Md. man convicted in biodiesel scam

June 25, 2012

A Maryland man was convicted Monday of selling phony bio­diesel credits in a fraud case that has raised concerns about oversight of a renewable fuels program run by the Environmental Protection Agency.

Rodney Hailey’s company, Clean Green Fuel, in the suburbs of Baltimore, made more than $9 million selling fake biofuel credits to oil companies, brokers and producers. Hailey, 33, used the money to charter private jets, buy jewelry and purchase more than a dozen luxury cars that played a role in his downfall.

“He generated absolutely nothing. He was doing absolutely nothing except spending money,” Assistant U.S. Attorney Stefan D. Cassella said in closing arguments at the federal courthouse in Baltimore. “He undermined the integrity of a program intended to help the environment, create jobs and reduce dependence on foreign oil.”

Hailey’s case, and allegations against another company in Texas, have prompted questions from some in Congress about the opportunities for fraud in the program designed to increase production of renewable fuels in the United States.

Companies that make or import gasoline or diesel are required to use a certain amount of renewable fuel. To meet their mandate, companies can buy credits that represent renewable fuel that another company has produced.

EPA officials have said that they have expanded enforcement efforts, and the program already includes more oversight than when Hailey entered the market, according to the industry’s trade group.

“Mr. Hailey’s greed has caused immeasurable damage to an industry and a government policy that are working for the public good,” Ben Evans, a spokesman for the National Biodiesel Board, said after the verdict. The organization, he said, is working on “safeguards that will prevent this kind of thing from happening in the future.”

Jurors returned their verdict in an hour and 15 minutes, finding Hailey guilty on 42 counts of wire fraud, money laundering and violating the Clean Air Act. He faces up to 32 years in prison.

The week-long trial was a tutorial in the biofuels industry with testimony from the EPA, a producer and the traders and brokers who dealt directly with Hailey between March 2009 and December 2010. Hailey sold more than 35 million credits, called renewable identification numbers — or RINs — representing more than 23 million gallons of fuel. But Hailey’s plant manager, his chief operating officer and the EPA never saw his production plant.

Defense attorneys accused the EPA of lax oversight and loose regulation of the RIN trading program, which began in 2005 and expanded in 2007. Hailey, they said, was a scapegoat for an agency concerned about politics and public relations.

The “EPA screwed up big time,” said attorney Joseph Evans. The “EPA has to blame Mr. Hailey because they have to answer to Congress about this.”

Assistant U.S. Attorney Tonya N. Kelly said, “It’s not the EPA’s fault that Hailey committed this crime.”

In closing arguments, Hailey’s attorneys acknowledged the “scheme,” but Evans said that the brokers and traders who bought from Clean Green had to have known that the volumes Hailey said he was producing were unrealistic.

“They turned a blind eye because they were making money,” said Evans, a federal public ­defender.

Hailey, dressed in a gray suit and light brown tie, sat impassively at the defense table as prosecutors repeatedly described him as a liar living a “fairy tale.” He spent lavishly as he quickly amassed millions, particularly on cars, including two Ferraris, a Bentley and a Maserati. The “conspicuous consumption” caught up to Hailey, prosecutors said. The federal investigation started after neighbors complained to a Baltimore County detective that some of the luxury cars were blocking a bus stop in his Perry Hall community.

Evans said his client is likely to appeal. “We respect the jury’s findings and will move on.”

Ann covers legal affairs in the District and Maryland for the Washington Post. Ann previously covered state government and politics in California, New Hampshire and Maryland. She joined the Post in 2005.
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