Biodiesel can be an affordable alternative fuel, but when there's RIN fraud involved, it can cost over $100 million. That's the cost to victims – biodiesel buyers and the IRS – in a biodiesel fraud case in Indiana perpetrated by six individuals and three companies, as announced by the Justice Department today. The alleged criminals committed a whole heap – that is, 88 - illegal acts, including "conspiracy, wire fraud, false tax claims, false statements under the Clean Air Act, obstruction of justice, money laundering and securities fraud," according to the Latin American Herald Tribune. It certainly isn't the first case of RIN fraud, but the US Attorney for the Southern District of Indiana called it, "the largest tax and securities fraud scheme in Indiana history."
Here's how the scam allegedly worked. The first step, as described by the Latin American Herald Tribune, is understanding that the US government, through the Energy Independence and Security Act (EISA) of 2007 gives an incentive – a $1-per-gallon tax credit – to the first entity to blend 100 percent biodiesel (B100) with petroleum. These gallons could also get sold with renewable identification numbers (RINs), and they were more valuable if they were. The trick is that one of the companies involved, E-Biofuels from Middletown, IN, allegedly bought B99 without a RIN but then resold it as B100 with a RIN, making a tidy profit by lying about the content of the fuel. The people involved were taken into custody and could face up to 20 years in prison if found guilty.