A defense attorney on Thursday placed the blame for the multimillion-dollar Washakie Renewable Energy fraud on the company’s CEO, Jacob Kingston, and the Utah polygamous sect to which he belongs.
“They deal in fraud,” Mark Geragos said during his opening statement in Salt Lake City’s federal court. “Fraud is Game 1. That is all they do for generations.”
Geragos is representing Lev Dermen, the only defendant remaining in the Washakie case.
While Dermen did not put his name or his companies’ names on any of the fraudulent biofuel applications to the U.S. government, federal prosecutor Leslie Goemaat countered, the illegal scheme accelerated when he met Kingston in 2012, jumping from $42 million in false claims to $1.1 billion.
The prosecutor said Dermen, who was known as Levon Termendzhyan until changing his name in 2017, promised Kingston something no other co-conspirator could.
“Levon Termendzhyan promised him the protection of his umbrella of law enforcement,” Goemaat said, “who Levon Termendzhyan said had been protecting him from prosecution for his whole life.”
[Read more: Trial for the last Washakie fraud defendant begins this week: Here’s what you need to know]
(Courtesy U.S. District Court for the District of Utah) Lev Dermen, left, stands with Jacob Kingston at a banquet hall in Southern California in 2014. Federal prosecutors say this photo is evidence of how Kingston purchased the 2010 Bugatti Veyron, left, for $1.72 million to give Dermen, and Dermen purchased the Ferrari, right to give to Kingston to launder money from a biofuel fraud. Kingston has pleaded guilty to crimes. Dermen has pleaded not guilty. Behind the men is a sculpture of a lion's head, the animal Dermen associates himself with.
Dermen traveled with bodyguards, hung out with law enforcement and portrayed himself as having government connections that could shield Kingston from arrest and prosecution, the prosecutor said. That was important, she said, because Kingston already had committed fraud and because he belonged to a polygamous sect called the Davis County Cooperative Society, also known as the Kingston Group or The Order.
Goemaat said $45 million in fraud proceeds went to The Order; IRS agents have been able to trace $72 million that went to Dermen or six of his companies.
For his part, Geragos — who has represented music stars Michael Jackson and Chris Brown and actors Winona Ryder and Jussie Smollett — described incestuous marriages within The Order and public assistance schemes designed to finance humongous families. He displayed a photo of Paul Kingston, Jacob Kingston’s uncle and purportedly the top man in The Order.
Jacob Kingston “didn’t want this fraud money going to his Uncle Paul,” Geragos said. “He wanted to circumvent The Order.”
To keep his mother and legal wife from going to prison, Jacob Kingston agreed to plead guilty, Geragos argued to the jury, and to “blame Levon.”
Geragos criticized other prosecution witnesses, too, saying the government plans to present a series of people who have admitted to crimes related to biofuel fraud or public corruption.
“That’s all this case is," the attorney added, “people lying, getting caught and lying again.”
(Francisco Kjolseth | The Salt Lake Tribune) Tyler Hatcher, assistant special agent in charge of IRS Criminal Investigations and Leslie Goemaat, special assistant U.S. attorney, arrive for the final day of jury selection at the federal courthouse in Salt Lake City, Wednesday, Jan. 29, 2020, in the trial of Lev Dermen, who is charged with 10 felonies related to fraud at Washakie Renewable Energy.
The differing styles of the two lead attorneys were on display Thursday. Goemaat stood at a podium, appeared well rehearsed and had exhibits at the ready. Geragos walked around the courtroom holding a microphone, was conversational and asked his co-counsel to remind him of the names of some of the companies and witnesses at issue in the trial.
The 53-year-old Dermen is charged with 10 counts: one count of conspiracy to commit mail fraud, one count of conspiracy to commit money laundering and eight counts of money laundering. He faces up to 180 years in prison.
Lawyers and U.S. District Court Judge Jill Parrish spent the first three days of the week seating a jury from a pool of northern Utahns. The sides selected 12 jurors and four alternates. For now, the panel has nine men and seven women.
For a few years in the mid-2010s, Washakie Renewable Energy was one of Utah’s most-visible companies. It spent $4 million advertising through the Utah Jazz, Goemaat said Thursday.
(Francisco Kjolseth | The Salt Lake Tribune) Defense attorney Linda Moreno arrives for the final day of jury selection at the federal courthouse in Salt Lake City, Wednesday, Jan. 29, 2020, in the trial of Lev Dermen, who is charged with 10 felonies related to fraud at Washakie Renewable Energy.
Washakie was supposed to be making biodiesel at its Box Elder County plant in Plymouth from used cooking grease, cornstalks and other organics. The U.S. government provided a tax credit for every gallon produced.
Goemaat told the jury that Washakie developed a shipping network that moved biofuel to countries such as India and Panama. The biofuel, which already had received a U.S. tax credit, was relabeled to such things as used cooking grease and then imported back to a port in Los Angeles. Documents were then falsified to make it appear as though the so-called cooking grease was processed into biofuel, making it eligible for a tax credit again.
“Not only did he know that money was stolen,” Goemaat said of Dermen, “he helped steal it.”
Washakie applied for $1.1 billion in tax credits, but the U.S. Treasury Department approved a payout of $470 million, Goemaat explained. That is the amount Washakie and Dermen are accused of stealing. Documents filed earlier in the case placed the theft at $511 million.
To launder the money, Goemaat argued, Dermen told Jacob Kingston where to send the proceeds. He had $134 million sent to Turkey, she said, and much of that was then transferred to Dermen and his companies.
(Francisco Kjolseth | The Salt Lake Tribune) Richard Rolwing, center, and Arthur Ewenczyk, at right, special assistant United States attorneys, arrive at the federal courthouse Wednesday, Jan. 29, 2020, in Salt Lake City, for the trial of Lev Dermen, who is charged with 10 felonies related to fraud at Washakie Renewable Energy.
Dermen also had Jacob Kingston buy a $3.5 million mansion in Huntington Beach, Calif., for Dermen, the prosecutor contended, and Dermen sent Jacob Kingston $3.16 million for a mansion in Sandy, Utah.
Jacob Kingston paid $1.72 million for a 2010 Bugatti Veyron — a French sports car — that went to Dermen. At a Pioneer Day picnic for Jacob Kingston’s family in Utah, Goemaat said, Dermen arrived and tossed Jacob Kingston keys to a Lamborghini.
Jacob Kingston has since pleaded guilty to 43 criminal counts and admitted he was buying biofuel and submitting falsified papers to claim the tax credit. His brother, Isaiah Kingston, also pleaded guilty to crimes. The brothers were both on a witness list read to potential jurors Monday. They are to testify in exchange for lesser sentences.
The brothers’ mother, Rachel Kingston, and Jacob’s legal wife, Sally Kingston, also pleaded guilty to crimes and are awaiting sentencing.
The defense is prepared to call four people with the surname Kingston to the witness stand, according to the list provided to potential jurors.
(Leah Hogsten | The Salt Lake Tribune) Kingston brothers Isaiah (left) and Jacob co-own WRE or Washakie Renewable Energy, that produces 10milion gallons of biofuel. The largest biodiesel producer in Utah, Washakie Renewable Energy, held an open house in Plymouth on Thursday, September 1, 2011 to showcase its new production facility.
Jacob Kingston also is expected to testify about how he and Dermen bribed a Belize security minister named John Saldivar. According to documents released before the trial and discussion from lawyers during a Jan. 13 hearing, Jacob Kingston will testify Dermen was making cash payments to Saldivar and that Jacob Kingston later took over making those payments.
Saldivar issued a statement Thursday denying any bribery.
“There is no court document that points to any bribery on my part,” he said, “and I continue to maintain that I have never done any favors for Lev Dermen in return for any cash and there will be absolutely no evidence that Jacob Kingston can truthfully provide to prove otherwise.”
The Central American country’s main opposition party has called on the prime minister to fire Saldivar.
The prosecution’s first witness was Katirina Pattison. She was the chief operating officer for two companies that bought and sold biodiesel in Indiana and did business with Washakie. In 2016, she pleaded guilty to one count of conspiracy to commit fraud and received three years of probation.
“Unless we had Levon’s signature, we would not be able to do business with Washakie,” Pattison testified. “That was our understanding.”
Pattison went on to describe meetings with Dermen and Jacob Kingston in which all parties agreed to fraudulently submit biofuel for tax credits.
Pattison acknowledged under cross-examination that at a dinner in Miami, her boss wanted to hammer out a fraudulent deal with Dermen, but Dermen didn’t want to discuss any business. She also acknowledged testifying in an earlier proceeding that no deal with Dermen was reached.
The six- to eight-week trial is taking Friday off. Testimony resumes Monday.
