Md. man gets 121/2-year term in biodiesel credit fraud

A Perry Hall man was sentenced Friday to 121/2 years in prison and ordered to pay more than $42 million in restitution after being convicted of selling $9 million worth of fake biodiesel fuel credits to oil companies and commodities brokers.

Rodney R. Hailey, 34, was found guilty in June of eight counts of wire fraud, 32 counts of money laundering and two counts of violating the Clean Air Act. Hailey operated Clean Green Fuel, a company that purportedly created renewable fuel from waste cooking oil but sold credits for more than 23 million gallons of biodiesel he never made.

The federal government established a renewable fuel program in 2005 that required oil refiners and importers to make renewable fuel or purchase credits from manufacturers. The initiative, intended to reduce the nation's dependence on foreign oil, has come under congressional scrutiny after a few companies were accused of selling phony biodiesel credits.

Environmental Protection Agency investigators visited Hailey's office in 2010 after receiving a tip that he was selling fake credits. Several months later, a federal financial crimes task force investigated after a neighbor complained to Baltimore County police about the luxury cars parked outside Hailey's house. He was charged in October 2011 and accused of using money from the fuel credits to purchase real estate, jewelry and several cars, including a Rolls-Royce and a Lamborghini.

Assistant U.S. Attorney Tonya Kelly said Friday that while Hailey seemed remorseful, the judge needed to consider his character at the time of the crime, particularly that he continued to collect Maryland unemployment insurance while running Clean Green Fuel.

"Mr. Hailey defrauded a government program," she said, "to essentially make $9 million by doing nothing."

Hailey looked downward and shook his head as he acknowledged the pain he'd caused, saying he had made victims of his family. He pleaded with U.S. District Judge William D. Quarles Jr., asking him to consider his clean record.

"I've never done anything like this before," he said. "Let me show you that I can fix it and I can be better, your honor."

Quarles called Hailey's fraud "blatant" and said the sentence would send a message about what happens when people try to cheat the federal government. The $42 million in restitution was based, in part, on claims made by the credit purchasers who were forced to purchase replacements at a higher price.

Hailey's attorney, Gerald Ruter, said he would meet with his client to consider an appeal.

Ben Evans, a spokesman for the National Biodiesel Board, a trade organization, said Hailey's punishment will help ensure that there's less credit fraud in the future.

But Jennifer Case, CEO of San Diego-based New Leaf Biofuel, said 121/2 years is a light sentence for the damage Hailey has done and that his actions made credit buyers less likely to trust small businesses like his.

"Companies like mine are still being penalized," she said.

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