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Two Elk: Crime, punishment and nagging mystery

Two Elk promoter Michael James Ruffatto, 71, is set to go before the chief US district judge in the Pittsburgh federal courthouse Monday, June 19, to receive his sentence for a massive criminal fraud.

Federal prosecutors — claiming that Ruffatto systematically submitted hundreds of false documents to divert $5.7 million from a Department of Energy research project in Wyoming and then used the money to go on a two-year personal spending spree — asked that he be sent to prison for a minimum of three years.

Ruffatto’s attorneys, citing their client’s advanced age and poor health, called for probation.

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

Either way, the sentencing in the squat, Depression-era Joseph F. Weis Jr. Courthouse marks the end of another gaudy chapter in the Wyoming and mountain west energy business.

One major mystery remains: How did the seemingly unqualified Two Elk power plant promoter manage to get $9.9 million in scientific research grants from the DOE’s prestigious National Technology Energy Laboratory?

A lawyer and part owner of several small California power plants, Ruffatto is neither a scientist nor an engineer. His two agents in Wyoming — the lobbyist son of a Wyoming U.S. Senator and a former University of Wyoming strength coach — likewise have little or no scientific background. When the grants were made in 2009-2010, most industry experts thought there were other, much more qualified applicants to study the CO2 underground storage potential of Wyoming’s Powder River Basin.

In fact, Ruffatto’s Colorado-based North American Power Group Ltd. had to get an extraordinary deadline extension — for which the Department of Energy claims to have no record or explanation — just to cobble together his last-minute grant application.

In response to a WyoFile Freedom of Information Act request for documentation of the unusual deadline change, the National Technology lab produced only one terse email, dated July 30, 2009 to the DOE contracting officer, noting that “HQ” had approved the one-week extension for Ruffatto’s application.

Supporting documents absent

The absence of supporting documentation — including who requested the extension and who may have lobbied for it — surprises Carl O. Bauer, who was director of the national laboratory at the time North American Power group was awarded the grant.

“It should have been documented why there was an extension,” Bauer told WyoFile. “For there to be an extension it has to be in a folder. It is a matter of public record.”

Bauer, who now serves on the University of Wyoming Energy Resource Council, said he has no specific recollection of the Two Elk grant: “That year we moved about $24 billion through our laboratory.”

But Bauer said the special treatment for Two Elk is “really unusual and inappropriate unless you have a basis for extension. Everybody has been preparing and it is down to the wire. It certainly seems to say that the procurement process wasn’t as crisp as it should have been.”

If they had bothered to check, federal officials would have discovered that Ruffatto already had a history of questionable dealings with the Department of Energy. In 1983, Ruffatto was vice president and general counsel for Crysen Corp., a Southern California energy company that agreed to pay a $9 million penalty for cheating on DOE price regulations.

But to the astonishment of those who knew Ruffatto mostly for his failed efforts to finance and build the long ballyhooed Two Elk power plant south of Gillette, Ruffatto got the research grants anyway. The grants were part of the Obama administration 2008 economic stimulus program designed to create new jobs and revive the moribund American economy.

Instead of fulfilling the terms of the research grants, which included the drilling of a deep exploratory well on his 880-acre Two Elk site, Ruffatto is accused of filling his own pockets with taxpayer dollars. He pleaded guilty in October to one felony count of filing a false claim. But prosecutors said he filed at least “12 fraudulent requests for reimbursement to the Department of Energy” totaling $5.719 million as well as hundreds of fictitious supporting documents.

“Millions of dollars of the government’s award monies were never used on the project,” Assistant US Attorney Mary Houghton told the court after Ruffatto pleaded guilty to criminal fraud in October.

Instead, Houghton said, the monies were “spent and dissipated by the defendant on extravagant personal expenses, totally unrelated to the project, including payments for the defendant’s personal residence in Englewood, Colorado, payments for the defendant’s Mercedes Benz, payments for personal purchases at Neiman Marcus, payments for carpeting worth thousands of dollars, payments for expensive jewelry, and payments for the defendant’s international travel.”

A luxury high-rise building in Arlington, Virginia, where Ruffatto bought his daughter a $2.85 million condominium. (Condo1)

In courtroom presentations, prosecutors focused mainly on luxury purchases by Ruffatto. But federal records show that in the same two-year period he used stimulus funds to pay himself, his North American vice president Brad Enzi — son of Wyoming U.S. Sen. Mike Enzi — and former UW strength and conditioning coach Matt Munford more than $1.3 million in salaries and benefits.

During one month alone, October 2010, federal pay vouchers show that Ruffatto used stimulus funds to pay himself $73,369; Brad Enzi, $13,890 and Matt Munford $5,070 in salary and benefits.

Both Brad Enzi and Munford say they have no idea how the payments were determined. Neither has been charged in the case although both likely would have been called to testify at trial had Ruffatto not pleaded guilty in October.

Although it is not clear if any public money was involved, Ruffatto also in March 2010 purchased a $2.85 million condominium for his daughter in Arlington, Virginia, across the Potomac River from Washington, D.C.

A $12,000 gift to the governor

In December 2010 he made a $12,000 contribution to the campaign fund of then newly elected Wyoming Governor Matt Mead. Ruffatto has not responded to the question of whether stimulus funds were used to make the political gift.

In both 2010 and 2011, Ruffatto regularly and generously gave money to various Southern California charities, including the Segerstrom Center for the Arts and the environmental organization Oceana.

And on New Year’s Eve in 2011, Ruffatto capped his two-year spending spree with a lavish reception — in one of California’s most expensive venues, The Resort at Pelican Hill — after his marriage to Orange County socialite Eve Kornyei.

The seaside resort lists prices for a 100 guest wedding reception between $83,000 and $124,000.

“Their wedding was quite a show,” recalled one of the guests. “They must have spent 40 or 50 grand on the flowers alone.”

Less than a month after the expensive wedding reception, the DOE suspended the Two Elk stimulus grant because of accounting irregularities, but not until $7.3 million of the $9.9 million had already been spent.

Already under investigation, Ruffatto sold the 23rd floor condominium in the luxury Arlington Turnberry Tower high-rise with its stunning view of the nation’s capital in 2013 for only slightly more than he paid for it three years earlier.

The $12,000 post-election donation to Gov. Mead was one of the largest individual gifts made to the Mead campaign fund. It came at a time when Ruffatto still harbored hopes of building his Two Elk power plant. The Wyoming governor appoints the members of the state Industrial Siting Council, that grants approval for big industrial projects like Two Elk.

According to Richard J. Barrett, special counsel to Gov. Mead, a search of correspondence and emails “found no correspondence of any kind between Mr. Ruffatto or his company, North American Power Group, and Governor Mead during the listed [2010-2012] time frame.”

The Resort at Pelican Hill outside Los Angeles, California, where Ruffatto held a lavish reception after his marriage to Orange County socialite Eve Kornyei. (The Resort at Pelican Hill)

Barrett said the governor does not recall ever meeting Ruffatto but that he met with North American Power Group Vice President Brad Enzi, whom he considers a family friend, on at least one occasion to discuss the Two Elk project.

After Ruffatto pleaded guilty in October, Mead was interviewed by Casper Star Tribune reporter Heather Richards.

“The original decision related to the Two Elk [power plant] project did not come during my time as governor,” Mead told the paper, “but the lessons have been learned and appropriate actions taken to address the loopholes.”

Grant made amid financial woes

According to federal court documents, the federal stimulus grants — in installments of $4.9 million and $5 million — came just in time to temporarily rescue Ruffatto and his struggling North American Power Group from looming financial woes.

In July 2009 — four months before he got the federal grants — the Orange County Business Journal reported that Ruffatto had begun to liquify his assets by selling his seaside Corona del Mar home for $12.1 million to Los Angeles Angels owner and beer magnate Arte Moreno. In October 2009, the trade newsletter Power, Finance and Risk reported that he had also put his half interest in four small California power plants up for sale.

His centerpiece Two Elk power plant project south of Gillette was going nowhere. The IRS was auditing the $445 million in federal tax-exempt industrial bonds he got from the state of Wyoming to build the Two Elk plant and later rescinded his right to use them.

“Revenue generated by NAPG’s other business elements was approaching company lows,” Ruffatto’s attorneys reported in a recent, remarkably confessional, court filing. “He was fearful for the future of coal-fired power generation. This confluence of facts led to Mr. Ruffatto’s indefensible decision to submit false claims.”

Ruffatto, the attorneys reported, somehow “rationalized” that because his power plant was not being built there was no immediate need to research underground storage for the CO2 gases it would produce.

Ruffatto claims he diverted the research funds back into his power plant project.

The government contends he simply “dissipated” millions on lavish personal whims and to maintain his image as a wealthy philanthropist.

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Meanwhile, Ruffatto’s frequent charitable donations have continued despite what he claimed were his ongoing, intense efforts to repay the full $5.7 million the government said he took from the stimulus grant. On July 30, 2016, only ten days before he was charged with criminal fraud, Michael and Eve Ruffatto were honored at a Southern California gala for the non-profit environmental organization Oceana as “2016 Ocean Champions for their dedication to ocean conservation and generous support.”

To this point, he has paid the government $3.7 million in restitution, a fact his lawyers say should be taken into consideration at time of sentencing.

“Mr. Ruffatto apologizes to the government and to this court for his profound mistakes,” attorney Chad Williams wrote in a June 5 pre-sentence memorandum. “He carries with him deep regret and shame for his actions. To this day, he is working to provide full restitution to the government by liquidating both his personal assets and those of NAPG.”

But even if he were to were to repay the full $5.7 million, government attorneys have said they still plan to pursue him for punitive damages under the federal False Claims Act, which could cost him as much as an additional $17 million in civil penalties.

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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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3 Responses to Two Elk: Crime, punishment and nagging mystery

  1. Shannon Anderson June 13, 2017 at 10:58 am #

    Another good story from WyoFile on this saga. Thanks for going in-depth while other media sources just scrape the surface. I personally called DOE while they were reviewing the Two Elk grant application and expressed many concerns ranging from the validity of state permits, the track record of the company, and questionable tax-exempt status of the bonds. While Ruffatto and others are certainly to blame, our government also shares tremendous fault for being a willing partner in this fraud.

    Sheridan, Wyoming

  2. perry cook June 13, 2017 at 7:57 am #

    Excellent article clearly summarizing rampant skulduggery

    lander, Wyoming

  3. Jim Phillips June 13, 2017 at 7:55 am #

    For Ruffatto not to serve time in prison is sending the wrong message to all the con men currently bilking people. A crime without violence is still a crime.

    Newcastle, Wyoming

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