Last December marked the end of an elaborate, multi-jurisdictional investigation into a complex fraud scheme involving suspects from the U.S. and Australia with a Canadian connection.
"For three years a portion of my team's efforts have revolved around the ongoing investigation into fraud against government environmental incentive programs," says S/Sgt. Trevor Dusterhoft of the RCMP's Federal Serious and Organized Crime (FSOC) Unit in British Columbia. "Normally, people might say 'You're investigating biodiesel? But that's green energy!' Everybody thinks that's a good thing. But we learned that producing biofuel isn't as easy as it may appear." It isn't always squeaky clean, either.
In 2011, the ecoEnergy for Biofuels Program, administered by Natural Resources Canada (NRC), received funding and began offering an operating incentive to producers of biodiesel based on production and sales levels. City-Farm Biofuel Ltd in Delta, B.C., negotiated an incentive agreement with the NRC under the ecoEnergy program.
Based on a tip, the FSOC unit learned that City-Farm Biofuel was grossly inflating the accounting records of its purchases of feedstock — oils used for producing biofuel. While the company was producing very small amounts of biofuel, about 20,000 litres per month, its claims were closer to 600,000 litres per month.
The fraudulent records were being used to supplement legitimate purchases as well as sales to non-arm's length companies including USA Global eMarketing (GEM) all in an effort to maximize the ecoEnergy incentive claims.
"These guys were essentially circling the border with the same truck. They would claim they were coming in with feedstock oils, but in fact it was coming in with fuel," says Dusterhoft. "In fact, the truck driver wouldn't even unload. He would just come in with fuel, they'd tell him to just sit for a few hours, then he'd take off with the fuel again."
Curiously, the fictitious sales to GEM were far in excess of those required to support the fraudulent incentive claims. The suspects operating within Canada hailed from the United States and Australia.
Following further investigation, RCMP investigators learned that the suspects were also conducting a multi-million dollar fraud against the United States government. The U.S. government program provided monetary incentives for the production and use of biodiesel. Both producers and importers can generate renewable identification numbers (RINS) for each gallon of biodiesel they produce or import, and sell or trade these on the market.
RCMP investigators contacted the Federal Bureau of Investigation (FBI) and U.S. Secret Service Vancouver attachés once they learned that both agencies had unrelated investigations into the same suspect. The FBI Vancouver attaché immediately placed RCMP investigators in touch with the U.S. Environmental Protection Agency (EPA) criminal division and investigational information was openly shared. This multi-agency information sharing, which also included the U.S. Homeland Security, resulted in the determination that U.S. authorities were being deceived.
Contrary to submitted documentation, the high volume of biodiesel being imported by GEM wasn't being produced and sold internationally by City-Farm Biofuel Ltd. in Canada. In fact, the supporting records were exaggerated in an effort to deceive program administrators. This deception allowed GEM, as a supposed legitimate importer of biodiesel, to make lucrative claims under the U.S. incentive programs.
This highly complex scheme involved millions of dollars being defrauded from both U.S. and Canadian government agency programs.
On July 22, 2014, Nathan Stoliar of Australia pleaded guilty to one count of conspiracy, one count of conspiracy to engage in money laundering, two counts of wire fraud and one count of making false statements under the Clean Air Act.
In January 2014, the indictment involving the biodiesel case against James Jariv of Las Vegas was unsealed. Jariv is awaiting trial on charges of conspiracy, wire and mail fraud and money laundering in relation to the biodiesel fraud. On November 15, 2014, Jariv was arrested in Las Vegas for his role in an unrelated timeshare resale fraud.
"The successful conclusion of this file was a direct result of our effective interagency partnerships," says Dusterhoft. "We simply can't function independently. Criminals operate with no regard for international borders and boundaries so it's absolutely critical that police build and maintain relationships with law enforcement personnel in other jurisdictions in order to enforce the laws of our respective countries."