Biodiesel scam involving Pasco firm lands man in federal prison

A Renton man was sentenced this week for laundering more than $39 million for a company that bilked federal programs supporting renewable energy.

Richard Estes, 77, was part of a conspiracy involving Pasco-based Gen-X Energy Group.

U.S. District Court Judge Salvador Mendoza, Jr. sentenced him to eight years and nine months in prison after Estes previously pleaded guilty to conspiracy to commit money laundering.

Along with the prison sentence, Estes is responsible for paying more than $4.3 million in restitution.

Federal prosecutors claimed Estes and others nationwide set up shell companies across the nation to take advantage of tax credits offered by the Internal Revenue Service.

The companies cycled the same batch of biofuels through each of the companies, according to the U.S. Attorney’s Office in Florida. Each time a new company received the product, it would claim to have made new biofuels.

Gen-X Energy Group started making headlines in the Tri-Cities after it rented a 18,000-square-foot biodiesel facility in Burbank in 2007.

A suspicious fire damaged the facility in 2009, closing the plant for several months before it announced plans to open a plant in Richland.

The company claimed the plant’s new technology used far less energy than a traditional biorefinery plant by reusing heat produced during processing. The company even received a $720,000 American Recovery and Reinvestment Act grant to build the refinery, though it was never built.

Prior to the conspiracy being discovered, company officials claimed they generated 15 million gallons of biodiesel a year by using various new and used vegetable oils.

The company also claimed to have a biodiesel production unit in Moses Lake, and until as late as October 2015 appeared to be active.

Gen-X Energy’s founder and chief executive officer, Scott C. Johnson of the Tri-Cities, pleaded guilty in November 2015 to his part in the conspiracy. He admitted to conspiracy to commit wire fraud and conspiracy to file false income tax claims. Sentencing is April 2017.

Federal investigators said Estes laundered $39 million from the scheme through accounts he owned.

Michael Ormsby, the U.S. Attorney for the Eastern District of Washington, commended the IRS and Environmental Protection Agency’s criminal investigation divisions for their work on fraud case.

“This is a classic case of an individual who allowed his own unfettered greed to guide his duplicitous actions,” said Darrell Waldon, a special agent in charge from the IRS criminal investigation division.

This story was originally published January 31, 2017 at 1:46 PM with the headline "Biodiesel scam involving Pasco firm lands man in federal prison."