A California gas station owner has been found guilty on all ten felony counts related to a scheme that defrauded the U.S. Department of Energy of approximately $500 million. Lev Dermen was convicted on March 20, 2020, in Utah federal court and now faces a potential sentence of up to 180 years in prison.
The conviction stems from a conspiracy between Dermen and members of a Utah polygamist community. Between 2010 and 2016, the defendants allegedly exploited a federal program that paid up to one dollar per gallon for domestically produced biodiesel. Prosecutors presented evidence that the group used the illicit proceeds to purchase luxury homes and high-end sports cars.
Fabricated Production Claims
Jacob Kingston and his brother operated Washakie Renewable Energy, a Utah-based company that the defendants publicly touted as the state’s largest producer of sustainable biodiesel. However, investigators found the company lacked any meaningful production capacity. Instead, the group purchased second-hand biofuels from international sources, including India and Panama.
To qualify for federal grants and tax credits, the defendants were required to manufacture their own biofuels. When federal auditors requested proof of domestic production, the defendants fabricated records to show fuel being manufactured at their facilities.
These false documents allowed them to claim tax credits for millions of gallons of fuel that never existed in a legitimate production pipeline.
Greed Led to Collapse
John Huber, the U.S. Attorney for the District of Utah, commented on the motivations behind the crime during the proceedings. “What brought them down as with many fraudsters was their outsized greed…The fraud and the greed was out of control,” Huber stated.
The scheme collapsed when federal investigators uncovered discrepancies in fuel production logs and supply chain records. The financial trail was clear enough for prosecutors to build a robust case against Dermen and his co-conspirators.
Testimony Secured Conviction
Before Dermen faced trial, Jacob Kingston and three other family members pleaded guilty to their involvement in the scheme. Kingston then testified against Dermen, providing key evidence about the internal operations of the fraud ring and confirming that the fuel claims were entirely fabricated.
His testimony proved crucial in establishing the extent of the conspiracy. Dermen’s lawyer attempted to challenge the verdict by requesting a mistrial, citing concerns that jurors had stayed away from court due to social distancing measures related to the coronavirus pandemic. The judge rejected this request, and the jury proceeded with their deliberations.
Regulatory Implications
The conviction represents a significant victory for federal regulators seeking to protect taxpayer money and ensure the integrity of renewable energy programs. Prosecutors emphasized that the Department of Energy would continue to scrutinize applications for renewable fuel tax credits more closely in the future.
The exposure of Washakie Renewable Energy also raised questions about the verification processes used by federal agencies to validate biofuel production. The involvement of international suppliers in the fraud ring suggests that cross-border trade in biofuels may require enhanced oversight to prevent similar schemes.
