Saturday, October 31, 2020

L.A. businessman convicted in biofuel tax fraud case

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Lev Aslan Dermen had beaten big cases before. A 1993 federal tax fraud charge ended in acquittal. Charged in 2003 with assaulting a Glendale policeman, the jury deadlocked in the first trial and acquitted in the second.

On Monday afternoon, in the federal courthouse in Salt Lake City, the petroleum magnate listened to the verdict at the close of his seven-week trial for fraud and money laundering, and it was a word he’d never heard uttered before by a jury: Guilty, 10 times.

The verdict — guilty on 10 felony counts — was not just a courtroom defeat for Dermen, one that will likely result in a significant prison sentence. It brought to an end the impression, earned after a string of acquittals and fizzled investigations, that Dermen was untouchable. Until Monday, he had never been convicted of a felony.

His attorney, Mark Geragos, called the verdict “a travesty” and criticized the court’s decision to allow the jury to continue deliberating in spite of the coronavirus pandemic. Geragos noted the 12 jurors returned their verdict just minutes after President Trump warned the country against meeting in groups of 10 people or more.

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“With respect, the defense believes this is a complete travesty and a prima facie due process and constitutional violation,” Geragos said. Crowded in “a potentially life-threatening environment,” the jury considered the complicated case for less than eight hours before reaching a verdict that “was not deliberated fully and fairly,” he said.

Geragos asked U.S. District Judge Jill N. Parish to declare a mistrial, writing in a motion that Dermen deserves to have his guilt or innocence determined by “jurors free from concerns of life, disease, and death.”

Throughout the seven-week trial, prosecutors brought evidence of a brazen scheme to loot a half-billion dollars in subsidies from the U.S. Treasury. Dermen, they alleged, conspired with Jacob Kingston, the leader of a polygamist sect in Utah and chief executive of Washakie Renewable Energy, a company that claimed to convert cooking oil and similar materials into biofuel but in fact made hardly any renewable energy at all.

Kingston, who pleaded guilty to several dozen felonies and testified against Dermen, has admitted playing a shell game with the federal government, shuttling batches of fuel between companies and falsifying paperwork to claim the $1-per-gallon subsidy earmarked for biofuel producers. He pleaded guilty in exchange for a sentence not to exceed 30 years in prison.

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Once Kingston met Dermen in 2012, prosecutors said, the fraud accelerated.

Dermen, born Levon Termendzhyan, left Armenia at 14 for Los Angeles and built an empire of gas stations, truck stops and energy companies in Southern California. He lived in a West L.A. mansion, drove a Bugatti, surrounded himself with bodyguards and beat case after case, beginning with a 1993 federal charge of taking part in a diesel tax scheme that ended in acquittal.

In 2003, Dermen was charged with assaulting a Glendale detective who had been tailing his cousin. He was acquitted after two trials.

In 2017, Los Angeles Police Department detectives and federal agents raided his homes and businesses, seeking evidence of money laundering, tax evasion and grand theft, among other suspected crimes, according to a copy of the search warrant. They hauled away Dermen’s business records, luxury cars, watches, Hermes bags and millions of dollars in cash — all of which were returned after county prosecutors declined to file charges.

Dermen seemed immune to law enforcement, prosecutors said, and he cashed in on this impression by offering Kingston the protection of an “umbrella” — a supposed network of law enforcement officials who would allow Dermen and his conspirators to operate with impunity. With Dermen’s assurance he was protected, Kingston testified, he began filing claims for ever-larger sums of subsidies.

Prosecutors did not allege that Dermen’s “umbrella” actually existed — only that Kingston and his family believed it did, and transferred to Dermen tens of millions of dollars to pay it off.

Dermen did, however, surround himself with law enforcement figures. Among his associates were Felix Cisneros, a former agent with Homeland Security Investigations, and John Saro Balian, a former narcotics detective with the Glendale Police Department.

Cisneros was convicted in 2018 of helping Dermen’s business partner, Santiago Garcia Gutierrez, travel illegally between the United States and Mexico, where he was negotiating a deal on Dermen’s behalf with Pemex, the Mexican state oil company. Cisneros served a year in federal prison.

Dermen and Balian were close associates for a decade before falling out in 2016. A Mexican Mafia associate told an LAPD detective that Balian offered him and another gang member $100,000 to “scare” someone, which led to a drive-by shooting that riddled an SUV carrying Dermen’s son with bullets.

Balian was not charged in the incident and has denied involvement in the attack. He pleaded guilty in 2018 to three felonies, none of them related to his association with Dermen, and served 21 months in federal custody. He was released in November.

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