The Securities and Exchange Commission is charging Imperial Petroleum and a number of its executives and suppliers with involvement in an alleged renewable fuel production scheme. The complaint names the Indiana-based company, its CEO Jeffrey Wilson, three ex-owners of E-Biofuels, and New Jersey-located companies Cima Green LLC, Caravan Trading LLC, and CIMA Energy Group, as well as their operators.
The SEC is accusing them of presenting themselves to investors as a legitimate biodiesel production business while concealing the illegal activity that was going on, which was the source of 99% of the revenue. Imperial Petroleum bought E-Biofuels as a subsidiary in 2010, and the Commission said that the latter’s owners falsely presented that they were making renewable fuel from raw agricultural products. This let E-Biofuels receive government incentives based on such representations when, actually, contends the regulator, E-Biofuels had middlemen purchase finished biodiesel while making these buys appear on bogus invoices as raw feedstock for producing biodiesel. Imperial Petroleum’s subsidiary later would sell the biodiesel that was bought for up to double what it paid.
The regulator believes that Wilson discovered that E-Biofuels wasn’t making biodiesel from raw matter, he let the fraud continue and Imperial’s yearly revenue rose from $1 million to over $100 million. Meantime, its stock price flew upward as investors were falsely told that E-Biofuels was engaged in environmentally friendly biodiesel production.
In its securities complaint, the SEC alleges that:
• Imperial made false statements in its yearly reports for fiscal years 2011 and 2010 the E-Biofuels made and sold over 28 million biodiesel gallons between 5/24/2010 – 7/31/2011. This was the same period that over 99% of Imperial’s revenues was from E-Biofuels.
• The scam resulted in over $50 million gross illicit profits.
• Between 11/09 and 1/12 E-Biofuels set up over 52 million bogus renewable energy credits and fraudulent tax credits worth $35 million.
• Investors and auditors were never notified about Imperial’s illegal business model.
• Despite discovering that E-Biofuels wasn’t operating as described in its 2010 yearly report, Wilson allegedly certified and signed the 10k filling’s accuracy.
• He also is accused of falsely portraying the company when communicating directly with prospective investors.
• E-Biofuels’ business was almost totally unsustainable and not legal.
After the scam was uncovered, Imperial’s stock price dropped to under 10 cents a share. The market loss was about $60 million.
The SEC wants financial penalties, ill-gotten gains’ disgorgement, and permanent injunctions against future violations of securities laws.
Also taking action is the U.S. Attorney’s Office for the Southern District of Indiana. Today, a federal magistrate judge unsealed the indictment against Wilson, who is charged with two counts of securities fraud, wrongful certifications as a corporate officer, and making false statements (including statements submitted in a filing to the SEC).
SEC Charges Indiana-Based Company and Executives for Defrauding Investors in Renewable Fuel Production Scheme, SEC, September 18, 2013
Read the SEC Complaint (PDF)
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