A Westport man has been sentenced to six and a half years in federal prison for defrauding the government of millions of dollars in a scheme involving renewable energy credits and for filing false claims with the IRS.
Donald Holmes, 75, pleaded guilty about two years ago to charges of conspiracy to defraud the government and commit wire fraud and was sentenced this week in federal court in Spokane.
The founder of the company was sentenced to eight years in prison earlier this year. Holmes is at least the sixth person to be sentenced.
Holmes was employed by Gen-X Energy Group, Inc., a renewable energy company formerly located in Moses Lake and Pasco. According to a statement from the United States Attorney’s Office for the Eastern District of Washington, located in Spokane, “between October of 2012 and April of 2015, Holmes and his co-conspirators falsely claimed the production of more than 72,000,000 marketable renewable energy credits, which they then sold for more than $57,000,000, and filed false claims with the IRS for $9,517,412 in excise credit refunds. Throughout this period, much of the renewable fuel claimed to be produced at the Gen-X facilities was either not produced or re-processed multiple times.
“American taxpayers and the biofuels industry were defrauded $65 million as a result of this massive and elaborate scheme,” said EPA Administrator Scott Pruitt. “EPA is committed to working with its law enforcement partners to prosecute those who blatantly disregard the law.”
United States District Judge Salvador Mendoza, Jr. sentenced Holmes. The prison term is to be followed by a three-year term of court supervision after Holmes is released from federal prison. In addition, Judge Mendoza ordered Holmes to pay $9,517,412.50 in restitution to the United States taxpayers and an additional $6,175,929.17 in restitution to the victims of his fraud. Holmes was remanded to the custody of the U.S. Marshal Service at the conclusion of the sentencing hearing.
“The United States Attorney’s Office for the Eastern District of Washington is, and will continue to be, committed to prosecuting aggressively and seeking appropriate punishment for white collar crimes,” said Acting United States Attorney Joseph Harrington. “The prison term imposed and the amount of restitution ordered reflect the seriousness of Holmes’ criminal conduct. I commend the tenacious and thorough efforts of the Environmental Protection Agency’s Criminal Investigation Division and the IRS-Criminal Investigation.”
Congress passed the Energy Independence and Security Act of 2007, which required the Environmental Protection Agency and the Internal Revenue Service to encourage the production and use of renewable fuel in the United States. Under the Act, these agencies were directed to write regulations and administer tax credits to ensure an increase in the amount of renewable fuel through a mandate applicable to petroleum refiners and importers, according to the statement. This regulatory scheme mandated that petroleum refiners and importers in the United States include renewable fuel in their product mixes. Petroleum refiners and importers could, however, meet this obligation by purchasing credits from renewable fuel producers. These biofuel credits were called “renewable identification numbers.” Renewable fuel producers could generate the numbers by producing qualifying renewable fuels in compliance with EPA regulations. The producers could sell the renewable identification numbers to obligated parties or intermediaries.
This investigation was conducted by the Internal Revenue Service-Criminal Investigation, the Environmental Protection Agency’s Criminal Investigation Division, and the United States Secret Service, with assistance from the Washington State Patrol.
