Iowa biofuels promoter to plead guilty

CEDAR RAPIDS, Iowa -- An Iowa biofuels promoter and former stock broker plans to plead guilty to federal fraud charges, meaning he'll move from county jail to federal prison this fall.

Darrel Smith
"At $1.40 a gallon, you all would be crazy not to do it, you know?" says Darrell Smith, chief operations officer for Energae LP Holdings, Clear Lake, Iowa, urging Grafton, N.D., area farmers to invest $10,000 into a beet-to-ethanol plant. (Mikkel Pates, Agweek)

CEDAR RAPIDS, Iowa - An Iowa biofuels promoter and former stock broker plans to plead guilty to federal fraud charges, meaning he'll move from county jail to federal prison this fall.

Darrell Duane Smith, 61, of Forest City, on May 22 announced he will waive indictment, and plead guilty to felony wire fraud and aggravated identity theft charges, eliminating the need for a grand jury.

The plea will be formally entered on Monday, June 5, in a guilty plea hearing before U.S. District Court Judge Linda R. Reade in Cedar Rapids, Iowa. Tony Morfitt, an assistant U.S. attorney, said the maximum penalty for a wire fraud charge is 20 years and the maximum sentence on the identity theft charge is two years.

Morfitt acknowledged, however, that Reade will set actual penalties according to federal guidelines, including the amount of financial loss and the number of victims. Judges typically set sentencing hearings in three or four months after prosecutors complete a presentence report.

Smith, who has been in jail since early 2016 because of separate federal charges involving failure to pay federal taxes for employees, was denied pretrial release on the new charges, Morfitt said.


Smith's attorney, Michael Lehammer of Cedar Rapids, Iowa, could not be reached for comment on the intended guilty plea. Lehammer had asked for pretrial release, citing Smith's poor health, including back pain and dental problems.

ND, Minnesota efforts

Smith's biofuels efforts extended to North Dakota and Minnesota. An attorney in one of the regulatory cases estimated that Smith's enterprises had brought in between $5 million and $10 million in investments. The government says Smith continues to have "significant financial resources."

On March 23, 2012, Smith appeared in Grafton, N.D., where he introduced the idea of sugar beet growers investing a minimum of $10,000 in Energae LP Holdings. Smith told farmers his company would reopen the Alchem Ltd. plant that had been shuttered in 2007. Smith said investor/growers would own shares in Energae, which was associated with various biofuels companies. One was Permeate Refining of Hopkinton, Iowa, which made ethanol from agricultural processing byproducts. Another was BFC Electric, at Cedar Rapids, which made electricity from wood waste.

Assistant U.S. Attorney Timothy Vavricek who is prosecuting the case, featured testimony from FBI Special Agent Scott Irwin. Irwin at an earlier hearing detailed evidence of Smith removing funds from clients' investment accounts without their knowledge or authorization and depositing them into accounts he controlled for Energae and the operation of Permeate.

Smith later sold tax credits for renewable fuels that later were judged invalid by the state of Iowa. Three North Dakotans filed cases against Smith with regulatory authorities, attempting to force Energae into receivership, but some settled for undisclosed amounts.

Numerous Red River Valley area farmers and investors were involved with Smith. The Rev. Todd Hylden, of Fergus Falls, Minn., who briefly worked as a marketing executive for Energae, left the company because of his concerns about Smith's practices.


Darrell Duane Smith mugshot from the Linn County, Iowa, sheriff's office, on March 22, 2016. (Forum News Service/Agweek/Linn County, Iowa, sheriff's office).

Related Topics: FRAUDGRAFTON
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