DOJ: $9 Million Green Energy Scam Defendant Sentenced to 6 Years in Prison

After convincing investors to contribute nearly $9 million in a fraudulent green energy undertaking, 44-year-old Ray Brewer has been sentenced to more than six years in prison. According to the US Department of Justice (DOJ), Brewer had convinced investors he was building and running equipment that converted cow manure into green energy using anaerobic digesters. In reality, Brewer had been running a green energy Ponzi scheme for over five years.

Ponzi Scheme Charges

According to the DOJ, between March 2014 and December 2019, Brewer resorted to an elaborate web of deceptions to convince his scam victims that the green energy project they’d invested in was real. This included: 

• Falsifying bank documents showing millions in approved loans. 
• Faking pictures showing the anaerobic digesters under construction.
• Sending fake invoices, construction schedules, and power generation reports for the digesters.
• Leading tours of dairies where he claimed the equipment would be installed.
• Forging lease agreements with the dairies he claimed had agreed to host the green energy equipment.
• Forging documentation appearing to show successful fundraising for the project through contracts with multinational corporations.

Brewer also claimed that the methane produced was generating Renewable Energy Credits (RECs). Instead, he was using the millions of investment dollars he received to refund other investors and to benefit himself, including building a custom home and buying land and vehicles. To conceal the origin of the funds, Brewer  deposited the investment funds into various accounts under the names of family, other entities, and a pseudonym.

Green Energy Fraud and Corporate Transparency Gaps

As global warming concerns grow, so do programs to combat its impact, such as carbon offsetting – despite the ethical issues associated with some of its applications, like human rights abuses and a lack of transparency or regulation. But governments are taking notice of the need for new energy solutions. In August 2022, for example, the US government passed a $430 billion green energy subsidy package as part of the Inflation Reduction Act. 

Yet as the world focuses on green energy, fraudsters are capitalizing on the trend. In June 2022, Jeff Carpoff was sentenced to prison for thirty years for a billion-dollar Ponzi scheme involving his green energy company, DC Solar. Although the scheme started as a legitimate business venture, it went south when Carpoff’s lack of knowledge in business and solar engineering began undermining the initial investment plan. Ultimately, according to the DOJ, Carpoff and multiple accomplices – including his wife Paulette – ended up selling solar generators that never existed and using the investment funds they received to fund a luxurious lifestyle.

Due to low regulations, there are also transparency concerns associated with mainstream carbon offsetting initiatives. A recent analysis by the Guardian, SourceMaterial, and DIE ZEIT claimed that most carbon offsets sold by a leading certifier had not reduced deforestation. A similar investigation by Follow the Money also revealed concerns over the accuracy of another leading company’s carbon offsetting claims. To explain how they would deal with gross overestimates, the firm purportedly said it would solve the problem by selling future credits more slowly – using future sales to offset their offsets, as Follow the Money put it.

The problem of greenwashing is not lost on regulators, who are beginning to take steps to mitigate the damage. In the US, the Securities and Exchange Commission announced a proposal in 2022 designed to increase scrutiny on Environmental, Social, and Governance (ESG) investments. The proposal seeks to require disclosures regarding ESG funds to prevent misleading investors. 

Key Takeaways

As the importance of ESG practices rises in the eyes of regulators and the entities they regulate, firms should maintain a keen awareness of the regulations, ethical concerns, and risks surrounding environmental scams and greenwashing trends. This means performing due diligence on their own green investments and ensuring responsible operations vis-a-vis customers. 

Our 2023 State of Financial Crime Report found that investment fraud is a top concern for firms worldwide. US Sentencing Commission statistics show that while the number of securities and investment fraud offenders has declined over the last five years, the median loss incurred has soared to more than $2,880,000. In the United Kingdom, the 2023 Financial Conduct Authority (FCA) Handbook lists best practices banks should consider when screening for this fraud typology. Firms in the United States should consider these tips, which include:

• Consider fraud loss in regular risk assessments.
• Contact customers in a timely manner if investment fraud is suspected.
• Tune transaction monitoring rules for investment fraud typologies, as recommended by subject matter experts.

For firms offering ESG-related products to customers, FINRA’s 2023 guidance urges communication that accurately represents the offerings and their risks.