A northern Iowa businessman who promoted his biofuels investments in North Dakota on Wednesday in Cedar Rapids, Iowa, was sentenced to 13 months in federal prison for failing to pay employment taxes.
Darrell Duane Smith, 60, of Forest City, Iowa, last June pled guilty to the tax charges. In addition to jail time, he was also ordered to serve two years of a supervised release after that prison term is completed.
Randy Less, a business associate who worked with Smith to run a non-corn ethanol plant at Hopkinton, Iowa, asked for his sentencing to be delayed until March 23 after being convicted of similar charges. Less also pled guilty in June for failing to pay employment taxes and to violating the Clean Water Act.
Smith was president and general partner of Energae, LP, of Clear Lake, Iowa. Energae in turn was an investor in Permeate Refining LLC, the ethanol plant at Hopkinton. The company also controlled a waste wood-to-electricity plant at Cedar Rapids, Iowa.
The U.S. Attorney's office for the Northern District of Iowa in Cedar Rapids, said that Smith controlled finances of Permeat which from the first quarter of 2011 to the third quarter of 2012 failed to pay more than $502,863 in federal taxes. Evidence showed that a subordinate had made some payments to the Internal Revenue Service and that Smith stopped making other payments.
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Smith and associates in March 2012 promoted converting a mothballed corn ethanol plant at Grafton, N.D., into one that would make their sugar beets into ethanol. The beet project never happened, but some North Dakotans invested in the Hopkinton and Cedar Rapids plants. A former stockbroker, Smith has been accused of mishandling funds or removing funds from investor accounts without prior consent. Two North Dakotans threatened to force Energae into receivership but dropped those actions when they were repaid their investments.
Iowa officials have deemed that some tax credits Smith sold investors had no value. In the sentencing on the tax charges, prosecutors said that investigations into Smith's investment solicitations were continuing.
