Richland couple sent to prison for their nationwide energy tax scheme

A Richland couple has been sent to prison for their roles in an energy credit scheme with a former Pasco-based biofuel production company.

The couple and their two trucking companies were involved in bilking the government out of $285,000 worth of clean energy tax credits offered by the Internal Revenue Service, which were then resold.

“Defrauding a renewable energy program in order to steal taxpayer funds is simply unconscionable,” said William Hyslop, U.S. attorney for the Eastern District of Washington.

Hector Garza Jr., 49, was sentenced by U.S. Judge Sal Mendoza Jr. to two years in prison and three months probation after Garza pleaded guilty to conspiracy to defraud the government with false claims.

Tammy Garza, 38, was sentenced to four months in prison and one year probation after she pleaded guilty to a charge of Clean Air Act false statements.

They and their Othello and Yakima businesses — HTG Trucking and Freedom Fuel Inc. — also have been ordered to together pay restitution to the U.S. Treasury, plus a $100,000 fine.

Their two companies also were sentenced to three years probation.

Richland man conspired with Gen-X

Hector Garza conspired to falsely claim the production and purchase of more than 500,000 gallons of biofuel to file claims for the taxpayer-paid alternative fuel credits, according to prosecutors with the Department of Justice Eastern District of Washington.

The fraudulent biofuel credits were then sold to unwitting buyers for nearly $300,000, according to prosecutors.

The Garzas and their companies conspired in a scam with Gen-X Energy Group, the Pasco-based biofuel production company, with HTG Trucking claiming to sell feedstocks for energy production to Gen-X from January to March 2013.

In turn, Gen-X pretended to make biofulel from the feedstock to sell to the Garzas’ other company, Freedom Fuel.

No biofuel was made, according to prosecutors.

Instead, the same material was simply trucked back and forth to Gen-X.

The same truckload was bought and sold among Gen-X, HTG Trucking and Freedom Fuel for months on paper, using false invoices created by HTG trucking and Gen-X.

Tammy Garza’s involvement was in aiding and abetting the use of false statements for the renewable energy credits that were claimed and sold as part of the scheme.

Hector Garza was approached to provide trucking services for Gen-X and may not have initially been aware that he and his drivers were engaged in fraud, according to prosecutors.

But when he realized what Gen-X was doing, he coerced Gen-X owner Scott Johnson of Pasco, to cut him in on the fraud, according to prosecutors.

Pasco Gen-X officials sentenced

Gen-X filed for the tax-credit for the biofuel that was never created and then gave half the money from the tax credit to the Garzas and their trucking companies.

Hector Garza also took steps to hide the fraud, telling his driver what to do and driving some of the trucks himself.

They drove to weigh scales along the way to generate a ticket and changed the weight of each load by leaving a wheel off the scale to make it appear less obvious that every load had the same materiel. He also told his driver to use fake driver names.

Other people involved in Gen-X have already been sent to prison.

Johnson was sentenced in June 2017 to eight years and one month in federal prison.

He was the lead player in four separate fraud schemes and enjoying an extravagant lifestyle by bilking the government out of millions of dollars in tax credits in four separate fraud schemes.

The vice president of Gen-X, Donald Holmes, was sentenced in late 2017 to six years and six months in prison.

Jin Chul “Jacob” Cha, 41, of Tustin, Calif., also was part of Gen-X Energy Group conspiracy and was sentenced in April 2018 to four years and three months in federal prison.

Cha personally pocketed $1 million to $1.5 million after he and co-conspirators falsely claimed the production of more than 9 million renewable energy credits that were sold for more than $6 million.