Aug. 9 (Bloomberg) -- Jeffrey David Gunselman, the chief executive officer of defunct bio-diesel fuel company Absolute Fuels LLC, was indicted by a federal grand jury in Texas on charges he schemed to generate fake renewable fuel credits and sell them to oil companies and brokers.
Gunselman, 30, was indicted yesterday in Lubbock on charges that from September 2010 to October 2011 he falsely represented he was in the business of producing bio-diesel fuel when he didn’t own a plant to make the product. Gunselman registered with the U.S. Environmental Protection Agency, generated false credits and sold them on an exchange, according to the indictment.
Oil companies and brokers purchase credits to demonstrate compliance with federal regulations mandating use of certain bio-diesel fuels. The credits can be traded, held for future compliance or retired to satisfy a fuel producer’s obligations under the law.
Under terms of the 2007 law, refiners must produce a total of 1 billion gallons a year of biodiesel, which can be made from soy oil or leftover restaurant grease. Under the EPA rules, instead of making the fuel themselves, refiners can buy credits from other producers to fulfill their obligations.
The EPA has allowed widespread fraud in the market for government-mandated biodiesel credits, lobbyists for refiners told a congressional panel last month.
Charles Drevna, president of the American Fuel & Petrochemical Manufacturers, told the House Energy and Commerce Committee’s oversight panel last month that victims of fraud were being penalized because the EPA forces refiners to buy replacement credits.
“We are aware of no other government program that penalizes the victims of fraud,” Drevna testified.
The indictment charged Gunselman with 51 counts of wire fraud, 24 counts of money laundering and four counts of making false statements.
Dan Cogdell, a Houston-based attorney for Gunselman, didn’t immediately return a telephone call seeking comment on the indictment.
The scheme netted Gunselman at least $42 million, according to the office of U.S. Attorney Sarah R. Saldana of the Northern District of Texas. Gunselman used the proceeds to purchase a 1984 Gulfstream jet for $1.6 million, a 2011 Bentley for $254,506, a 1982 M60A1 Patton Military tank for $355,000, a ranch in Boerne, Texas, for $2.6 million and other luxury items, Saldana said in a statement. Authorities seek the forfeiture of $42 million along with the real estate, vehicles, jewelry and airplane.
Gunselman was arrested on July 19 and appeared before a U.S. Magistrate judge in San Antonio. A date hasn’t been set for his arraignment in Lubbock.
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