daily operations after the Imperial acquisition, and Mr. Wilson maintained that he was largely unaware of e-Bios day-to-day operations. According to him, he purchased the company because it came with a self-sufficient group of managers. There was, however, significant evidence about Mr. Wilsons involvement in and awareness of e-Bios activities, as set out in the following paragraphs.
A few months after the acquisition, Mr. Wilson exchanged emails with his son and Chad, both of whom were working at the e-Bio plant. Chad stated that e-Bio was not producing any glycerin, a necessary by-product of transesterification (the process that converts feedstock into biodiesel). Mr. Wilson replied with his...
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