The defense lawyer for a Perry Hall man accused of fraudulently selling $9 million worth of fake renewable fuel credits said he didn't deceive anybody because victims knew they were buying phony credits for an unworkable federal energy program.
Rodney R. Hailey's lawyer, assistant public defender Douglas R. Miller, contended that the large commodities brokerages and the oil company that bought Hailey's fuel credits didn't care that the credits were fake.
"Everybody needed [credits] and ... the supposed victims in this case knew just what they were buying," Miller said. "Rodney Hailey did not deceive anyone."
"Where there is no deception, there is no fraud," he said.
Miller's comments, made in opening arguments of Hailey's trial in U.S. District Court, represent the first defense offered by the former president of the now-shuttered biodiesel firm, Clean Green Fuel, which once had an office in Nottingham. It was raided in May 2011 and Hailey was charged in October.
Hailey, 33, is being tried by a jury on multiple counts of wire fraud, money laundering and violating the federal Clean Air Act. He's accused of selling credits for nonexistent biodiesel and spending the proceeds on a $600,000 home in Perry Hall, diamond jewelry and a series of upscale vehicles, including a Rolls-Royce, a pair of Bentleys and a Lamborghini.
But Hailey's lawyer argued his client's conspicuous consumption demonstrated he had nothing to hide and that he was merely helping other, bigger players in the renewable fuel industry to evade federal regulations.
"It's not against the law to own a Ferrari," Miller said. "It's not against the law to fly to Disney World on a private plane."
The seven-year-old federal renewable fuels program was flawed from its start, Hailey's lawyer argued. To boost production of ethanol and other environmentally friendly "biofuels," the nation's oil refiners and importers are required to use a certain amount of renewable fuel every year or pay steep penalties. But lawmakers chose to let the industry meet its quota by buying "credits" without having to make or use the fuel themselves.
Then two years later, Hailey's lawyer contended, the Obama administration set an unrealistically high renewable fuel production quota for the industry to meet.
The Environmental Protection Agency, which oversees the renewable fuels program, is "besieged" by Congress, Miller said, for what he called its "mismanagement." A House Energy and Commerce subcommittee is investigating the agency's oversight of the program.
Hailey's lawyer said buyers of Clean Green Fuel's credits knew or should have known they were not real because in 2009 and 2010 the company was peddling nearly 23 million gallons' worth, which if true would have been enough to make it one of the largest biodiesel producers in the country. An EPA engineer testified Monday that the median annual output of the nation's 150 biodiesel producers is about 1 million gallons.
In the government's opening argument, Assistant U.S. Attorney Tonya N. Kelly said Hailey took advantage of a weakness in the federal renewable fuels program and as a result the credit-trading program is not working properly. Some biofuel producers say they can no longer sell their credits because of the scandal surrounding Clean Green Fuel and two other companies since accused by the EPA of selling phony credits.
But the prosecutor laid the blame squarely on Hailey, against whom she said former employees would testify that he never produced a gallon of biodiesel. Hailey lied repeatedly to federal regulators about his company's nonexistent fuel production, she added, and then lived a "fairy tale" existence by spending the proceeds of his fake credit sales on luxury items.
The EPA has ordered companies that bought Clean Green Fuel's invalid fuel credits to replace them and pay $3.7 million in fines, Kelly noted. Hailey's actions, the prosecutor said, have cost energy companies and the public "millions and millions of dollars."
Eric Rubury, an executive with OceanConnect LLC of White Plains N.Y., one of the brokers that bought Hailey's credits, estimated in an email that his and other companies required to replace the credits may wind up spending more than $200 million to do so.
The trial is expected to go into next week.