Tuesday, April 20, 2021

Martin Shain, energy consultant, pleads guilty in tax credit bribery scheme

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A Seattle energy consultant pleaded guilty Wednesday to tax evasion and fraud charges in connection with a tax credit brokering scheme he masterminded with the help of an Oregon Department of Energy manager.

Martin Shain pleaded guilty in U.S. District Court in Portland to one count each of tax evasion and conspiracy to defraud the United States. He’s scheduled for sentencing Sept. 25 to accommodate a medical procedure. Prosecutors have recommended a 46-month sentence.

Shain also is slated to be sentenced on state charges next month. He pleaded guilty to tax evasion May 15 in Marion County Circuit Court. He also pleaded no contest to charges of forgery, bribery, racketeering and grand theft, acknowledging the state has enough evidence to convict him of those charges, too. His agreement with state prosecutors included a recommended sentence of 48 to 60 months, to be served concurrently with his federal sentence.

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In the end, he could end up spending less time in jail than Joe Colello, the Energy Department employee who accepted more than $300,000 in bribes from Shain to help facilitate the sale of state tax credits. Those deals netted Shain $1.34 million in commissions over a three-year period starting in mid-2012. He failed to report the income or pay taxes on it, and took steps to conceal it, prosecutors said. Colello drew a five-year term for his role in the scheme.

Shain faces a potential fine of $250,000 and a maximum sentence of five years on each of the federal charges. His state plea agreement also included $2.2 million in restitution. That includes $1.3 million in commissions that Colello was ordered to jointly repay with Shain to the towns, transit agencies, universities and private companies that hired Shain to sell their tax credits.

Until 2015, Colello oversaw the sale of state energy tax credits at the Department of Energy. State rules allowed the original recipients of the credits to sell them to a third party at a discount, and it was Colello’s job to match sellers with buyers and process the transactions for a small fee.

Sellers also could use outside brokers to find buyers and complete the deals. In 2012, Shain set up a company in his mother’s name to start brokering credits, then arranged his scheme with Colello. Using his insider knowledge, Colello steered Shain to public agencies and companies looking to sell their credits. Once Shain had secured a brokerage contract, Colello would then tap his list of buyers and complete the deals, crediting Shain with finding buyers who had actually gone directly to the state looking for available credits.

From 2012 to 2015, Shain’s brokerage company earned $1.3 million in commissions from 11 clients. In turn, prosecutors say, Shain sent approximately 58 cashier’s checks to Colello or his girlfriend totaling more than $300,000.

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The kickbacks scheme came to light after The Oregonian/OregonLive published an investigation showing the state had improperly awarded the $12 million in tax credits to a series of university solar projects based on forged documents. Shain was the state’s consultant on those projects, responsible for obtaining the tax credits. With Colello’s assistance, he also sold the tax credits for the solar projects, which brought in the largest portion of the illicit commissions earned.

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