United States v. Dermen
| Decision Date | 10 February 2021 |
| Docket Number | Case No. 2:18-cr-00365-JNP-BCW |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. LEV ASLAN DERMEN, et al., Defendants. |
| Court | U.S. District Court — District of Utah |
UNITED STATES OF AMERICA, Plaintiff,
v.
LEV ASLAN DERMEN, et al., Defendants.
Case No. 2:18-cr-00365-JNP-BCW
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
February 10, 2021
MEMORANDUM DECISION AND ORDER DENYING DEFENDANT'S MOTION FOR JUDGEMENT OF ACQUITTAL OR IN THE ALTERNATIVE FOR A NEW TRIAL AND GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR DISCOVERY
District Judge Jill N. Parrish
On March 16, 2020, following a seven-week trial, Defendant Lev Dermen (a.k.a. "Levon Termendzhyan") was convicted of ten counts of various offenses arising out of his participation in a conspiracy to defraud the United States government of renewable tax credits and launder the proceeds of the fraud. On April 7, 2020,1 Defendant moved for a judgement of acquittal or, in the alternative, for a new trial, based on the insufficiency of the evidence under Rules 29 and 33 of the Federal Rules of Criminal Procedure. Docket No. 949. On April 29, 2020, Defendant submitted a supplemental Rule 33 motion for a new trial based on newly discovered evidence and to reopen discovery. Docket No. 964. On May 21, 2020, Defendant filed a supplemental motion requesting Rule 33 relief and to reopen discovery. Docket No. 1014. On August 3, 2020, Defendant filed another supplemental motion for a new trial and to reopen discovery. Docket No. 1099. The Government opposes Defendant's motions. Docket Nos. 956, 972, 1024, and 1102. For the reasons
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stated below, Defendant's motions are DENIED. The court, however, grants Defendant's request to disclose several documents that the Government filed with the court ex parte and under seal.
A. Indictment
On January 17, 2019, a grand jury in the District of Utah returned a Second Superseding Indictment charging Defendant Dermen, along with Jacob Kingston ("Jacob"), Isaiah Kingston ("Isaiah"), Rachel Kingston ("Rachel"), and Sally Kingston ("Sally") with 46 offenses. Docket No. 135. Initially, all five defendants pled "not guilty" to the charged offenses. See Docket Nos. 10, 62, 173. On July 18, 2019, Jacob, Isaiah, Rachel, and Sally changed their pleas and entered into plea agreements with the Government.
After Defendant Dermen's co-defendants pled guilty, the ten counts that Defendant had originally been charged with in the original indictment were renumbered as Counts 1 through 10 in the stipulated Renumbered Indictment. Docket No. 489-3. The counts charged Defendant Dermen with the offenses summarized in the table below:
| Count | Charge |
| 1 | Conspiracy to Commit Mail Fraud |
| 2 | Conspiracy to Commit Money Laundering |
| 3 | Concealment Money Laundering for Wire Transfers and Withdrawals Related to the Repayment of Kazi Loan |
| 4 | Concealment Money Laundering for Wire Transfers and Withdrawals Related to the Repayment of Kazi Loan |
| 5 | Concealment Money Laundering for Wire Transfers and Withdrawals Related to the Repayment of Kazi Loan |
| 6 | Concealment Money Laundering for Wire Transfers and Withdrawals Related to the Repayment of Kazi Loan |
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| 7 | Concealment Money Laundering for Wire Transfers and Withdrawals Related to the Repayment of Kazi Loan |
| 8 | Concealment Money Laundering for Wire Transfer in Connection with Purchase of Sandy, Utah Residence |
| 9 | Expenditure Money Laundering for Wire Transfer to Defendant's Turkish Bank Account |
| 10 | Expenditure Money Laundering Relating to Purchase of Huntington Beach Residence |
See Docket No. 489-3.
B. Trial Testimony
Defendant Dermen's trial began on January 27, 2020 and lasted for seven weeks. The Government called fourteen witnesses to testify and entered 306 exhibits. Defendant recalled the Government's summary witness as his first witness and called one additional witness. The Government did not call rebuttal witnesses or submit any rebuttal evidence. After deliberating for over eight hours over two days, the jury convicted Defendant on all ten counts.
At trial, the Government presented a case that Defendant Dermen conspired with other individuals, including Jacob, Isaiah, Rachel, and Sally, to defraud the United States Government out of $1.1 billion in renewable fuel tax credits and Renewable Identification Numbers ("RINs").2 The Government also presented evidence that Defendant participated in laundering the proceeds of this fraud through complex financial transactions. Defendant attempted to rebut the Government's case by primarily alleging that the Kingstons were the main perpetrators of the fraud scheme and that Defendant was an honest entrepreneur who had unwittingly become business
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partners with various bad actors involved in the Kingstons' schemes. Defendant claimed that Jacob, the true leader of the fraud, was now cooperating with the Government and blaming the fraud on Defendant to receive a lighter prison sentence. Below, the court summarizes the testimony of key witnesses and evidence presented at trial.
1) Jacob Kingston
Jacob testified at trial for six days, the longest of any witness. He testified as a witness for the Government pursuant to a cooperation agreement. During his direct examination, Jacob testified that shortly after graduating from his doctoral program in 2006, he formed a biodiesel production company called Washakie Renewable Energy ("WRE") based in Plymouth, Utah. He hired his mother (Rachel), his brother (Isaiah), and his wife (Sally) to work at WRE. He testified that the Kingstons were members of the Davis County Cooperative Society ("the Order"), a religiously affiliated organization in which members provide their income to a central entity that distributes money back to members as needed. Jacob's uncle was the leader of the Order.
Beginning in 2010, Jacob began collaborating with Andre Bernard of Biofuels of Colorado ("BOC") to create false paperwork to fraudulently claim tax credits on biofuels. In 2011, Jacob and Bernard entered into an agreement with a grease processing facility, Grease Depot, to fraudulently claim the waste product from Grease Depot as biofuel in order to fraudulently file for renewable fuel tax credits on the waste material. Later in 2011, Jacob partnered with Joshua Wallace of Aspen Biofuels to fraudulently claim renewable tax credits. Rachel and Isaiah filed fraudulent paperwork relating to the Biofuels of Colorado and Grease Depot schemes, and Sally and Isaiah participated in the Aspen Biofuels scheme. During this time, Jacob testified that the vast majority of the fraudulent tax credits that he received from the U.S. Treasury were being paid to
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his partners in these schemes. Through 2011, Jacob and his family continued to live in poor conditions despite the millions of dollars Jacob was claiming through fraudulent tax credits.3
In December of 2011, Jacob met Defendant Dermen at Defendant's offices in Commerce, California in connection with another potential biofuel fraud scheme. Jacob explained that at this meeting, he and Defendant agreed to fraudulently claim biodiesel credits, with Defendant serving as the buyer of the fuel that WRE purported to create. In exchange for a share of the proceeds of the fraud, Defendant also agreed to provide Jacob and the other co-conspirators with protection from prosecution through a network of corrupt law enforcement agents referred to as the "umbrella." Jacob and Defendant communicated through burner phones and often made references to Defendant's umbrella. Jacob testified that he did not question the existence of the umbrella and believed at the time that Defendant's corrupt law enforcement contacts kept the co-conspirators protected from legal consequences of their actions.
Jacob testified at length to many schemes in which he and Defendant were involved within the broader conspiracy. Jacob's testimony regarding these schemes is summarized below:
• India Rotation: Jacob testified that he conspired with Defendant in 2012 to create a trail of false paperwork and fraudulently claim tax credits on third-party biodiesel that was exported to India and imported back to Los Angeles. The co-conspirators then manufactured additional paperwork to show that the product, falsely labeled as unprocessed feedstock, was shipped to Utah to be processed and sent back to Los Angeles. In reality, the product was never shipped to Utah. Jacob testified that he agreed to participate in this scheme with Defendant when they met at his offices in Commerce, California.
• Panama Rotation: Jacob testified that he conspired with Defendant in 2012 to recreate the India rotation on third party biodiesel that was exported from the East Coast of the United States to Panama, trucked across Panama, and shipped to Los Angeles. As with the India rotation, the co-conspirators manufactured paperwork falsely showing that the product was shipped from Los Angeles to Utah to be processed, and then shipped back to Los Angeles.
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• CIMA Green: Jacob testified that Defendant negotiated an arrangement with Joseph Furando and Katirina Pattison to use WRE to recertify third-party biodiesel from their company, CIMA Green. WRE would then sell the biodiesel to Defendant's company, Noil Energy, at a below-market price....
• Singapore Project: Jacob testified that he entered into an agreement with Defendant to form a company under Defendant's son's name and use a Singapore facility to import biodiesel that could be re-certified through WRE. As with the India and Panama rotations, Jacob testified that a paper trail would then be created to falsely show the product being shipped to Utah to be processed. Although Jacob testified that a company was purchased to carry out this plan, the Singapore facility was never used to recertify biodiesel.
• Morrissey Oil: Jacob testified that in 2012, he conspired with Defendant to use WRE to recertify B994 biodiesel purchased through Morrissey Oil, a company based in Ireland. Morrissey Oil would produce fraudulent invoices and contracts to create a false paper trail. The resulting fraudulent RINs
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