Keystone Biofuels owners indicted for alleged $10M fraud

The indictment, filed Wednesday in Pennsylvania’s Middle District court, alleges Keystone Biofuels co-owners Ben Wootton, 52, of Cumberland County, and Race Miner, 48 of Colorado, led a scheme to sell fuel they knew did not legally qualify as biodiesel.

They face charges of conspiracy and making false statements. Miner plans to plead not guilty, said his attorney, Linda Dale Hoffa of Philadelphia-based Dilworth Paxson.

Neither Wootton nor his attorney could be reached for comment Thursday afternoon.

The charges mark the lingering struggles of a company that descended from up-and-coming to bankrupt over the course of a few years.

Keystone Biofuels launched in 2005 in Hampden Township as one of just three companies in the state making biodiesel. The market at the time seemed promising, with the rising price of oil and an increasing number of state and federal tax incentives expected to spur demand.

The phone at the young Cumberland County company was “ringing off the hook,” Miner told the Central Penn Business Journal at the time.

By 2011 the company had moved to a 60,000-square-foot facility in Lower Allen Township, quadrupling Keystone’s footprint. Wootton expected to increase production tenfold and double the 14-person staff.

The biodiesel market, however, hit a steep downturn in 2012, and federal incentives trailed off. The fall happened around the same time that Keystone incurred significant debt to temporarily close and upgrade its new space.

The company filed for Chapter 11 bankruptcy in 2013 with the intention of reorganizing its debts. It owed more than $2.8 million to its top 20 creditors alone.

Still, Wootton remained optimistic. The biodiesel industry seemed positioned for an uptick, and the company seemed to have investors lined up to propel it back into the game.

That comeback never happened, Wootton wrote in a letter to the Environmental Protection Agency in 2015, when he served on the board of a biodiesel trade group. National regulatory delays in 2014 caused the investors to put their plans on hold, he wrote, and the business was ultimately liquidated.

“I lost everything,” he said in the letter. “My life savings, my retirement, my daughters’ college funds, everything but my house, which now has two mortgages on it representing a huge debt.”

The 30 people Keystone employed at its peak were also hurt, Wootton continued. He noted about half of those employees were veterans of wars in Iraq and Afghanistan.

The indictment filed Wednesday says the alleged fraud started in 2009, before the company started its downward spiral.

Keystone took advantage of an EPA program known as the Renewable Fuel Standard, which requires petroleum refiners and importers to either produce a certain amount of renewable fuel or purchase credits from renewable fuel producers, according to court documents.

Producers assign serial numbers called renewable identification numbers to batches of qualified biodiesel, which can then be traded or sold as credits on the open market.

Keystone Biofuels allegedly generated more than 16 million of these numbers, representing about $10 million in credit sales, even though company officials knew their product did not meet the EPA definition of biodiesel.

In one instance, for example, an “unindicted co-conspirator” told Wootton and Miner via email that a sample of the company’s purported biodiesel “failed miserably” to meet EPA standards and that he, the co-conspirator, “prefer[ed] not to ‘doctor’ the samples to get passing results,” according to court documents.

Keystone nonetheless continued selling the product as biofuel, even though it knew it repeatedly failed testing, officials allege.

Keystone Biofuels by Jenni Wentz on Scribd