A Utah-based biodiesel company that barely produced a drop of its own fuel. A California gas station owner who allegedly helped steer half a billion taxpayer dollars into luxury cars and desert homes. And a federal incentive program, designed to boost clean energy, that instead bankrolled a fraud stretching from Salt Lake City to India.
That is the picture painted by the March 20, 2020, conviction of Lev Dermen in Utah federal court. The jury found him guilty on all ten felony counts. The charges: conspiracy, money laundering, mail fraud. The maximum sentence: 180 years in prison. The scale: roughly $500 million taken from the U.S. Department of Energy.
The fallout reaches well beyond Dermen. The scheme depended on the Kingston brothers, Jacob and his sibling, who controlled Washakie Renewable Energy. They claimed to be Utah’s largest producer of clean-burning biodiesel. They were not. Instead, the company bought second-hand biofuels from India and Panama. Then they filed for federal payments that were supposed to go only to domestic manufacturers.
Between 2010 and 2016, the government paid up to one dollar for every gallon of biodiesel produced by qualifying entities. Washakie collected that money. Dermen helped them apply for the grants and tax credits. Federal auditors eventually demanded proof of domestic production. The company could not provide it. By then, the money was gone.
Where it went is now part of the court record. The prosecution showed that the defendants used the illicit proceeds to buy luxury homes. They bought high-end sports cars. The fraud paid for a lifestyle that had nothing to do with renewable fuel. The conviction makes clear that the government intends to take that back. Restitution is likely to be a central part of the sentencing.
The case also touches the polygamous Kingston group, a Utah-based community with a long history of run-ins with federal law. Jacob Kingston and his brother operated within that structure. Their business was the vehicle for the fraud. Dermen, the outsider from California, provided the connection to the federal incentive program. Together, they exploited a system designed to promote clean energy. The system failed to catch them for years.
What comes next for the Department of Energy’s biofuel subsidy program is uncertain. The fraud exposed a gap in oversight. Companies were paid based on their own claims of production. Audits came later, sometimes too late. The program is meant to reduce dependence on fossil fuels. It is also a target for fraud. The Dermen case is not the first. It is the largest.
Sentencing is pending. Dermen faces up to 180 years. That is a life sentence for a man already well into middle age. The judge will decide how much of that maximum to impose. The prosecution will push for a number that sends a message. The defense will argue for leniency. The victims — American taxpayers — will not get their half-billion back anytime soon.
The fraud lasted six years. It took the government four years to bring it to trial. The money is gone. The cars and houses may be seized. The biodiesel program will likely face new scrutiny. None of that changes the core fact: a gas station owner and a group of polygamists found a way to turn a clean-energy subsidy into a criminal enterprise. They almost got away with it.
