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Many small to mid-sized businesses teeter on the brink of survival from time to time due to temporary income shortfalls or some unexpected large expense. Owners and managers sometimes must make difficult decisions to solve cash-flow problems. In times of crisis, they may not fully grasp how their decisions on the job could expose them to a government investigation, and a charge for white-collar crime.
Government investigators and prosecutors follow a rigid set of rules established by laws. Investigators have little care or concern for the reasons why people break the law. Every day, prosecutors bring charges against people who consider themselves honest. When people break the law—intentionally or unintentionally—they open themselves up to long-term exposure for legal consequences.
Keystone Biofuels, founded in 2005, operated in the biofuel space. It provided bulk-fuel delivery services, including oil, gas and alternative fuels. The company pioneered the Pennsylvania renewable fuel industry. As part of its business, Keystone qualified to earn tax credits for each gallon of renewable fuel produced.
The owners of Keystone Biofuels, Ben Wooten and Race Miner, knew each other for a long time and had fairly extensive experience in the alternative biofuels business. They hired David Tielle to serve as Keystone’s director of business development.
The Great Recession of 2008 took a great toll on the business operations at Keystone Biofuels. Financial challenges at the time drove the business to the precipice of bankruptcy and financial ruin. As a result, the company began producing fuel that did not meet the standards required for the EPA program. According to the government, the owners claimed biofuel credits that they did not produce, and the owners fraudulently sold the credits into the open market.
Wooten and Miner pumped all of their earnings back into the company to keep it alive. For a while, Keystone rebounded and expanded, producing a quality product. That revival, however, didn’t last.
Keystone suffered about $2 million in losses during 2012. Miner sold his shares in the company to Wooten during this time. Wooten filed for bankruptcy on behalf of the company and Tielle set out professionally on his own.
A federal investigation began shortly thereafter. Federal agents from the EPA approached Tielle with a late-night knock on his door in March of 2014. He began cooperating immediately.
Indictments came down for Wooten and Miner in May of 2017. Those criminal charges alleged that the owners conspired on the fraudulent transactions. Investigators alleged that Wooten and Miner created false corporate records and sham financial transactions that would account for the nonexistent and non-qualifying fuel. A superseding indictment followed for obstruction of justice as a result of their false claims to the EPA.
Neither the original indictment filed in May 2017 nor the superseding indictment filed in January 2018 against Wooten and Miner named Tielle as a defendant. However, the grand jury report named an “unindicted co-conspirator” that served as director of business development.
Wooten and Miner elected to go to trial and fight the charges.
Tielle continued to cooperate with government prosecutors. He testified on the witness stand over three days. Tielle subsequently pleaded guilty to one count of conspiring to defraud the Internal Revenue Service. In exchange for his cooperation, the judge sentenced him to three years-probation.
The jurors deliberated over a span of two days before handing down nine guilty verdicts for co-owners Wooten and Miner. Those convictions included six counts of making false statements to the EPA, one count of conspiracy to defraud the Internal Revenue Service (IRS), and one count of aiding and assisting in the filing of a false claim with the IRS. Each defendant received sentences of 70 months in prison plus fines and penalties totaling more than $9 million.
This case highlights the aftermath that followed when investigators learned of the Keystone Biofuels fraud. Investigators approached the former business development manager at his home. They threatened him with the harsh consequences that would follow if he did not cooperate.
Many people in business do not appreciate the magnitude of problems they create when they skirt rules. When people don’t know that their actions can lead to criminal investigations, they are more vulnerable to making bad decisions. Government investigations can lead to financial ruin from losses associated with defending against civil investigations that often lead to charges for white-collar crime.
We recommend that companies invest in compliance training to educate owners, managers, and employees about steps they can take to protect their company, and their liberty.
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