Biofuel Fraudster Sentenced to Seven Years in Prison for Scamming Multiple Federal Agencies and Customers

The owner of a biofuel company was sentenced to seven years in prison followed by a three-year term of supervised release and ordered to pay $10,207,000 in restitution for defrauding multiple federal agencies and customers.

Following a four-week trial before U.S. District Judge Jeffrey L. Schmehl, a federal jury in the Eastern District of Pennsylvania convicted David Dunham, owner of Smarter Fuel LLC in Wind Gap, Pennsylvania and co-owner of Greenworks Holdings LLC of Allentown, Pennsylvania, of conspiracy to commit wire fraud and defraud the United States; wire fraud; filing false tax documents and obstruction of justice. 

The conviction arose from Dunham’s planning and executing a scheme to defraud the Environmental Protection Agency (EPA), the IRS, the U.S. Department of Agriculture (USDA), and his customers, to obtain renewable fuel credits in his “green energy” business.  

“This sentence sends a clear message that the Department of Justice will not tolerate fraud and will not hesitate to prosecute those who seek to undermine support for true American-made renewable fuel,” said Assistant Attorney General Jeffrey Bossert Clark of the Justice Department’s Environment and Natural Resources Division.  “Mr. Dunham’s crimes were longstanding and elaborate, but this did not stop the Department from ensuring that such crimes are punished and justice is done.”

“David Dunham is a thief, dressed up in ‘green energy’ clothing,” said U.S. Attorney William M. McSwain for the Eastern District of Pennsylvania.  “He thought he could con not just one, but several federal agencies. Eventually, his lies caught up to him and now his reward is a long stint in federal prison.”

“David Dunham used false and fraudulent pretenses to steal millions of dollars from the Government,” said IRS Criminal Investigation Special Agent in Charge Thomas Fattorusso. “His loss of liberty today is the price he must pay for scamming the Government and stealing from hard working American taxpayers.”

To carry out his green energy scam, from 2010 to 2015 Dunham fraudulently applied for, received, and sold EPA “credits” for producing biofuels that he, in fact, did not produce and, in many instances, had never possessed in the first place.  Dunham also sought and received millions of dollars from the IRS and the USDA based on the same falsehoods.  All told, based on the repeated falsehoods he told the federal agencies, Dunham obtained nearly $50 million in fraudulent revenue.  In carrying out this massive fraud, Dunham used his businesses, Smarter Fuel, which he owned, and Greenworks Holdings, which he operated with his co-defendant, Ralph Tomasso, who previously pleaded guilty to conspiracy to defraud federal programs.

The evidence at trial also showed that Dunham engaged in multiple cover-ups designed to hide his crimes from authorities.  These included altering his accounting records the day before an IRS audit in 2010, and providing a USDA auditor with dozens of falsified records, which Dunham had ordered an employee to produce, during a 2012 audit.

The case was investigated by the EPA’s Criminal Investigation Division, the IRS Criminal Investigation, and the USDA’s Office of Inspector General.  The case is being prosecuted by Assistant U.S. Attorney Mary E. Crawley and Trial Attorney Adam Cullman of the Environment and Natural Resources Division.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

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    Good evening and thank you for inviting me to join you this evening. I’m pleased to have the opportunity to discuss the Antitrust Division’s intellectual property and antitrust portfolio, which has been a cornerstone of our efforts over the last few years. I’d like to thank Tim, Jacob, and Craig for their excellent setup, which allows me to dive into some of the critical issues we’ve spent the last several years addressing.
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  • Science & Tech Spotlight: Agile Software Development
    In U.S GAO News
    Why This Matters Agile software development has the potential to save the federal government billions of dollars and significant time, allowing agencies to deliver software more efficiently and effectively for American taxpayers. However, the transition to Agile requires an investment in new tools and processes, which can be costly and time consuming. The Methodology What is it? Agile is an approach to software development that encourages collaboration across an organization and allows requirements to evolve as a program progresses. Agile software development emphasizes iterative delivery; that is, the development of software in short, incremental stages. Customers continuously provide feedback on the software's functionality and quality. By engaging customers early and iterating often, agencies that adopt Agile can also reduce the risks of funding failing programs or outdated technology. Figure 1. Cycle of Agile software development How does it work? Agile software development is well suited for programs where the end goal is known, but specific details about their implementation may be refined along the way. Agile is implemented in different ways. For example, Scrum is a framework focused on teams, Scaled Agile Framework focuses on scaling Agile to larger groups, and DevOps extends the Agile principle of collaboration and unites the development and operation teams. Scrum, one of the most common Agile frameworks, organizes teams using defined roles, such as the product owner, who represents the customer, prioritizes work, and accepts completed software. In Scrum, development is broken down into timed iterations called sprints, where teams commit to complete specific requirements within a defined time frame. During a sprint, teams meet for daily stand-up meetings. At the end of a sprint, teams present the completed work to the product owner for acceptance. At a retrospective meeting following each sprint, team members discuss lessons learned and any changes needed to improve the process. Sprints allow for distinct, consistent, and measurable progress of prioritized software features. How mature is it? Organizations have used versions of incremental software development since the 1950s, with various groups creating Agile frameworks in the 1990s, including Scrum in 1995. In 2001, a group of software developers created the Agile Manifesto, which documents the guiding principles of Agile. Following this, Agile practitioners introduced new frameworks, such as Kanban, which optimizes work output by visualizing its flow. The Federal Information Technology Acquisition Reform Act (FITARA), enacted in 2014, includes a provision for the Office of Management and Budget to require the Chief Information Officers of covered agencies to certify that IT investments are adequately implementing incremental development. This development approach delivers capabilities more rapidly by dividing an investment into smaller parts. As a result, more agencies are now adopting an incremental, Agile, approach to software development. For example, in 2016, the Department of Homeland Security announced five Agile pilot programs. In 2020, at least 22 Department of Defense major defense acquisition programs reported using Agile development methods.  As the federal government continues to adopt Agile, effective oversight of these programs will be increasingly crucial. Our GAO Agile Assessment Guide, released in 2020, takes a closer look at the following categories of best practices: Agile adoption. This area focuses on team dynamics, program operations, and organization environments. One best practice for teams is to have repeatable processes in place such as continuous integration, which automates parts of development and testing. At the program operations level, staff should be appropriately trained in Agile methods. And at an organizational level, a best practice is to create a culture that supports Agile methods. Requirements development and management. Requirements—sometimes called user stories—are important in making sure the final product will function as intended. Best practices in this area include eliciting and prioritizing requirements and ensuring work meets those requirements. Acquisition strategy. Contractors may have a role in an Agile program in government. However, long timelines to award contracts and costly changes are major hurdles to executing Agile programs. One way to clear these hurdles is for organizations to create an integrated team with personnel from contracting, the program office, and software development. Clearly identifying team roles will alleviate bottlenecks in the development process. Figure 2. Different roles come together to make an Agile software development team. Program monitoring and control. Many Agile documents may be used to generate reliable cost and schedule estimates throughout a program’s life-cycle. Metrics. It is critical that metrics align with and prioritize organization-wide goals and objectives while simultaneously meeting customer needs. Such metrics in Agile include the number of features delivered to customers, the number of defects, and overall customer satisfaction.  Opportunities Flexibility. An Agile approach provides flexibility when customers’ needs change and as technology rapidly evolves. Risk reduction. Measuring progress during frequent iterations can reduce technical and programmatic risk. For example, routine retrospectives allow the team to reflect upon and improve the development process for the next iteration. Quicker deliveries. Through incremental releases, agencies can rapidly determine if newly produced software is meeting their needs. With Agile, these deliveries are typically within months, instead of alternative development methods, which can take years. Challenges GAO has previously reported on challenges the federal government faces in applying Agile methods; for the full report see GAO-12-681. Lack of organizational commitment. For example, organizations need to create a dedicated Agile team, which is a challenge when there is an insufficient number of staff, or when staff have several simultaneous duties. Resources needed to transition to Agile. An organization transitioning to Agile may need to invest in new tools, practices, and processes, which can be expensive and time consuming. Mistrust in iterative solutions. Customers who typically see a solution as a whole may be disappointed by the delivery of a small piece of functionality. Misaligned agency practices. Some agency practices, such as procurement, compliance reviews, federal reporting, and status tracking are not designed to support Agile software development. Policy and Context Questions In what ways can Agile help the federal government improve the management of IT acquisitions and operations, an area GAO has identified as high risk for the federal government? How can policymakers implement clear guidance about the use of Agile software development, such as reporting metrics, to better support Agile methods? How might resources need to shift to accommodate the adoption of Agile in federal agencies? What risks could those shifts pose? What updates to agency practices are worth pursuing to support Agile software development? For more information, contact Tim Persons at (202) 512-6888 or personst@gao.gov.
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  • High Ranking MS-13 Gang Member Facing Federal Firearms Charges After Nightclub Shooting
    In Crime News
    A criminal complaint was unsealed Nov. 6 charging the local leader of an MS-13 Gang clique with being a convicted felon in possession of a firearm, announced Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division and U.S. Attorney Don Cochran for the Middle District of Tennessee.
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  • Pennsylvania Man Charged with Trafficking in Endangered and Invasive Fish
    In Crime News
    A Pennsylvania man has been indicted in the Western District of Pennsylvania for violating the Lacey Act.
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  • Small Business Contracting: Better Documentation and Reporting Needed on Procurement Center Representatives
    In U.S GAO News
    The Small Business Administration (SBA) does not maintain complete documentation to support data on the activities of procurement center representatives (PCR), which is information used to oversee PCRs and assess their performance. PCRs are responsible for helping small businesses gain access to federal contracting and subcontracting opportunities—for example, by making set-aside recommendations to federal agency contracting officers. SBA area offices generate a monthly report that summarizes data on PCRs' activities and accomplishments, and SBA procedures require PCRs to maintain these reports and the supporting documentation. GAO found that they do not consistently do either. According to SBA officials, in some cases the supporting documentation, which PCRs store on their individual computers or in their offices, either was destroyed or was not maintained after PCRs left their positions. Officials told GAO that SBA recently implemented a new database and established a policy requiring the monthly reports to be maintained in the database. However, SBA has not established a centralized means of maintaining the supporting documentation. A central repository for PCRs to store their supporting documentation would provide greater assurance that the documentation is maintained as required and help SBA verify the accuracy of the data PCRs report on their activities. SBA assigns PCRs to buying activities, divisions in federal agencies that purchase goods and services based on geographic coverage and other factors. Specifically, PCRs are assigned within one of six regional areas to ensure geographic coverage, at specific federal agencies, and at buying activities that have significant opportunities for small business contracting. However, SBA has not submitted required reports to Congress on its rationale for assigning PCRs to cover buying activities. The Small Business Act, as amended, requires that SBA submit a report (1) identifying each area for which SBA has assigned a PCR, (2) explaining why SBA selected the areas for assignment, and (3) describing the activities performed by PCRs. SBA was required to submit the first report to Congress by December 26, 2010, and subsequent reports every 3 years thereafter. SBA officials told GAO they were not aware of the reporting requirement. As a result, Congress lacks the information these reports were intended to provide, information that could be useful for its oversight of PCRs. The Small Business Act establishes tools to enhance procurement opportunities for small businesses, such as set-asides and requirements that large contractors set goals for using small business subcontractors. SBA's PCRs advocate for the inclusion of small businesses during the procurement process. GAO was asked to examine how PCRs help small businesses gain access to federal contracting and subcontracting opportunities. This report addresses, among other objectives, (1) documentation SBA maintains on the activities of PCRs and (2) how SBA assigns PCRs to cover buying activities and its requirement to report to Congress on these assignments. GAO reviewed SBA policies and procedures, data on PCR assignments, and selected data reported by PCRs and related documentation. GAO also interviewed agency officials. GAO recommends that SBA (1) develop a central repository for PCRs to store the supporting documentation for the data they report on their activities and (2) ensure that it submits required reports to Congress on PCRs' assignments and activities. SBA concurred with both recommendations. For more information, contact William B. Shear at (202) 512-8678 or shearw@gao.gov.
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  • Former Hilo Correctional Officer Pleads Guilty for Assaulting an Inmate and Conspiring with Other Officers to Cover it Up
    In Crime News
    A former correctional officer at the Hawaii Community Correctional Center pleaded guilty to three felony offenses yesterday for assaulting an inmate; for failing to protect the inmate from being assaulted by three other correctional officers; and for conspiring with those officers to cover it up.
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  • Attorney General William Barr Delivers Video Remarks for the Virtual National Law Enforcement Training on Child Exploitation
    In Crime News
    Good morning, the Department of Justice is pleased to once again host the National Law Enforcement Training on Child Exploitation.
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