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These undated file photos released by the Weber County Sheriff’s Office show Jacob Kingston, left, and Isaiah Kingston | Photos courtesy of Weber County Sheriff’s Office via AP, St. George News
WASHINGTON, D.C. — Five people were sentenced this week to prison for their roles in a $1 billion biofuel tax conspiracy: Lev Aslan Dermen, aka Levon Termendzhyan, 56, was sentenced to 40 years; Jacob Kingston, 46, was sentenced to 18 years; Isaiah Kingston, 42, was sentenced to 12 years; Rachel Kingston, 67, was sentenced to seven years; and Sally Kingston, 45, was sentenced to six years.
According to court documents and testimony from Dermen’s 2020 trial, from 2010 to 2018, Dermen conspired with Jacob and Isaiah Kingston, their mother, Rachel Kingston, Jacob Kingston’s wife, Sally Kingston, and others, to fraudulently claim more than $1 billion in refundable renewable fuel tax credits.
The IRS ultimately paid out more than $511 million in credits to Washakie Renewable Energy (“Washakie”), a Utah biodiesel company owned by Jacob and Isaiah Kingston. The Kingstons distributed the fraud proceeds among themselves and Dermen.
Dermen was found guilty after a seven-week jury trial of conspiracy to commit mail fraud, conspiracy to commit money laundering and money laundering. In addition to the prison sentence, U.S. District Judge Jill N. Parrish ordered Dermen to pay $442,615,520 in restitution to the IRS and imposed a money judgment of more than $181 million against him.
Jacob Kingston was ordered to pay $511 million in restitution to the IRS. The court also imposed a $338 million money judgment against him. Jacob Kingston was co-owner and CEO of Washakie.
Isaiah Kingston was also ordered to pay $511 million in restitution to the IRS. Isaiah Kingston, Jacob Kingston’s brother, was co-owner and CFO of Washakie. Rachel Kingston was the “special projects manager” at Washakie and participated in the scheme by backdating documents and creating fake invoices to support the filing of the false claims.
Sally Kingston also worked at Washakie and participated in the scheme by similarly backdating documents and creating fake invoices to support the filing of the false claims.
The conspiracy began in 2010 and continued through 2018 and involved multiple fraudulent schemes. One involved purchasing biodiesel from the East Coast of the United States (which had been produced by others who had already claimed the renewable fuel tax credit) and exporting it to foreign countries, including Panama, then doctoring transport documents to disguise and import the biodiesel as “feedstock.”
Washakie used this false paperwork to claim it had produced biodiesel from the feedstock to support its filing of fraudulent claims for IRS biofuel tax credits. Washakie also fraudulently obtained millions of EPA renewable identification numbers that were then sold for approximately $65 million.
Later, Dermen and the Kingstons conspired to purchase millions of gallons of biodiesel and rotate it though the U.S. shipping system to create the appearance that qualifying fuel was being produced and sold by Washakie.
Washakie applied for and was paid by the IRS more than $300 million for its claimed 2013 production and over $164 million for its claimed 2014 production. Evidence at Dermen’s trial showed that, to further create the appearance of legitimate business transactions, Dermen and the Kingstons schemed to cycle their and other co-conspirators’ fraud proceeds in more than $3 billion in financial transactions through multiple bank accounts.
Throughout the scheme, Dermen falsely assured Jacob Kingston that Kingston and his family would be protected by Dermen’s “umbrella” of corrupt law enforcement and immune from criminal prosecution. In exchange, Jacob and Isaiah Kingston transferred over $134 million in fraudulent proceeds to companies in Turkey and Luxembourg that were subsequently laundered internationally and through the U.S. financial system.
Money from the fraudulent claims were distributed to Dermen and the Kingstons and used to make lavish purchases in the United States, Turkey, and Belize. Dermen’s associates in Turkey bought and rebuilt a 150-foot yacht named “Queen Anne.”
The Queen Anne was seized by the government in Beirut, Lebanon in 2021, and then sold in Cyprus for $10.1 million.
The Kingston defendants sent over $35 million of their share of the fraud proceeds to their extended family and companies they owned.
Dermen also laundered $3.5 million through SBK Holdings USA, Inc., to purchase a mansion in Huntington Beach, California. The government now seeks forfeiture of this residence as well as a couple dozen other parcels of real property that were purchased with the Kingstons’ share of the proceeds.
“The significant sentences imposed by the Court reflect the breathtaking scope of the defendants’ nearly decade-long tax fraud scheme – one of the largest ever,” said Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.
IRS-Criminal Investigation, the Environmental Protection Agency-Criminal Investigation Division and the Defense Criminal Investigative Service of the Department of Defense Office of the Inspector General investigated the case. Investigators in the Justice Department’s Office of International Affairs, Grand Duchy of Luxembourg, Austria, Belize, Ireland, Lebanon and Cyprus are credited for their assistance in the investigation.
Senior Litigation Counsel John E. Sullivan and Trial Attorney Richard M. Rolwing of the Justice Department’s Tax Division, along with Assistant U.S. Attorney Leslie Goemaat for the District of Columbia, formerly of the Tax Division, prosecuted the case.
Senior Policy Advisor Darrin L. McCullough of the Justice Department’s Money Laundering and Asset Recovery Section assisted with the extensive forfeiture proceedings related to the prosecution. Several Assistant U.S. Attorneys for the District of Utah assisted in the forfeiture proceedings.
Press release from the United States Department of Justice.
Copyright St. George News, SaintGeorgeUtah.com LLC, 2023, all rights reserved.
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