September 14, 2017
from the United States District Court for the Southern
District of Indiana, Indianapolis Division. No.
l:13-cr-00190-SEB-TAB-l - Sarah Evans Barker, Judge.
Wood, Chief Judge, and Ripple and Hamilton, Circuit Judges.
Ripple, Circuit Judge.
jury indicted Jeffrey Wilson, in a twenty-one-count
indictment, with the following offenses: (1) fraud in
connection with the purchase or sale of securities, in
violation of 15 U.S.C. §§ 78j(b) and 78ff, and 17
C.F.R. § 240.10b-5 (Count 1); (2) fraud in the offer or
sale of securities, in violation of 15 U.S.C. §§
77q(a) and 77x, and 18 U.S.C. § 2 (Count 2);
(3) material false statements in required Securities and
Exchange Commission ("SEC") filings, in violation
of 15 U.S.C. § 78ff and 18 U.S.C. § 2 (Counts 3-9);
(4) wrongful certification of annual and quarterly reports by
a corporate officer, in violation of 18 U.S.C. §
1350(c)(1) (Counts 10-14); (5) material false statements by a
corporate officer to an accountant, in violation of 15 U.S.C.
§§ 78m(b)(5) and 78ff, 17 C.F.R. §§
240.13b2-2(a) and 240.13b2-2(b), and 18 U.S.C. § 2
(Counts 16-17 and 19-20); and (6) false statements to
Government investigators, in violation of 18 U.S.C. §
1001 (Count 21).
convicted Mr. Wilson on all charges. He then filed a motion
under Federal Rule of Criminal Procedure 29(c) for acquittal
on all counts, contending that the Government had failed to
present evidence sufficient to prove his guilt beyond a
reasonable doubt. The district court denied the motion. It
then sentenced Mr. Wilson to 120 months' imprisonment for
Counts 1, 3-14, 16-17, and 19-20, and to 60 months'
imprisonment for Counts 2 and 21, all to run concurrently.
The court also imposed 18 months' supervised release per
count, each to be served concurrently. The court ordered Mr.
Wilson to pay $16, 468, 769.73 in restitution and a $1, 900
Wilson now appeals and renews his challenge to the
sufficiency of the evidence. He contends that the Government
failed to prove beyond a reasonable doubt that he had the
requisite mens rea to commit the charged offenses.
After hearing oral argument and carefully examining the
record, we cannot accept this argument. None of Mr.
Wilson's contentions reach the high threshold of showing
that a reasonable jury could not have found him guilty. When
viewed in the light most favorable to the prosecution, the
evidence adequately supports the jury's finding that Mr.
Wilson acted knowingly and willfully when making false
statements to investors, regulators, an outside accountant,
and Government agents. It also supports the reasonable
inference that Mr. Wilson was aware of and participated in a
fraudulent tax scheme called "Alchemy."
Accordingly, we affirm the judgment of the district court.
Wilson was the Director, Chairman of the Board, President,
and Chief Executive Officer of a public company called
Imperial Petroleum, Inc. ("Imperial") from May
2010, to November 2011. In May 2010, Imperial acquired
e-Biofuels, LLC ("e-Bio"), a biofuel company owned
previously by Craig Ducey, Chad Ducey, and Brian Carmichael.
Craig and Chad are brothers; Carmichael is related to them by
marriage. A third brother, Chris Ducey, handled
transportation logistics for e-Bio.
to its acquisition by Imperial, e-Bio had developed a fraud
scheme called Alchemy. It involved purchasing biodiesel from
a third party and then reselling it to customers as though it
had been produced originally by e-Bio. This scheme was
profitable because it allowed the company to take advantage
of government incentives for renewable-energy production
without actually expending production costs. The relevant
incentives are renewable identification numbers
("RINs") and the blender's tax credit.
are essentially labels used by the Environmental Protection
Agency ("EPA") to track renewable fuel production
and consumption. Biodiesel producers can generate and attach
a certain number of RINs to each gallon of biodiesel that
they manufacture, using EPA-approved procedures, at
EPA-registered facilities. Producers can sell this RIN-valued fuel
to petroleum fuel refiners and importers. These customers
must obtain and retire a certain number of RINs in order to
meet annual regulatory obligations. This system creates a market
for RIN-valued biodiesel-i.e., biodiesel that has
not yet had its RINs retired.
blender's tax credit is a $l/gallon credit; it is granted
to the taxpayer that first blends biodiesel with any amount
of petroleum diesel. Before biodiesel is blended, it is known
as BlOO, which indicates that it is 100 percent biodiesel.
Biodiesel is often blended with a small amount of petroleum
diesel. This process results in a product known as B99, which
is approximately 99 percent biodiesel and, more importantly,
already has been used to claim the tax credit.
of these two separate government incentives, RIN-valued BlOO
is more valuable to biodiesel purchasers than RIN-less B99.
The conspirators behind Alchemy profited by purchasing
RIN-less B99 and then reselling it as RIN-valued BlOO. To
avoid suspicion, e-Bio used a third-party company, Caravan
Trading ("Caravan"), as a middleman. Caravan was
owned by Joseph Furando. Caravan would purchase RIN-less B99
at low cost and then resell it to e-Bio along with fake
invoices describing the biodiesel as feedstock
(e.g., soybean oil or chicken fat). Feedstock is
used to create biodiesel, so e-Bio would pretend that it had
used this "feedstock" to produce BlOO in its own
plant. E-Bio generated RINs for this fake BlOO, which was
actually B99 with no legitimate RIN value. The company
profited by selling this product at the price of RIN-valued
carry out this plan, e-Bio hired truck drivers to pick up the
RIN-less B99 from Caravan's fuel terminals and deliver it
to the e-Bio plant. There, it was pumped into storage tanks
and later transferred to another truck for delivery to
e-Bio's customers. E-Bio furnished drivers delivering
this product with paperwork reciting that the fuel they were
carrying was RIN-valued BlOO, produced at the e-Bio plant. To
cut down transportation costs, e-Bio eventually had truck
drivers carry the biodiesel directly from Caravan's fuel
terminals to e-Bio's customers. The company would fax
fake paperwork, including false bills of lading, to the
drivers while they were en route in order to make it appear
as if the fuel had been produced at (and delivered from) the
e-Bio plant. These deliveries were called "Ghost
Loads/' because the drivers of those loads were never
seen at the e-Bio plant.
negotiating the acquisition of e-Bio, Craig informed Mr.
Wilson that the e-Bio plant was not producing biodiesel from
feedstock and that it was purchasing fuel from Caravan.
Shortly after Imperial acquired e-Bio, Craig emailed Mr.
Wilson a spreadsheet entitled "e-Biofuels make versus
buy cost 6-16-2010.xls" (the "Make vs. Buy
spreadsheet").This spreadsheet compared the cost of
making biodiesel from scratch versus the profit of buying it
from Caravan. At one point, Mr. Wilson asked Craig how e-Bio
could increase its output under the latter option, and Craig
told Mr. Wilson that e-Bio's main customer would purchase
as much biodiesel as e-Bio could sell.
parties disputed at trial the degree of Mr. Wilson's
involvement in e-Bio's business. The evidence showed that
the Duceys continued to oversee many of e-Bio's daily
operations after the Imperial acquisition, and Mr. Wilson
maintained that he was largely unaware of e-Bio's
day-to-day operations. According to him, he purchased the
company because it came with a self-sufficient group of
managers. There was, however, significant evidence about Mr.
Wilson's involvement in and awareness of e-Bio's
activities, as set out in the following paragraphs.
months after the acquisition, Mr. Wilson exchanged emails
with his son and Chad, both of whom were working at the e-Bio
plant. Chad stated that e-Bio was not producing any glycerin,
a necessary by-product of transesterification (the process
that converts feedstock into biodiesel). Mr. Wilson replied
with his understanding that a lack of glycerin meant e-Bio
was not producing biodiesel from feedstock. His son confirmed
this conclusion. Around the same time, Mr. Wilson told the
managers of Caravan that he wanted to increase their business
November 2010, Imperial filed its first annual report with
the SEC. In that report, Mr. Wilson represented that e-Bio
manufactured millions of gallons of biodiesel from feedstock,
that it produced glycerin as a by-product of this production
process and that it took advantage of RINs that are generated
when biofuel is produced. The following year, Mr. Wilson
filed another annual report, three quarterly reports, and two
current reports with the SEC. All of these documents included
the same or similar statements representing that e-Bio
produced biofuel from feedstock rather than buying and
reselling biodiesel produced by a third party. Mr. Wilson
certified the accuracy of the annual and quarterly reports
even though they included false statements about e-Bio's
production process and output. Mr. Wilson communicated
similar statements to Imperial's outside accountant and
Mr. Wilson's tenure as president of Imperial, e-Bio
increased its fraudulent fuel sales substantially. It was
able to increase its output by undertaking more and more
Ghost Loads, especially in the Houston area. The
Government's witnesses testified that Mr. Wilson knew of
these Ghost Loads and wanted to increase them by sending more
drivers to Texas. Mr. Wilson also had discussions about ways
to mitigate the risks posed by the Ghost Loads. For instance,
he favored bribing e-Bio's truck drivers so they would
not expose the true nature of their deliveries, and he agreed
to purchase a fax machine to transmit falsified paperwork
directly to the drivers rather than by using an intermediary.
He also was present during discussions about removing
e-Bio's name from the trucks to deflect any suspicions
about the deliveries.
one audio-recorded meeting, Furando explained that the
conspirators referred to the entire scheme as Alchemy. He
also said: "Big oil does not care. ... The RINs you guys
generate, they don't care if they're real or not.
They just want an obligation met. And they want to be done
with it." The parties dispute whether Mr. Wilson
attended this meeting. During trial, three witnesses
testified that they were at the meeting along with Mr.
Wilson. A fourth witness identified a voice in the recording
as that of Mr. Wilson; Mr. Wilson's brother disputed that
identification. The jury had separate exemplars of Mr.
Wilson's voice to compare with the recording.
summer 2011, a hedge fund, Platinum Partners
("Platinum"), considered investing in Imperial.
David Steinberg, an investment professional at Platinum,
evaluated Imperial as a potential investment. Ashley Player,
a renewable energy consultant whom Platinum had hired to
conduct due diligence on Imperial, assisted him. As part of
her investigation, Player inquired as to how e-Bio's
15-million-gallon-per-year plant could produce 25-30 million
gallons of biodiesel per year. Chad told her that about half
of e-Bio's output came from reprocessing
"off-spec" biodiesel (i.e., biodiesel that
fails to meet one or more industry specifications). The other
15 million gallons, he told her, were produced from
feedstock. Platinum Partners did not invest in Imperial.
this same time, Mr. Wilson was attempting to activate the
production equipment at the e-Bio plant. Investors were
requesting to visit the plant, but Mr. Wilson was not willing
to host them until the plant could process genuine feedstock.
Mr. Wilson ran into difficulties getting the plant up and
running, and he eventually resigned from his position.
Imperial's ownership of e-Bio, the subsidiary generated
99 percent of Imperial's revenues. Overall, e-Bio resold
over 35 million gallons of biodiesel and realized more than
$55 million in profits as a result of Alchemy. As e-Bio
generated more and more revenue, the value of Imperial's
stock rose as well. Mr. Wilson and his wife transferred
hundreds of thousands of Imperial shares during this time,
and Mr. Wilson issued more than $1 million in Imperial shares
to different companies that he controlled. He also paid off
more than $5 million in company debts using Imperial stock
and wrote more than $100, 000 in company checks to himself.
These payments were not disclosed in Imperial's SEC
filings and run counter to Mr. Wilson's statements in SEC
reports that he had deferred his salary. When the scheme fell
apart, Imperial's stock lost almost all of its value, and
investors lost more than $18 million.
2012, Government agents interviewed Mr. Wilson as part of an
investigation into whether Imperial's SEC filings
contained false statements about e-Bio's production of
biodiesel. When confronted with questions from investigators,
Mr. Wilson repeated the explanation that Chad had given to
Ashley Player: he told them that at least half of e-Bio's
output was produced from feedstock at the company's
EPA-registered plant, and that the other half was made by
reprocessing off-spec biodiesel. Mr. Wilson also told the
investigators that: (1) he never compared the cost of
off-spec biodiesel to feedstock; (2) he did not compare the
costs of reprocessing off-spec methyl ester to making
biodiesel from feedstock; and (3) he did not know if
reprocessing off-spec methyl esters was more profitable than
making biodiesel from feedstock.
District Court Proceedings
September 2013, the Government filed a twenty-one-count
indictment alleging that Mr. Wilson had committed the
following offenses: fraud in the purchase or sale of
securities (Count 1); fraud in the offer or sale of
securities (Count 2); material false statements in required
SEC filings (Counts 3-9); wrongful certifications of
annual and quarterly reports(Counts 10-14); material omissions
and false statements to a public company's independent
accountant (Counts 16-17 and 19-20); and false
statements to Government investigators (Count 21). Craig was
charged as a co-defendant. He pleaded guilty prior to the
trial and testified against Mr. Wilson. Chad, Chris,
Carmichael, Furando, and Katirina Pattison (the original
Alchemy conspirators) were all charged separately and also
pleaded guilty. During Mr. Wilson's trial, the Government
presented testimony from multiple participants in the ...