The businessman, Rodney R. Hailey, president of the now-shuttered Clean Green Fuel, appeared in U.S. District Court for what had been scheduled as an arraignment. But Hailey surprised prosecutors by not going through with a guilty plea that they said he had agreed to before the proceeding.
Hailey, 33, was charged last week with wire fraud, money laundering and violating the federal Clean Air Act in what could be the beginning of a government crackdown on abuse and fraud in the lucrative trading of renewable fuel credits. Oil companies are required by federal law to either produce a certain quantity of renewable fuels or buy credits to satisfy their quotas.
Authorities charge that Hailey generated more than 21 million gallons' worth of "renewable identification numbers," or RINs, for biodiesel, but produced no actual fuel from used restaurant cooking oil, as he claimed. Investigators contend that he spent millions from the sale of bogus credits on a five-bedroom house, a fleet of luxury cars and trucks, and diamond jewelry. If convicted on all three charges, Hailey could receive a combined maximum sentence of 32 years in prison and $750,000 in fines.
Acknowledging that he was taken by surprise by Hailey's decision not to plead guilty, Cassella told federal magistrate Stephanie A. Gallagher that Hailey had agreed before Thursday's appearance to cooperate with authorities and had even signed a plea agreement.
Hailey's attorney, Andrew C. White, offered no explanation in court for the apparent change of heart and declined to comment afterward.
The prosecutor asked that Hailey be fitted with an electronic monitor, suggesting he is a flight risk because of the unaccounted-for funds. Cassella said Hailey, who also has a home in Anaheim, Calif., had not fully complied with investigators' requests for information about where all the money went.
Federal authorities have moved to seize Hailey's Perry Hall home and other property, but the prosecutor said the defendant has violated a restraining order barring him from spending any money or selling any assets bought with proceeds from the biodiesel business. He sold a Bentley for more than $100,000, according to court records, and spent more than $10,000 in late May and early June at Saks Fifth Avenue and other high-end stores.
According to the criminal information filed against him, Hailey bought $81,000 in diamond jewelry, two Bentleys and more than 20 other vehicles with earnings from Clean Green Fuel. The whereabouts of those items isn't clear.
Hailey's lawyer countered that his client had met and communicated with authorities, and had never failed to appear for any appointment in the case, which he's been aware was coming for months.
"If he was going to take off, he would've done it before today," White said. He told the magistrate that Hailey has his own business and is supporting his family, though he offered no details.
The magistrate declined to order electronic monitoring for Hailey, directing him instead to check in with court personnel. A new date for an arraignment is to be set.