This $6 million fraudster was living the American Dream, until he got greedy in Pasco

Jacob Cha's life has been nothing less than the American Dream.

He emigrated from South Korea at 8, went to school, helped his parents with a janitorial business and then started his own with a biofuel company, a federal judge said Friday.

"Looking at this from the outside in, I was impressed by the hard work that you and your family have done to create a life for yourselves and your family and your community," said Judge Sal Mendoza Jr.

But Cha's dream crumbled amid personal greed as he got involved with an extensive fraudulent biofuel production scheme that stretched from Eastern Washington to Florida.

Cha — whose given name is Jin Chul Cha — "conspired to submit over $2.5 million in false tax credits and sell $3.5 million in phony biofuel credits to unwitting purchasers," according to court documents.

The Tustin, Calif., man personally pocketed $1 million to $1.5 million in the far-reaching sham involving Gen-X Energy Group, a former Pasco-based renewable energy company.

On Friday, Cha, 41, was ordered to serve four years and three months in federal prison, followed by three years of supervised release.

Mendoza opted to go above the federal prosecutor's recommendation of nearly 3 1/2 years, with a sentence at the top of the range.

"The conduct here and, frankly, the greed is something that is extremely concerning to this court," Mendoza said during the hearing in U.S. District Court in Richland.

He also denied defense requests for Cha to do some of the time on electronic home monitoring or to turn himself in to the Bureau of Prisons at a later date.

"In the interest of being fair to you and all others that I sentenced in this case, the court has not released a single individual," said Mendoza. "I think it's time to face the music as it were, so you will be placed in custody today."

Cha pleaded guilty in January to conspiracy to commit wire fraud and conspiracy to defraud the government by filing false claims.

Prosecutors said he operated three separate companies and over a three-year period "purported to sell feedstock for or purchase millions of gallons of biofuel" with Gen-X, which had a plant in Moses Lake.

Cha apologized to Judge Mendoza and said he will never do it again.

"I've been repenting for the past three years. Every year, I've been praying morning and night for mercy," he said. "Honorable judge, if you give me a second chance, I will try my best to pay the restitution. Just asking for a second chance."

Scott C. Johnson, the founder and president of Gen-X, led the conspiracy to bilk the government out of millions in tax credits offered by the Internal Revenue Service. He is serving an 8-year, 1-month term in federal prison.

Johnson started the Pasco company because making biodiesel was a passion, but he turned to white-collar crime when faced with closing the doors and letting down shareholders and investors.

He brought on others to set up shell companies across the country to take advantage of the incentives put in place by Congress to increase the use of renewable fuels.

From October 2012 to March 2015, Cha and his co-conspirators falsely claimed the production of more than 9.4 million marketable renewable energy credits, according to court documents and a Department of Justice news release.

The fraudsters then sold those credits for more than $6 million, and filed false claims with the IRS for $2.5 million in excise credit refunds.

Johnson and some others falsely claimed the production of 72 million marketable biofuel credits, then sold that for $57 million. They also received $9.5 million from the IRS in excise credit refunds.

Most of the renewable fuel claimed to be produced at the Gen-X facilities either was never produced or the same batch was processed, or rounded, through multiple times.

"The defendant, Mr. Cha, has been sentenced to spend years in prison for his role in a multi-million dollar conspiracy to defraud the renewable fuels program," Acting Assistant Attorney General Jeffrey H. Wood said in the news release. Wood is with the Justice Department's Environment and Natural Resources Division.

"This prosecution, which is part of a broader effort involving the Gen-X Energy Group, shows there are serious consequences for this kind of fraudulent conduct," he added. "I applaud the work of the federal, state and local law enforcement personnel involved in bringing down this criminal enterprise."

While Cha was not the organizer and he didn't benefit financially the same as Johnson, Mendoza made it clear that he also shouldn't be considered a minimal or minor participant since he was involved in two different schemes.

Defense attorney Carl Oreskovich said his client was reluctant to get involved, but nevertheless he got in.

Cha had internal fights over how to stop doing it and to make his business what he wanted it to be, the Spokane lawyer said.

However, Karla Gebel Perrin, a lawyer in the Environmental Protection Agency's Seattle criminal investigation division and a special assistant U.S. attorney, reminded the court that the scheme only ended when agents knocked on the door of Gen-X with a search warrant.

Up to that point, Cha was still trying to engage in business with the company, she said.

"We use words like fraud and false claims. This is stealing," Gebel perrin said. "Mr. Cha stole from the government and he stole from these companies who purchased these (Renewable Identification Numbers) believing that they were valid, and then had to replace as a result of the fraud."

Cha, who used his million to buy a family home with his wife and child, cooperated with the government in the ensuing investigation.

"This is the third time before the court for a Gen-X-related sentencing, the fifth defendant being sentenced before you related to Gen-X fraud, and the eighth defendant in here or Florida for this scheme," said Gebel Perrin. "To say it is far-reaching is a vast understatement. ... The total fraud, $6 million, is more than most Americans will ever see in their lifetime."

Cha on Friday paid $30,000 toward restitution, which Oreskovich said was raised legitimately. The full restitution amount will be determined at a later hearing.

This story was originally published April 20, 2018 at 6:36 PM with the headline "This $6 million fraudster was living the American Dream, until he got greedy in Pasco."