Green Energy Fraudster Convicted at Trial for Scamming Multiple Federal Agencies and His Customers

May 03, 2019

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(U.S. Department of Justice) Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Environment and Natural Resources Division (ENRD) and United States Attorney William M. McSwain for the Eastern District of Pennsylvania announced today that a federal jury in Reading, Pennsylvania, convicted David M. Dunham Jr. of the following crimes: conspiracy to commit wire fraud and defraud the United States; wire fraud; filing false tax documents; and obstruction of justice. The conviction stemmed from Dunham hatching and executing a scheme to defraud the Environmental Protection Agency, the Internal Revenue Service, and his customers to obtain renewable fuel credits in his “green energy” business. The government is also seeking forfeiture of approximately $1.7 million in fraudulently obtained revenue and several parcels of real estate. The trial lasted four weeks before United States District Judge Jeffrey L. Schmehl.

In Dunham’s green energy scam, he fraudulently applied for, received, and sold “credits” for selling renewable biofuels that he, in fact, did not sell and, in many instances, had never possessed in the first place. He obtained these credits from government agencies, which resulted in Dunham obtaining $50 million in fraudulent revenue. Dunham ran the scam from approximately 2010 to 2015, using his business, Smarter Fuels, and that of his co-defendant, Ralph Tomasso, who previously pleaded guilty to conspiracy to defraud federal programs.

“Today’s conviction sends a clear message to any future fraudsters out there: crime does not pay. Especially when that crime involves defrauding American customers and multiple federal agencies,” said Assistant Attorney General Clark. “When the defendant knowingly cheated a federal government program aimed at energy conservation, he gave himself an unfair advantage over his competitors and stole millions of dollars from the American taxpayer in the process. The Department of Justice will not tolerate this type of deception and will continue to work with its law enforcement partners to root out this unlawful conduct.”

“Though this defendant tried to deflect blame on others, his years of scamming the government and his customers has finally caught up to him,” said U.S. Attorney McSwain. “And the truth is as simple as this: Everyone has to follow the rules. You cannot lie, steal, or cover up your misdeeds. If you do, we will hold you accountable. Experience shows that fraudsters like Dunham are always looking for the next best scam. As American consumers become increasingly more concerned with energy conservation, green energy scams like the one in this case provide criminals with an easy angle. We are grateful that the jury saw through Dunham’s lies and reached the correct result.”

“David Dunham created an elaborate scheme that served no purpose other than to mislead and defraud the government,” said IRS Special Agent in Charge Guy Ficco. “Unfortunately for him, our special agents were able to track the movement of paperwork and uncover the deceit behind his actions. We, along with our fellow law enforcement partners and the Department of Justice, will continue to investigate and prosecute those who commit similar crimes.”

“The defendant made numerous fraudulent claims to illegally profit from the Renewable Fuel Standard (RFS) Program,” said Director Jessica Taylor, Director of EPA’s Criminal Investigation Division. “Today’s conviction should send a clear signal that EPA and our law enforcement partners are committed to protecting the integrity of the Energy Independence and Security Act of 2007.”

“We appreciate the commitment of the Department of Justice and the cooperative efforts of our law enforcement partners throughout this significant investigation,” said USDA-OIG Special Agent-in-Charge Bethanne M. Dinkins. “Mr. Dunham’s conviction at trial sends a strong message regarding the benefit of working across agency lines to protect the integrity of Government programs like the USDA Advanced Biofuel Payment Program, established in the 2008 Farm Bill as an incentive for companies to produce and use alternative fuel sources. The USDA Office of Inspector General will continue to dedicate resources to protect the Department’s programs and assets by investigating those who commit fraud and compromise the integrity of USDA programs.”

The case was investigated by the Environmental Protection Agency’s Criminal Investigation Division, the Internal Revenue Service’s Criminal Investigation Division, and the United States Department of Agriculture’s Office of Inspector General. The case is being prosecuted by Trial Attorney Adam Cullman of the Environmental Crimes Section and Assistant United States Attorney John Gallagher. READ MORE

Green energy fraudster sentenced to seven years in prison for scamming multiple federal agencies and customers (Internal Revenue Service)

Lehigh Valley entrepreneur gets 7 years for biofuel fraud (Morning Call)

Excerpt from Morning Call: David Dunham Jr.’s lawyers portrayed him at his sentencing Thursday in federal court in Reading as an Eagle Scout, an innovator and a pillar of his family and his community.

When he ran afoul of the law, it was a result of his own hubris in a new industry governed by complicated regulations and rapidly changing rules, attorney Mark Cedrone said.

And after he was confronted with his wrongdoing, Dunham rebuilt his company, Smarter Fuels Inc. in Plainfield Township, into a profitable business, only to see it go up in smoke early Monday.

Prosecutors challenged Dunham’s claim that he was in over his head and confused, noting that he was convicted of defrauding three separate government programs over a span of four years.

“That is impossible to square with the fact that he was never confused when it came to something that would get him more money,” Assistant U.S. Attorney Adam Cullman said.

If Dunham was confused, Cullman said, he could have asked regulators whether what he wanted to do was legal.

“He didn’t because he wouldn’t have liked the answer,” Cullman said.

Prosecutors also alleged that Dunham perjured himself over the course of two and half days of testimony during his trial in April 2019. For that and other reasons, prosecutors argued in a sentencing memorandum, Dunham should be sentenced to a 17½- to nearly 22-year prison term.

U.S. District Judge Jeffrey Schmehl, however, overruled the government’s arguments that Dunham should receive a tougher sentence for obstruction of justice and leading a conspiracy with five or more people. He also found the government’s loss was about $17 million, less than half the $36 million prosecutors contended he stole.

By Schmehl’s calculation, the sentencing guidelines called for a minimum sentence of nine years in prison, but he said taking the needs of Dunham’s family and business into consideration, he decided on the more lenient seven-year sentence.

Dunham, 40, of Hanover Township, Northampton County, and a co-conspirator were indicted in 2015 on charges they had defrauded U.S. Environmental Protection Agency, IRS and U.S. Department of Agriculture programs to encourage the production of renewable fuels.

A Lehigh University graduate and biofuel advocate, Dunham started Smarter Fuel Inc. in 2004 after converting his Volkswagen to run on cooking oil to keep his commuting costs down, according to the company’s website.

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The company’s plant on Male Road was destroyed in a fire reported about 1:45 a.m. Monday. Cedrone said there is nothing to suggest the fire is suspicious. It remains under investigation by the Pennsylvania State Police fire marshal. READ MORE