A Richland couple and their two trucking companies have admitted participating in an extensive fraudulent biofuel production scheme that stretched from Eastern Washington to Florida.
The guilty pleas this week came more than two years after they were indicted, and less than two weeks before they were scheduled for trial in Richland’s U.S. District Court.
Hector M. Garza Jr. pleaded guilty to conspiracy to defraud the government with false claims.
Fifteen other charges involving wire fraud, obstruction of justice and a felon in possession of ammunition will be dropped as part of the plea agreement.
Tammy L. Garza originally had 15 charges, but entered a plea to an amended charge for Clean Air Act false statements.
And their Othello and Yakima businesses — HTG Trucking LLC and Freedom Fuel Inc. — both admitted one count of conspiracy to defraud the government with false claims.
Renewable energy company in Pasco
Federal prosecutors say the Garzas and their companies were connected to Gen-X Energy Group, a former Pasco-based renewable energy company. Gen-X also had a plant in Moses Lake.
The conspiracy involved bilking the government out of millions in tax credits offered by the Internal Revenue Service.
Scott C. Johnson, the founder and president of Gen-X, brought on other people 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.
Sentencing in the Garzas’ case is set Oct. 17 before Judge Sal Mendoza Jr.
Hector Garza is facing a maximum 10 years in federal prison and Tammy Garza is looking at up to two years.
Meanwhile, their corporations could be fined $500,000 each, or double the loss to the victim or gain to the defendants, whichever is greater.
‘Tenacious and thorough efforts’
“Defrauding the public by scamming renewable energy incentive programs will not be tolerated,” said U.S. Attorney Joseph H. Harrington for the Eastern District of Washington.
He commended the “tenacious and thorough efforts” of investigators from the IRS and the Environmental Protection Agency, and said his office “will continue to work closely with our law enforcement partners to aggressively prosecute fraud and other white collar crimes.”
A news release from Harrington said that between January and April 2013, Hector Garza and his co-conspirators falsely claimed the production of hundreds of thousands of marketable renewable energy credits.
Those credits were then sold for more than $296,000, while they also filed false claims with the IRS for about $284,500 in excise credit refunds.
“Throughout this period, much of the renewable fuel claimed to be produced at the Gen-X facilities was either not produced or re-processed multiple times,” the news release said.
Fraudulent energy, tax credits
Hector Garza, HTG Trucking and Freedom Fuel pleaded guilty to conspiring to defraud the United States with the false claims to the IRS.
The trucking companies were used to “round” supposed renewable fuel by driving the same load back and forth between Gen-X’s Moses Lake facility and the Garzas’ businesses in Othello and Yakima, and to generate fraudulent renewable energy credits and tax credits each time the same batch of fuel was “rounded,” Harrington wrote.
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
At least six others sentenced
Johnson, the Gen-X founder, was sentenced in June 2017 to eight years and one month in federal prison.
The lead player in four separate fraud schemes, he enjoyed an extravagant lifestyle by bilking the government out of millions of dollars in tax credits.
Jacob Cha got four years and three months in federal prison for personally pocketing $1 million to $1.5 million in the far-reaching sham. The South Korean immigrant’s American Dream crumbled amid personal greed.
At least four others have been sentenced for the fraud.
“The United States tax system is designed to provide vital government services to American citizens. It is not a slush fund for fraudsters,” said Carrie Nordyke, the acting assistant special agent in charge with the IRS Criminal Investigation.
“The IRS will continue to work with federal law enforcement agencies to prosecute scammers like Hector and Tammy Garza, who illegally claim thousands in tax credits for personal financial gain.”