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WASHINGTON — Five people, including four Utah family members associated with a polygamous clan, were sentenced to federal prison last week for a billion-dollar tax fraud scheme associated with their biofuel company, according to a statement released April 7.
Prison sentences ranged between six and 40 years.
Testimony in the 2020 trial for Lev Aslan Dermen, a Los Angeles businessman, and court documents in the case support that Dermen conspired with Jacob and Sally Kingston, Isaiah Kingston and Rachel Kingston as the Utah family's company fraudulently claimed over $1 billion from "refundable renewable fuel tax credits."
Washakie Renewable Energy, the company owned by brothers Jacob and Isaiah Kingston, received over $511 million in credits from the IRS — which was distributed between Dermen, the brothers, their mother and Jacob Kingston's wife.
The Kingstons are members of the Davis County Cooperative Society, or the Kingston Order, which practices polygamy.
Albert Childress, an agent with the IRS based in Arizona, said this is "one of the most egregious examples of tax fraud in U.S. history." He said the five individuals went to great lengths to hide proceeds from their fraud.
"The government has made a statement that there will be severe consequences for fraud. Despite your efforts to launder your money, or any attempts to cover your crimes, there is always a trail which our financial investigators can follow, and justice will be done," he said.
The crimes
The U.S. Department of Justice said there were multiple fraudulent schemes as part of this conspiracy, including purchasing biodiesel, exporting it to foreign countries and then changing documents to import the fuel as "feedstock." Then Washakie Renewable Energy claimed it used the feedstock to produce biodiesel — which allowed it to apply for biofuel tax credits.
The company also applied for unearned tax credits by rotating millions of gallons of fuel through the U.S. shipping system, and then claiming it produced fuel.
Compay officials used multiple bank accounts to cycle fraud proceeds, and transferred millions of dollars to companies in Turkey and Luxembourg for international laundering.
The statement said the company also fraudulently obtained and resold Environmental Protection Agency renewable identification numbers — earning about $65 million.
Dermen assured the Kingstons during the fraud that lasted from 2010 to 2018 that their family would be immune from criminal prosecution.
The charges and sentences
Jacob Kingston, 46, was ordered to pay $511 million to the IRS, in addition to paying $338 million imposed by the court, after pleading guilty in July 2019. A statement from the U.S. Department of Justice said he admitted to mail fraud, filing false claims with the IRS, money laundering paired with conspiracy to commit money laundering, obstruction by destroying records paired with conspiracy to destroy records, and witness tampering.
He was sentenced to 18 years in federal prison.
Isaiah Kingston, 42, was also ordered to pay back the $511 million to the IRS and pleaded guilty to similar crimes including conspiracy to commit mail fraud, assisting in filing false tax returns, money laundering and conspiracy to commit money laundering, and obstruction by concealing and destroying records and conspiracy to commit obstruction. He was sentenced to 12 years in federal prison.
The brothers testified at Dermen's trial after pleading guilty to their own charges. Derman, 56, was sentenced to 40 years in federal prison.
Rachel Kingston, 67, worked as the "special projects manager" at Washakie Renewable Energy and the Department of Justice said she created fake invoices and backdated documents to support the false claims the company filed. She pleaded guilty to conspiracy to commit mail fraud, money laundering and obstruction by concealing and destroying records. She was sentenced to seven years in federal prison.
Sally Kingston, 45, also backdated documents and created fake invoices, the statement said. She pleaded guilty to conspiracy to commit mail fraud and conspiracy to commit money laundering and was sentenced to six years in federal prison.
"The significant sentences imposed by the court reflect the breathtaking scope of the defendants' nearly decade-long tax fraud scheme — one of the largest ever," said Stuart M. Goldberg, acting deputy assistant attorney general of the tax division in the Department of Justice.
He said Dermen and the Kingston family cost taxpayers over $500 million, and they attempted to double that amount.
What happened with the money?
Dermen and the Kingstons made some lavish purchases with the money, including a mansion in Sandy for Jacob and Sally Kingston.
Dermen's associates in Turkey rebuilt a 150-foot yacht that was seized by the government in Lebanon and sold for $10.1 million. Dermen used money sent by the Kingstons to purchase land in Belize to build a casino.
Jacob Kingston purchased a $1.8 million 2010 Bugatti Veyron, an elite French sports car, for Dermen as a "gift," and Dermen "gifted" Jacob Kingston a chrome Lamborghini and a gold Ferrari.
Over $35 million was sent by the Kingstons to their extended family.
The U.S. government is seeking forfeiture of multiple properties purchased with the laundered money, including a mansion owned by Dermen in Huntington Beach, California.
Trina A. Higgins, U.S. Attorney for the District of Utah, said her office will continue working on the case as it seeks forfeiture of assets and to recoup losses from the tax fraud.
