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Feds eye civil penalties as judge delays Ruffatto sentencing

A federal judge has delayed sentencing Michael J. Ruffatto for another two months as prosecutors buttress their argument that the Two Elk power plant developer should go to prison for siphoning $5.7 million — “a staggering amount of stolen money” — from a Department of Energy project in Wyoming.

Assistant U.S. Attorney Mary McKeen Houghton last week disputed Ruffatto’s claim that he should be granted probation rather than jail time because of his age, poor health and family responsibilities, and because he has repaid some of the money he has admitted stealing.  For the first time in any of its court filings, the government characterized Ruffatto’s crime as “theft” and the huge amount of money he took as “stolen.”

Michael J. Ruffatto, promoter of the never-built Two Elk project near Gillette, pleaded guilty to federal criminal fraud charges.

“He [Ruffatto] did not out of the goodness of his heart, pay back monies to the Department of Energy after his fraudulent conduct was discovered,” Houghton wrote in a June 13 federal court filing. “He knew his gig was up.”

Houghton described Ruffatto, 71, a former Arizona state prosecutor, as an arrogant, rich, highly educated operator who was fully aware of his wrongdoing.

“The defendant’s illegal conduct was motivated by unbridled greed,” she wrote. “Michael Ruffatto arrogantly believed that the Department of Energy would never discover his surreptitious transfers of millions of dollars of government funds into his personal bank account for payment of extravagant personal expenses.”

Included in those expenses are a Mercedes sedan, jewelry, expensive carpets, international travel, and mortgage payments on his suburban Denver estate that he now has listed for sale at $11.5 million.

$2 million short in restitution

So far, Ruffatto has returned $3.7 million of the money he obtained by falsely billing the government. He still owes more than $2 million in restitution on the criminal charge and faces as much as $17 million in potential civil penalties under the U.S. False Claims Act. It is the ongoing negotiations to reach a civil settlement, in fact, that defense lawyers used as the main reason for requesting the latest delay in Ruffatto’s sentencing.

“Mr. Ruffatto has been working diligently with the government to resolve the civil investigation related to the conduct underlying his guilty plea in the case,” defense attorney Jason D. Schall wrote in a last-minute motion. “Mr. Ruffatto believes that he and the government may be in a position to reach a resolution of the civil investigation within the next 60 days.”

It was the first time that either of the parties, prosecution or defense, had stated publicly that a civil settlement was in the works.

U.S. District Judge Joy Flowers Conti agreed to move the sentencing date, most recently set for June 19, to Friday, Aug. 25 in Pittsburgh.  Pittsburgh is home to the DOE National Energy Technology Laboratory that from 2009-2010 issued the $9.9 million stimulus grant to Ruffatto’s North American Power Group, ostensibly to study underground carbon storage potential in Wyoming’s Powder River Basin.

The grant was suspended by the DOE in January 2012 because of accounting irregularities, but not until $7.3 million had already been spent. This included $1.3 million in salaries and benefits paid to Ruffatto and North American Power Group Vice President Brad Enzi, son of Wyoming U.S. Sen. Mike Enzi. Brad Enzi has not been charged in the case.

The U.S. Department of Energy’s National Energy Technology Laboratory in Pittsburgh, Pa., ordered North American Power Group to return $5.7 million in unallowable costs related to a stimulus project in Wyoming.

In an earlier filing, Ruffatto claimed he felt “pressure” from the federal grants and that this caused him to “rationalize” submitting false invoices for millions of dollars through his wholly owned Wyoming shell company, North American Land and Livestock.

He said that he used the stolen money to pay bills at his Two Elk Power Plant and that his false billing “benefitted” the government because there first needed to be a power plant on site to produce the CO2 gases to be captured and stored at the 880-acre Two Elk site south of Gillette.

Read other exclusive WyoFile stories on the Two Elk saga

Assistant U.S. Atty. Houghton responded with ridicule, noting that the long-promoted Two Elk power plant south of Gillette has never been built, or even started. The failed Two Elk project has been the headache of Wyoming state and local officials since Ruffatto first proposed it in 1997. In subsequent years, he received $445 million from the state’s federal tax-exempt industrial bonding allocation and $11 million in industrial impact funds.

“Michael Ruffatto,” Houghton wrote, “further ‘rationalized’ that he could secretly use government monies to pay costs incurred in connection with his ‘envisioned’ coal power plant and that ‘passing the power plant costs to the government’ actually ‘benefitted’ the government.” But Ruffatto, Houghton continued, omitted “an explanation as to how Michael Ruffatto ‘rationalized’ his surreptitious payments of millions of dollars of government monies for personal expenses.”

Houghton also disputed Ruffatto’s claim that he was too old and too ill to withstand the 3-4 year prison sentence recommended by the government. In his request for probation, Ruffatto included a letter from his doctor Jacques Saari, MD,  of Lone Tree, Colorado, claiming that Ruffatto suffers from “multiple medical conditions including coronary artery disease, hypertension, high cholesterol, type 2 diabetes and hypothyroidism.”

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Citing case law, Houghton said that none or all of these conditions constituted the “extraordinary physical impairment” that might entitle Ruffatto to avoid a prison term. Houghton cited one case in which a defendant suffered from Hepatitis C, HIV, end-stage kidney disease, hypertension and chronic arthritis, and was still imprisoned. Besides, she argued, Ruffatto was already a senior citizen with those health problems when he committed the crime: “The defendant chose to defraud the Department of Energy at this time of his life and with certain medical conditions.”

Throughout her argument, Houghton emphasized Ruffatto should not get special treatment because he is an educated white-collar criminal. Incarceration, Houghton wrote,  “sets an important precedent and sends a clear message: defendants of wealth (or access to it) with employment options may not fare better than those lacking wealth or employment.”

Feds respond to probation plea

 


Ruffatto’s doctor’s sentencing letter


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About the Author

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Rone Tempest was a longtime national and foreign correspondent for the Los Angeles Times. In 2004 he was part of a team of reporters to win the Pulitzer Prize for coverage of the massive wildfires in Southern California. From 2000-2007 he was a lecturer at the Graduate School of Journalism of the University of California, Berkeley. One of the co-founders of WyoFile, he served as its editor from 2008 to 2011. Rone lives in Lander.

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One Response to Feds eye civil penalties as judge delays Ruffatto sentencing

  1. Anita Edington June 20, 2017 at 7:14 am #

    Until jail time is associated with crimes like this there is no incentive not to do it.
    If they don’t get caught and prosecuted, all is good. They get to keep the money.
    If they do get caught, they just repay the money (usually only part of it) with perhaps a relatively
    small civil penalty. Heads they win, tails we, the taxpayers lose.

    Buffalo, Wyoming

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