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Investors Lose Millions in E-Biofuels Alleged Scam

An Indiana-based company called E-Biofuels has been accused by federal officials of allegedly operating the largest tax and securities fraud scheme in the state’s history. U.S. Attorney Joe Hogsett says the scam cost the government and investors more than $100 million.

According to the charging documents, instead of actually manufacturing biofuel, E-Biofuels bought cheaper fuel and sold it to customers as its own product for a profit. In doing so, E-Biofuels was able to fraudulently collect about $35 million in federal tax breaks that are supposed to be reserved for pure biofuel producers.

Read the indictment here.

Two New Jersey-based companies, Caravan Trading Co. and CIMA Green, are named in the charging documents for allegedly conspiring with E-Biofuels to pretend that the lower-grade biofuel was a high-quality product from the E-Biofuels Middletown facility. Also named in the lawsuit is Jeffrey Wilson, former president and CEO of Imperial Petroleum, an Evansville-based publicly traded company that bought E-Biofuels in May 2010.

In total, six people, including Wilson, three E-Biofuels employees and two employees from the New Jersey companies, could face up to 20 years in federal prison on some counts, as well as significant fines, the U.S. attorney’s office said.

As reported Sept. 18 by the Indianapolis Business Journal, the Securities and Exchange Commission (SEC) launched an investigation last year into E-Biofuels LLC in Middletown, Indiana. The company filed for bankruptcy in April 2012.  At the time, the company said it was about $17 million in debt. E-Biofuels’ parent company, Evansville-based Imperial Petroleum Inc., received subpoenas from the SEC and a grand jury that May, according to a regulatory filing.

Charging documents cite 88 counts against seven people and three corporations. Among the charges are allegations of conspiracy, wire fraud, false tax claims, false statements under the Clean Air Act, obstruction of justice, money laundering and securities fraud.

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