United States District Court, S.D. Indiana, Indianapolis Division
ORDER ON MOTION TO DISMISS AND MOTION FOR JUDICIAL
NOTICE OF EXHIBITS
WALTON PRATT, JUDGE
matter is before the Court on Defendant Christine
Furando's (“Ms. Furando”) Motion to Dismiss
filed pursuant to Federal Rules of Civil Procedure 12(b)(1)
and 12(b)(6) (Filing No. 238). Also pending before
the Court is Plaintiff-Relator Alexander Chepurko's
(“Chepurko”) Motion for Judicial Notice of
Exhibits (Filing No. 256). Chepurko blew the whistle
on Ms. Furando and co-defendants e-Biofuels, LLC, Caravan
Trading, LLC, Cima Green, LLC, Imperial Petroleum, Inc.,
Joseph Furando, Craig Ducey, Chad Ducey, and Jeffrey Wilson
(collectively, “Defendants”) for false claims
submitted to the United States Government
(“Government”) for transactions in the renewable
energy industry. Because of Chepurko's whistleblowing
efforts, the Government was able to prosecute some of the
Defendants named in this case, resulting in criminal
convictions. Chepurko separately filed this civil False
Claims Act qui tam action against the Defendants to
recover damages and civil penalties on behalf of the
Government and himself.
Furando filed the instant Motion to Dismiss, asserting that
Chepurko failed to state a viable claim against her and that
this Court lacks subject matter jurisdiction over the claims.
Chepurko filed a Motion asking the Court to take judicial
notice of exhibits submitted in opposition to the Motion to
Dismiss. For the following reasons, the Motion to Dismiss is
granted in part and denied in part, and the
Motion for Judicial Notice of Exhibits is
following facts are not necessarily objectively true, but as
required when reviewing a motion to dismiss, the court
accepts as true all factual allegations in the complaint and
draws all inferences in favor of Chepurko as the non-moving
party. See Bielanski v. County of Kane, 550 F.3d
632, 633 (7th Cir. 2008).
United States Congress adopted the Renewable Fuel Standard
program (“RFS”) to improve the nation's
renewable energy industry and to reduce greenhouse gas
emissions. The program encourages the production and use of
renewable fuel in the United States. The Environmental
Protection Agency (“EPA”) was charged with
developing, implementing, and enforcing the program through
various regulations (Filing No. 152 at 7). The RFS
program requires producers or importers of renewable fuel to
generate fuel credits, known as a “renewable
identification number” (“RIN”), in
proportion to the amount and type of renewable fuel they
produce or import. The RFS program also requires that
non-renewable fuel refiners and importers, known as obligated
parties, and renewable fuel exporters obtain valid RINs and
retire those RINs each year by submitting them to the EPA.
Id. at 7-8.
fuel producers have valid RINs only if their claim to the EPA
to create the RINs is accurate and meets the regulations
established by the EPA. Generating RINs for a volume of
biodiesel that was not actually produced in compliance with
EPA regulations is illegal. Generating RINs is permissible
only based on renewable fuel and if the production process
used to make that fuel meets specific regulatory criteria. It
is illegal under the regulations to generate RINs more than
once for any given volume of biodiesel. Renewable fuel
producers are required to report data to the EPA about the
production process and the feedstock used in production, and
it is illegal to knowingly make material false statements in
electronic or paper submissions to the EPA. Because of the
regulations, the EPA assumes when RINs are generated by
producers that biodiesel was actually produced and introduced
into streams of commerce pursuant to the stringent
requirements of the RFS program. Id. at 8.
developed a system of assigning a unique identification
number-a RIN-to each batch of renewable fuel. A RIN is a
38-digit number that includes the fuel batch number, the
identification number of the manufacturer who created or
imported the batch of fuel, and the volume of fuel produced.
The producer of a batch of renewable fuel creates the RIN for
the batch. Once the RIN is created, it remains attached to
that batch of renewable fuel until the fuel is blended with
non-renewable fuel, at which point the RIN may be
“separated” from the fuel and used for compliance
with regulatory renewable volume obligations, held for future
compliance, or traded. If the batch is divided before it is
blended with non-renewable fuel, then the RIN is also
divided. Id. at 8-9.
track RIN transfers, the EPA developed a system called the
EPA Moderated Transaction System. After a producer produces
batches of renewable fuel and creates RINs, the producer must
submit the new RINs to the transaction system within five
days of the RINs' creation. The transaction system
screens each submission and either accepts or rejects the new
RINs. All producers and importers of renewable fuel must
retain all detailed, supporting records. Producers and anyone
else who engages in fuel manufacture and RIN transactions
must also submit quarterly reports to the EPA, detailing all
fuel and RIN generation and transactions for that quarter.
Id. at 9- 10.
has established regulations to regulate the generation and
transfer of RINs. The regulations direct proper creation of
RINs, validity of RINs, who may transfer or receive RINs, the
production process of renewable fuel to support the creation
of RINs, and the use of RINs to satisfy regulatory
obligations. Violating the regulations, or causing others to
violate the regulations, exposes the violator to civil,
criminal, and administrative penalties (Filing No. 152 at
10-11). When individuals violate the law or regulations,
the EPA issues a “notice of violation” to the
individual. Id. at 12. The EPA pursues enforcement
actions against renewable fuel producers and importers that
generate invalid RINs. Id. at 7.
filing this lawsuit, Chepurko contacted the Government on
October 11, 2011, to disclose information about false claims
that had been submitted to the Government. Between October
2011 and April 2012, Chepurko voluntarily disclosed to the
Government through written disclosures and in-person meetings
extensive information that in turn was used as the basis for
the allegations of this lawsuit. Chepurko and his counsel met
with representatives of the United States Attorney's
Office, the Internal Revenue Service, the EPA, the Department
of Justice, and the Securities and Exchange Commission
(Filing No. 152 at 3).
on Chepurko's disclosures, the Government conducted
criminal and civil investigations of the Defendants named in
this action. The EPA issued notices of violation against some
of the Defendants as well as against some of the customers of
the Defendants who were pulled into the Defendants'
fraudulent scheme. At least one civil action, one
administrative action, and two criminal actions were filed by
the Government based on the information disclosed by
Chepurko. Id. at 3-4, 13.
Imperial Petroleum, Inc. (“Imperial”) is located
in Evansville, Indiana, and is the parent company of
Defendant e-Biofuels, LLC (“e-Biofuels”). Located
in Middletown, Indiana, e-Biofuels is the entity in this
action that falsely claimed to produce biodiesel for which
fraudulent RINs were created. Defendant Jeffrey Wilson was
the chairman and president of Imperial. Defendant Craig Ducey
was the chief executive officer of e-Biofuels, and Defendant
Chad Ducey was the chief operating officer of e-Biofuels.
Id. at 5-7.
Caravan Trading, LLC (“Caravan”) is located in
Ramsey, New Jersey. Caravan sold RIN-less biodiesel to
e-Biofuels that e-Biofuels falsely claimed it produced.
Defendant Cima Green, LLC (“Cima Green”) also is
located in Ramsey, New Jersey. Defendant Joseph Furando
(“Mr. Furando”) is the chief executive officer
and part owner of Caravan and Cima Green. Christine Furando
is married to Joseph Furando, and she also is a part owner of
Caravan and Cima Green. Id. Mr. Furando and Jeffrey
Wilson were criminally convicted and are presently in federal
prison for their involvement in the fraudulent scheme alleged
in this civil action. Id. at 5-6.
alleged fraudulent scheme which Chepurko disclosed to the
Government, consisted of e-Biofuels claiming to manufacture
biodiesel from chicken fat and other organic
“feedstock”-the raw materials from which
biodiesel fuel is manufactured. However, in actuality,
e-Biofuels was not manufacturing biodiesel fuel in any
significant quantity. Rather, it simply purchased RIN-less
biodiesel from Astra Oil Company (“Astra”) via
Caravan, transported the fuel to its Indiana facility, and
then resold the fuel as though it had been produced at its
facility (Filing No. 152 at 13).
May 2010 and the summer of 2012, after separating and
retiring RINs, Astra sold RIN-less fuel to Caravan. Caravan
then resold the RIN-less fuel it had purchased from Astra to
Imperial and e-Biofuels. Caravan also created internal
records to give the impression that it was selling Imperial
and e-Biofuels “feedstock” as opposed to finished
biodiesel. Id. at 15. Once Imperial and e-Biofuels
took possession of the RIN-less biodiesel fuel, they
generated new RINs for that volume of fuel as though the
biodiesel fuel had been produced at the e-Biofuels facility.
The creation of new RINs for the same fuel was illegal and
was made possible after Astra had stripped off the RINs and
made a profit from the RINs or used the RINs to meet
requirements of the federal program. Id. Imperial
and e-Biofuels then either sold the fuel with the falsely
generated RINs attached or separated the falsely generated
RINs to sell independently. They also falsely labeled some of
the biodiesel fuel before selling it. Id. at 16.
and e-Biofuels submitted false reports and statements to the
EPA, falsely registering the new RINs to conceal their
scheme, to avoid paying penalties, and to obtain tax credits.
Id. at 14, 17. The Defendants knowingly generated
and conspired to generate invalid RINs for biodiesel for
which RINs previously had been generated. Id. at 14.
More than 33.5 million RINs generated by e-Biofuels were
invalid because they were generated without producing any
qualifying renewable fuel. The majority of these invalid RINs
were transferred to others. Id. at 13. The false
claims and fraudulent conduct in generating more than 33.5
million invalid biodiesel RINs was possible because of the
agreement among and involvement of each of the Defendants.
False Claims Act qui tam action, brought pursuant to
31 U.S.C. § 3729, et seq., was initiated in
June 2012 under case number 1:12-cv-786-TWP-MJD. In September
2013, Caravan, Cima Green, Mr. Furando, e-Biofuels and its
officers, and others were charged by the Government in a
related criminal case. They were charged with conspiracy to
defraud the Government, submitting false claims to the
Government, making false statements under the Clean Air Act,
and other criminal violations. The criminal charges were
based on the same facts of this civil action. See United
States v. Ducey, et. al., No. 1:13-cr-189-SEB-TAB,
Docket No. 1. Jeffrey Wilson of Imperial and Craig Ducey of
e-Biofuels were separately charged by the Government in
another related criminal case in September 2013. That
separate criminal case was based on the same facts of this
civil action and included charges for false statements made
to the Securities and Exchange Commission. See United
States v. Wilson and Ducey, No. 1:13-cr-190-SEB-TAB,
Docket No. 1.
August 5, 2014, Chepurko's qui tam action under
case number 1:12-cv-786-TWP-MJD was consolidated under this
case number (1:14-cv-377-TWP-MJD), and Chepurko's Amended
Complaint was docketed (Filing No. 52; Filing
No. 65). The Amended Complaint asserted three claims
against Ms. Furando, Mr. Furando, e-Biofuels, Caravan, Cima
Green, Imperial, Craig Ducey, Chad Ducey, Jeffrey Wilson, and
April 15, 2015, Ms. Furando personally appeared before the
district court in the related criminal case as the
representative of Caravan and Cima Green. Ms. Furando, on
behalf of these companies, pled guilty pursuant to a written
plea agreement that she had signed. See United States v.
Ducey, et. al., No. 1:13-cr-189-SEB-TAB, Docket Nos.
191, 193, 194. Judgments were entered against Caravan and
Cima Green, and the entities were held jointly and severally
liable with the other criminal ...