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Two Elk: Venality and greed, not coal research and jobs

PITTSBURGH — It was supposed to be a scientific and environmental research project to see if industrial carbon dioxide gases could be safely captured and stored underground in Wyoming’s Powder River Basin, and eventually help slow global warming.

More immediately, the federally funded Two Elk Energy Park Industrial Capture and Storage project, part of President Barack Obama’s National Recovery Act stimulus program, was supposed to create new jobs and help revitalize the moribund US economy.

Instead, according to federal prosecutors here in Pittsburgh, Two Elk promoter Michael J. Ruffatto used the stimulus grant as his personal piggy bank, indulging himself with luxury cars, jewelry, oriental carpets, and foreign travel.

Michael J. Ruffatto, who pleaded guilty Friday to federal criminal fraud charges related to his never-built Two Elk project near Gillette, used federal stimulus fund money to pay for “extravagant personal expenses, totally unrelated to the project.” Federal prosecutors say that included payments for this 6-bedroom, 10-bath home in Englewood, Colorado. The house is now for sale for nearly $13 million. (Zillow)

Michael J. Ruffatto, who pleaded guilty Friday to federal criminal fraud charges related to his never-built Two Elk project near Gillette, used federal stimulus fund money to pay for “extravagant personal expenses, totally unrelated to the project,” prosecutors said. That included payments for this 6-bedroom, 10-bath home in Englewood, Colorado. The house is now for sale for nearly $13 million. (Zillow)

In addition, federal records show that Ruffatto used the $9.9 million in stimulus grants to pay himself and his chief deputy Brad Enzi, son of Wyoming senior U.S. Sen. Mike Enzi, more than $1.2 million in salaries for two years2009 – 2011before the grants were abruptly suspended by the Department of Energy for accounting irregularities. No new jobs were created.

“Protecting federal taxpayer funds dedicated to energy-related development projects is an important responsibility,” U.S. Attorney David J. Hickton said after Ruffatto’s plea hearing in Pittsburgh federal court Oct. 21. “Recovery Act funds were awarded to spur job creation, not to provide personal enrichment.”

After his guilty plea, the 70-year-old Ruffatto — looking grey as the cloudy Pittsburgh sky and lacking the confident brio that has marked his 40-year career as a power plant promoter — was released on a $25,000 unsecured bond. Chief U.S. District Judge Joy Flowers Conti ordered him to surrender his passport and restricted his travel to southern California and Colorado, where he has offices, and northern Virginia, where he has family.

Judge Conti set a sentencing hearing for February 3, 2017.

Millions of dollars filtered through subsidiary

Ruffatto pleaded guilty to a single chargethat he fraudulently billed the government for $363,668.50 on Oct. 13, 2011for which he faces a maximum sentence of five years in prison, a $250,000 fine, and restitution of the money.

However, in an open-court statement, Assistant U.S. Attorney Mary McKeen Houghton placed the total fraud in the case at $5.7 million, mostly money that Ruffatto allegedly channelled through a shell company, North American Land and Livestock, of which he is sole owner and officer.

“Michael Ruffatto filtered millions of dollars through a wholly owned subsidiary … North American Land and Livestock LLC, while falsely representing to the Department of Energy that the subsidiary was doing work on the project when in fact, as the defendant well knew, NALL performed no work on the project,” Houghton said.

Michael J. Ruffatto’s ambitious plans for energy projects expected to create jobs near Gillette first encouraged and then disappointed local residents when they were never built. Prosecutors say Ruffatto fraudulently obtained millions of dollars which he “spent and dissipated ...on extravagant personal expenses” including his multi-million house. (Zillow)

Ruffatto’s ambitious plans for energy projects expected to create jobs near Gillette first encouraged and then disappointed local residents when they were never built. Prosecutors say Ruffatto fraudulently obtained millions of dollars which he “spent and dissipated …on extravagant personal expenses” including his multi-million house. (Zillow)

In addition to the criminal charge in the Friday plea hearing, U.S. Attorney Hickton told WyoFile that Ruffatto could face civil penalties under the federal False Claims Act. That law, which dates to the prosecution of war profiteering during the American Civil War, carries a potential penalty of three times the amount of the alleged fraud.

If prosecutors stick to their estimate of $5.7 million in false claims, the possible penalty under the False Claims Act would be more than $17 million.

Brad Enzi, North American Power vice-president who has worked as Ruffatto’s Wyoming agent since 2006, was not charged in the case. He has repeatedly said that he did not know that his salary was being paid with money from the stimulus grant.

Because Ruffatto waived his right to a jury trial, Brad Enzi did not have to testify in the criminal case. But if the government civil case goes to trial, the younger Enzi, whose U.S. senator father once described the entire stimulus program as “bailout baloney,” could be called as a witness.

One of those in the courtroom during the Friday afternoon plea hearing was Assistant U.S. Attorney Paul Skirtich, a nationally recognized authority on False Claims actions who has dogged the Ruffatto-North American Power Group case since 2012.

“We are not finished yet,” Skirtich said.

Early expert questions about project

From almost the very beginning, many people in industry and scientific circles questioned the seriousness of the Two Elk carbon project. For one thing, there seemed to be no progress toward drilling the deep-site characterization well that was supposed to be the project’s centerpiece.

Michael J. Ruffatto, promoter of the never-built Two Elk project near Gillette, pleaded guilty Friday to federal criminal fraud charges. A prosecutor expert in federal civil actions to punish false bills filed with the government said, “We are not finished yet.” (TK)

Michael J. Ruffatto, promoter of the never-built Two Elk project near Gillette, pleaded guilty Friday to federal criminal fraud charges. A prosecutor expert in federal civil actions to punish false bills filed with the government said, “We are not finished yet.”

Ruffatto’s alma mater Stanford University, one of the first partners, dropped out early. Dr. Sally Benson, an internationally recognized groundwater hydrologist at Stanford, said she was puzzled by the lack of progress on the carbon capture study.

“I’ve thought a lot about this, and I simply do not know what motivated the project to turn out like it did,” Benson told WyoFile at the time. Stanford pulled out of the Two Elk project after receiving only $99,917.03 — about 15 percent — of its sub-contract agreement with North American Power Group.

Likewise, Montana State University, another early partner, withdrew after receiving less than half of the $250,000 Ruffatto promised.

“Everyone decided that this was not what we thought it was going to be, so let’s cut and run,” said John Talbott, who was at Montana State in 2011 when the school cut ties with Ruffatto.

Money spent on “extravagant personal expenses”

But few could have imagined the venality and greed that federal prosecutors exposed in federal court on a rainy afternoon in Pittsburgh, after Ruffatto pleaded guilty to the felony fraud.

“Millions of dollars of the government’s [stimulus] award monies were never used on the project,” Assistant US Attorney Houghton told the court, “but 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.”

As the assistant US attorney read aloud the long list of extravagant spending, both Ruffatto and his attorney appeared increasingly uncomfortable. The defense attorney said that he would object to the government’s narrative at the time of sentencing, according to Charles A. Russell, Ruffato’s spokesman.

“Mr. Ruffatto’s attorney, Jason Schall, objected to the government’s  alleged version of the facts,” said Russell in a statement. “Mr. Ruffatto admitted, on the record, facts sufficient to support his plea of guilty.”

Citing “serious mismanagement or misuse of funds,” the DOE in January 2012 had abruptly suspended the Two Elk grants, but not until $7.8 million had already been paid, including more than $1 million in salaries to Ruffatto and $130,000 to North American Vice President Brad Enzi.

In federal documents obtained by WyoFile under a Freedom of Information Act lawsuit in 2015, the DOE inspector general reported that at least $5.7 million of the money paid to North American Power Group was “unallowable.”  The department, records show, demanded repayment of the full amount by Oct. 31, 2012.

Through his spokesman, Ruffatto said he has reimbursed $3 million to DOE, although not by the government’s deadline.  According to his Denver attorneys, Ruffatto intends to repay the full $5.7 million that the government contends he obtained through a massive fraud that included creating hundreds of “phony” bills and invoices.

Ruffatto’s guilty plea means Brad Enzi, who worked for Ruffatto, will not have to testify in a criminal trial. Brad Enzi is the son of U.S. Sen. Mike Enzi. Civil charges could be brought against would-be developer, Ruffatto, however. (TK)

Ruffatto’s guilty plea means Brad Enzi, who worked for Ruffatto, will not have to testify in a criminal trial. Brad Enzi is the son of U.S. Sen. Mike Enzi. Civil charges could be brought against would-be developer, Ruffatto, however.

In court Friday,  Assistant U.S. Attorney Houghton said Ruffatto “submitted to the Department of Energy, in December 2011 and again in March 2012, hundreds of fraudulent backup documents allegedly evidencing millions of dollars of work performed on the project, by contractors, well specialists, and engineers when, as the defendant well knew, no such work was performed on the project.”

Still co-owner of four small power plants in California, Ruffatto last year offered for sale his suburban home in Cherry Hills Village, Englewood, Colorado. The 11,433-square-foot, six-bedroom, 10-bathroom home has a heated swimming pool, playhouse, pond, caretaker’s apartment, and attached six-stable barn. Sitting on a 10-acre lot, the home is now priced at $12,995,000, recently reduced from $14 million.

Brad Enzi was not named in the Pittsburgh federal criminal complaint, nor was his friend Max Munford, a former University of Wyoming strength and conditioning coach who was also on the NAPG payroll, nor were any of the other North American Power Group employees who were paid with stimulus funds. Munford received more than $44,000 according to pay records from September 16, 2009 to July 31, 2011 obtained by WyoFile.

Ruffatto’s previous courtroom experience with criminal fraud was on the other side, as a junior prosecutor under Arizona Attorney General  Bruce Babbitt. He spent a year beginning in 1976 on the celebrated state criminal fraud case against Lincoln Thrift Association founder Robert H. Fendler, who eventually went to prison on the charges.

Bitter aftertaste in Wright

The federal criminal case against Ruffatto represents something of a denouement for the 1,000 or so residents of Wright, the coal and oil town on the rolling prairie and scoria outcrops south of Gillette.

The Pittsburgh-based National Energy Technology Laboratory, the leading government fossil fuel research facility, has claimed to have been investigating the Two Elk stimulus project  since 2011.  However, there was little public sign of an active inquiry until late last year, when federal agents began interviewing people in Wyoming associated with the project.

Wyoming Rancher Dan Tracy, whose property abuts the Two Elk site in southeastern Campbell County near Wright, said he was approached earlier this year by two federal investigators from Pittsburgh.

Tracy, 78, said the investigators asked him to describe any activity he had seen on the Two Elk property during the 2010-2011 period when Ruffatto billed the stimulus program for nearly $2.8 million in “heavy equipment mobilization; drilling pad and mud pit construction; drilling water procurement; layout area preparation.”

“I told them he hadn’t done a thing,” Tracy said.The rancher said he was not surprised by the federal fraud charges. He said his 20 years of dealings with Ruffattomostly land transactionshave been characterized by late payments and broken promises.

Gillette and Wright are an energy hub and residents hitch their future to industrial projects. But Ruffatto, "He just came into town, made these promises ... and then left," said Joe Robidoux, mayor of Wright in 1996. (TK)

This postcard shows how Gillette and Wright are an energy hub where residents hitch their futures to industrial projects. But Ruffatto, “he just came into town, made these promises … and then left,” said Joe Robidoux, mayor of Wright in 1996.

“Frankly, I’m just surprised they took so long to get to him,” Tracy said. “I knew he was a slick sumbuck from the first time I met him, drinking my coffee and eating my wife’s cookies in our kitchen. Getting money from him is like pulling teeth.”

But Tracy also places a large part of the blame on the failure of local, state, and federal officials to hold Ruffatto accountable.

Ruffatto has been an active promoter of major power plant projects in Wyoming, Colorado and California since 1996 when he proposed Two Elk, first a 250-, later a 350-megawatt, coal-fired power plant on the site next to Tracy’s ranch west of Wright.

However, none of the nine power plants he has promoted over the years, including seven in Wyoming, has ever been built.

WyoFile has been reporting on Ruffatto, Brad Enzi, and the various Two Elk projects since 2008, including a seven-part investigative series, “The Two Elk Saga,” published in 2014.

Want to revisit the Two Elk saga? Click here

In addition to the stimulus grants under the Obama administration National Recovery Act, Ruffatto has received help from local, state, and federal sources to support his various Two Elk proposals, including an allotment of $445-million in tax-exempt industrial bonds from two successive Wyoming governors and $11 million from Wyoming sales tax funds to build infrastructure to support the Two Elk plant that was never built.

“Two Elk was long on its death bed when the Stimulus Act funds came along, but that taxpayer money kept it going for a few more years,” said Shannon Anderson, acting director of the Powder River Basin Resource Council, a Wyoming landowners’ group long opposed to the facility.

Anderson said that instead of spending the federal funds on the project itself, the funding “allowed the company to keep paying their staff, including Brad Enzi, who was a government affairs person, not someone with the technical wherewithal to get the project off the ground. All Brad Enzi did was keep the phantom project going with support from the government.”

Joe Robidoux was mayor of Wright in 1996 when Ruffatto first swept into town with his ambitious plans for his Two Elk power plant, which he said would add 50 full-time employees and $2.1 million in annual tax revenue to the local economy.

“He just came into town, made these promisesnot just about this plant, but a whole string of power plantsand then left,” Robidoux said. Ruffatto demonstrated his political skill, later amplified by his hiring of Brad Enzi, by retaining popular Wright native and former Campbell County Commissioner Harry Underwood as his agent.

Robidoux and his wife Brenda were so excited about the prospect of a new major employer in the area that they applied for loans to expand their hardware business. But they became concerned when the banks did not share their enthusiasm about the reality of the Two Elk dream.

They declared bankruptcy in 2004.

After years of little or no activity, people in Wright began referring to the Two Elk project as “No Elk.”

Brenda Robidoux for one, is bitter about the Two Elk experience and was pleased to learn that the federal government had filed charges against Ruffatto.

“I just want these guys to squirm because of what they did to Wright and our people,” she said. “They just gave us hope and then they took it away.”

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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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4 Responses to Two Elk: Venality and greed, not coal research and jobs

  1. beverly j. boynton October 27, 2016 at 8:05 am #

    Yes, great reporting. This so sticks in the craw; the amount of self-interest and greed, combined with disrespect for the county, on Ruffatto’s part is beyond the pale, yet seems increasingly common. Hope he pays the full amount required under the False Claims Act.
    Please keep up on the follow-up for sentencing and the potential involvement of others.

    kelly, Wyoming

  2. reed zars October 25, 2016 at 5:19 pm #

    Rone,

    It’s an incredible story, and you were the one who broke it wide open. Today’s result never would have come about if it hadn’t have been for you. My congratulations and respect to you.

    That the state of Wyoming never had the guts to call the sham for what it was is pitiful and an utter embarrassment.

    Laramie, Wyoming

  3. Shannon Anderson October 25, 2016 at 7:55 am #

    Only WyoFile could have done this story. Thanks for keeping the sunshine on this project and its fraudulent dealings with Wyoming and American taxpayers.

    Sheridan, Wyoming

  4. Trish October 25, 2016 at 6:55 am #

    Great reporting wyofile!!!

    Riverton, Wyoming

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