Approaching Pittsburgh’s massive granite federal courthouse, I saw Michael J. Ruffatto, his wife Eve and his daughter Katherine ahead of me. They looked grim.
Ruffatto, 72, was to be sentenced later that Wednesday, June 27, for stealing millions of dollars from a federal stimulus grant awarded to study carbon storage potential on his Two Elk Energy Park property in Wyoming’s Powder River Basin.
The last time I had seen Ruffatto was nearly two years earlier at his 2016 plea hearing.
On that occasion, Ruffatto and I had engaged in casual conversation. We are nearly the same age. He was a student at Stanford University when I was a student across the bay at the University of California. We had mused that we were sitting on opposite sides of Stanford stadium when Stanford beat Cal in the 1968 Big Game. Ruffatto wished me safe travels home to Wyoming.
This time, however, I kept my distance. As happens to most reporters in these situations, my mind turned to my years of reporting on this case, hoping that I had been fair and accurate. In my five decades as a reporter, the Two Elk saga probably took more time than any other story.
My reporting on Ruffatto began in 2007, as part of a fairly routine journalistic exercise — a “scrub” of Wyoming U.S. Sen. Mike Enzi (R), then running for his third term in office.
A “scrub” simply means that a reporter dives into public records — financial disclosure statements, property transactions, court documents, police reports and the like — to see if anything affects the candidate’s fitness for public office.
Having been a journalist for more than 50 years — if you count my time as a teen-aged correspondent for the now-defunct South Omaha Sun — I’d done a lot of scrubs.
What struck me immediately about Enzi, a former Gillette shoe store owner, was how modestly he lived, especially compared to his mostly wealthy colleagues in the U.S. Senate. His biggest asset appeared to be the equity in a century-old row house on Capitol Hill that he and his wife Diane bought in 1997 for $360,000 but which, by 2008, the District of Columbia valued at $874,000.
In terms of net worth, Enzi ranked 82nd among the 100 U.S. Senators.
This from my notes at the time:
He (Enzi) doesn’t appear to travel or entertain lavishly. A close examination of his campaign fund expenditures revealed only modest indulgences that include a fondness for Krispy Kreme donuts, University of Wyoming football tickets, and elaborate Christmas tree decorations. In short, it is the kind of financial resumé you might expect of an elder in the Presbyterian Church and the only accountant in the U.S. Senate, both of which Enzi is.
If Mike Enzi did have a soft spot, I discovered, it appeared to be for his 6-foot-8-inch son Brad and for his then-daughter-in-law Danielle Davis Enzi, a Kentucky native who met Brad in Washington, where both were registered lobbyists. (The couple divorced in 2013.)After Sen. Enzi first went to Washington in 1996, son Brad, a walk-on University of Wyoming basketball player who graduated from UW in 1997 with a communications degree, quickly followed his father to the nation’s capital.
On June 22, 2003, Brad was mentioned briefly in a Los Angeles Times investigative story as one of 17 Senate offspring who were working as lobbyists or consultants on government relations.
At the time, Brad Enzi worked as a “government affairs” specialist for Black Hills Corp., a coal mining company with huge stakes in the Powder River Basin. (His father, a two-term mayor of Gillette, sat on the board of Black Hills in the years immediately before his election to the Senate in 1996).
Meanwhile, Danielle Enzi in 2004 incorporated herself in Wyoming as Enzi Strategies LLC, a political consulting firm. Sen. Enzi put her on the payroll as a fundraiser for his campaign and political action committees.
The practice of putting relatives on campaign staffs is not illegal but is generally discouraged because it suggests that the politician is converting campaign contributions to personal gain, which is illegal.
In 2006, Brad Enzi took a job as vice president in Wyoming for North American Power Group. The Greenwood Village, Colorado company had been pushing for years to build a $750-million coal-fired Two Elk power plant and transmission line in Campbell County, 45 miles south of Gillette.
And this is where, for this reporter at least, the Two Elk saga began.
North American Power Group and its president Michael J. Ruffatto already had a somewhat troubled history in Wyoming because of the many delays and false hopes raised by the phantom Two Elk power plant, first proposed with great fanfare in 1996.
Ruffatto, who is also a lawyer, kept the project alive by exploiting a loophole in federal tax laws that allowed him to apply for Wyoming’s quota of tax-exempt industrial bonds. Local governments spent more than $11 million to build infrastructure — roads and sewers — for the plant that never materialized.
So when Ruffatto hired the senator’s son to be his public face in Wyoming and represent Two Elk before state licensing boards and commissions, it seemed to merit a story. WyoFile published its first story on Two Elk in its inaugural Feb. 12, 2008 edition.
After that, Two Elk, Ruffatto and Brad Enzi moved briefly to the back burner while WyoFile, still in its formative stages, pursued other stories. It was a time when WyoFile — similar to non-profit internet news organizations in other states — was trying establish itself as a source of serious public-interest reporting. Like the national non-profit ProPublica, we offered our stories free of charge to state and regional media. But first we had to win the confidence of established newspapers and broadcasters, some of whom feared that we were a nascent competitor. Two Elk was a first step in that direction.
Sometime in late 2010 I was reviewing the list of federal stimulus grants, when North American Power Group popped out (along with the University of Wyoming) as one of the 10 grant recipients in a $140-million Department of Energy program to study underground carbon storage as a way to reduce CO2 emissions into the atmosphere.
Ruffatto’s “Two Elk Energy Park Carbon Site Characterization Project” had been awarded a total of $9.9 million.
I had a reporter’s hunch that something might be wrong with this picture. For one thing, North American Power Group and its management didn’t fit the profile of any of the other recipients, which were mostly universities or research laboratories staffed by scientists, geologists and engineers.
Ruffatto was a lawyer and a businessman with a background in oil and gas trading. Brad Enzi was a lobbyist with a communications degree.
I wanted to know how the stimulus money was being spent generally, and more specifically if Brad Enzi — whose senator father had dismissed the stimulus program as “bailout baloney” — was receiving any of it. So in the summer of 2011 I made a Freedom of Information Act request for copies of invoices filed by North American Power Group and its subsidiary, North American Land & Livestock.
When the results came back, my reporter’s hunch proved correct: Ruffatto used stimulus monies to pay himself, Brad Enzi and other North American Power Group employees — including a former University of Wyoming strength and conditioning coach — more than $1 million in salaries and benefits, far more than the scientists and engineers were being paid in comparable projects.
In one month alone, Oct. 2010, Ruffatto paid himself $73,369.52, claiming that he worked 76 hours a week at a rate of $214 an hour. Brad Enzi received $17,363.72 for a reported 182.5 hours of work in August, 2010, a rate of over $95 an hour. I contacted the managers of several other similar carbon storage projects but couldn’t find anyone who was paid anything close to these amounts.
The impressive paychecks became almost laughable years later when federal investigators revealed that virtually no work had been done on the stimulus project.
This round of reporting resulted in a Sept. 2011 story:
About this time, people who had worked with Ruffatto in the past or who knew more details about the Two Elk stimulus grant began contacting me.
One of these sources, an engineer with a major energy company, told me that most people in the industry thought there had been a much better candidate in the Powder River Basin for the grant that Ruffatto had received. The “Many Stars” project sponsored by the Crow Nation and administered by the Big Sky Carbon Sequestration Project of Montana State University, the source told me, was preferred by most experts in the field. But “Many Stars” lost out despite the fact that Ruffatto was late submitting his application.
“After all of the applications were finally in,” said an engineer whose company was involved in several similar projects and who followed the Two Elk application process, “we did a kind of handicapping around the office about the possibilities. I remember saying ‘This one doesn’t have a chance in hell.’”
From another source I received a copy of an audit of the federal carbon sequestration projects, including Two Elk, by the DOE Office of Inspector General. Using information in the audit, I was able to confirm that the Two Elk project had been quietly suspended by the DOE in Jan. 2012 because of numerous accounting irregularities.
The suspension resulted in an Apr. 16, 2013 story:
In addition to the suspension, the story was the first to report that the Two Elk stimulus project was under federal investigation. It also contained the first interviews with important engineering and academic subcontractors — including Schlumberger Limited, Stanford University, and Montana State University — who had all withdrawn from the project out of frustration with Ruffatto and North American Power Group.
“I’ve thought about this and I simply do not know what motivated the project to turn out like it did,” Stanford’s Dr. Sally Benson told me, saying that Ruffatto and his staff had failed to supply any site-specific data she needed to conduct the carbon storage research.
By this time I was hooked on the story and decided to “go deep” in my research.
One of my colleagues at WyoFile, Anne MacKinnon, called it a “Balzacian quest” after the 19th century French writer Honoré de Balzac, known for his use of minute details to create realism. Balzac is also generally credited, rightly or not, with the observation that “Behind every great fortune is a great crime,” so MacKinnon’s comment seemed appropriate.
“Going deep” in journalism means stepping back and taking a long look at a story and all of its characters. It means looking at old high school annuals, examining dusty public records, and interviewing old friends and business associates. It means poring over transcripts and court documents.
I wanted to know who Michael J. Ruffatto was, where he came from, and how he made his money. I wanted to know the good as well as the bad. I wanted to know his ambitions and his motivations. And I wanted to know what the various government entities he encountered did, or failed to do, as he built his career.
By the time I was finished I had conducted interviews in person, by telephone, or through email in 11 states. The documents I reviewed included the DOE invoices; quarterly filings with the federal Recovery Accountability and Transparency Board; real estate assessment records in three states; Colorado and California public utilities commission filings and transcripts; voluminous bond applications and bond sales applications as well as hundreds of newspaper and trade-publication articles.
The result was something new for WyoFile, a seven-part series and e-book that was published in weekly installments from May 20 to June 10, 2014:
The e-book was published by Atavist.com and can be read free in Kindle, ePub, Nook, Kobo and iBooks formats.
The Two Elk Saga series advanced the story on several fronts. It introduced Michael Ruffatto as the striving son of working class parents in northern California. Ruffatto attended high school in San Jose, spent a year as an exchange student in Germany, where he said he showed his German hosts some California dance moves. He graduated from Stanford University before serving in the Air Force as a navigator and attending the University of South Carolina School of Law.
The series tracked Ruffatto’s career from his days as a young prosecutor in Arizona, where he turned in hundreds of hours handling what was then the biggest fraud case in the state’s history — the prosecution of Lincoln Thrift Association founder Robert H. Fendler — to the launching of his own business, North American Power Group, in Greenwood Village, Colorado.
The articles depicted Ruffatto’s quixotic battles with Colorado’s biggest electric utility in front of the Colorado Utility Commission and it portrayed his grand ambitions for a coal-fired power plant empire, beginning with Two Elk, in Wyoming’s Powder River Basin.
Ruffatto himself helped in the profile. He hired Charlie Russell, a veteran Colorado public relations expert, and the two of them crafted a short biography that I incorporated into the series.
As I wrote in the series introduction:
The Two Elk saga is made up of intertwined stories: one man’s outsized dream; Wyoming’s desire to believe in energy castles in the air, kept aloft by taxpayer dollars; and the federal government’s failure to bring anyone down to earth, until millions of dollars in public money had been squandered. It is, in short, a case study of territorial ambition, personal greed, political nepotism, government malfeasance, and a highly creative interpretation of federal tax laws.
On another level, however, it is a Gatsbyesque tale of a striving former Air Force navigator — the first of his working-class family to attend college — who built a modest energy business by piecing together scraps acquired from a bankrupt Oklahoma energy company, and then attempted to parlay it into unimaginable wealth as a Rocky Mountain utility magnate.
In this respect, at least, it is a very American story.
The most significant reporting to come out in the series was uncovering the front company, North American Land & Livestock, a subsidiary of North American Power group that Ruffatto used to bilk the federal government out of millions of dollars in taxpayer money.
One of the bills Ruffatto submitted was a $2,791,103 North American Land & Livestock charge for “heavy equipment mobilization; drilling pad and mud pit construction; drilling water procurement; layout area preparation.”
I interviewed engineers at the other DOE-funded carbon sequestration projects who told me that the charge was at least 20 times what it should have been for the work described. I interviewed the subcontractor, Tyler Miller, of Gillette, who fished out invoices for the work he actually did at the site in 2011 and said they totalled only $86,000.
In fact, it was the North American Land & Livestock shell company that federal prosecutors eventually isolated as the main channel Ruffatto used to fraudulently bill the government more than $5.7 million and funnel the money into his personal bank account where he then spent it on a Mercedes, jewelry, carpets and other personal luxuries.
“The evidence would show that millions of dollars of award monies were not used on the project, but were secretly transferred by Michael Ruffatto into his personal bank account and used to fund his extravagant lifestyle,” Assistant U.S. Attorney Mary Houghton said at Ruffatto’s October 2016 plea hearing.
“In order to transfer the monies, Michael Ruffatto filtered millions of dollars through a wholly-owned subsidiary controlled by him, North American Land & 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, North American Land & Livestock performed no work on the project.”
After the Two Elk Saga series and e-book appeared in the summer of 2014, it seemed it would be only a matter of months before the federal hammer fell on Michael Ruffatto and his massive scam.
I spent part of my time tracking the personal spending spree that Ruffatto went on after he received the federal stimulus grant.
Other than paying himself more than $1 million in salaries and benefits, Ruffatto bought a $2,850,000 luxury condo for his daughter in suburban Washington, D.C., and paid for an elaborate wedding reception for himself and his second wife, Southern California socialite Eve Kornyei Ruffatto, at the exclusive Orange County, California, Resort at Pelican Hill, which charges $83,000 to $124,000 for such events.
In the fall of 2010, Ruffatto also hosted a fundraiser, organized by Danielle Enzi, at his Colorado estate for Wyoming gubernatorial candidate Matt Mead. After Mead was elected to his first term that November, Ruffatto contributed $12,000 to Mead’s campaign PAC. Despite attending the fundraiser and later being shown a photograph of Ruffatto, Mead said in an interview that he did not recall ever meeting the fraudster.
Meanwhile, Ruffatto and his new wife Eve continued to appear in Southern California society pages where they were frequently honored for their generous contributions to environmental and artistic charities.
I also discovered something that I wished had been in the Two Elk series. According to an overlooked 1983 clipping from the Los Angeles Times — my employer 1981 to 2007 — Two Elk was not the first time that Ruffatto had run afoul of the Department of Energy in a Wyoming-related venture.
In 1985, Ruffatto had been vice president and general counsel for Crysen Corp., a California-based oil and gas trading company. Crysen and Wyoming-based True Co., the natural gas producer and processor, were charged by the DOE with cheating on federal energy price regulations in 1979 and 1980.
Crysen was fined $9 million including interest. True Co. settled with the DOE for $3.5 million.
Meanwhile, I continued to seek more details of the January 2012 suspension of the Two Elk stimulus grants by filing Freedom of Information Act requests to the Department of Energy and the DOE National Energy Technology Laboratory that was responsible for the Two Elk stimulus grant.
The first FOIA request, sent by email in Apr. 2013, was rejected by the federal laboratory on the grounds that the information was exempt from disclosure because release of the records “could reasonably be expected to interfere in law enforcement proceedings.”
Following FOIA protocol, I appealed that decision to the DOE Office of Hearings and Appeals because I was not seeking documents that were compiled for law enforcement purposes.
The appeal was rejected on May 23, 2013 on the grounds that there was an “ongoing investigation” and “pending enforcement proceeding” and that the release of the documents I was seeking could cause “foreseeable harm to the pending investigation.”
The next step, filing a FOIA lawsuit against the National Energy Technology Laboratory, took me to a place I had never been in my long journalism career. I had covered federal courts in Oklahoma, Colorado, Michigan and California, but I had never been a plaintiff.
To prepare for the lawsuit I consulted my brother Mark Tempest, an attorney in North Carolina with extensive experience in federal court, and with Corvallis, Oregon, attorney Daniel J. Stotter, an expert on FOIA law. Both men generously donated their time to help me and WyoFile.
On Aug. 14, 2013 I filed my case in Wyoming U.S. District Court — 14 CV171, Rone B. Tempest, Lander, Wyoming v. National Energy Technology Laboratory, Pittsburgh, Pa. The lawsuit cost WyoFile $400 and was assigned to U.S. District Judge Nancy Freudenthal.
My argument was that the “pending enforcement action” and “ongoing investigation” exemptions did not apply to my request.
“More than two years and seven months after the initial suspension of the stimulus grants,“ I wrote, “there has been no enforcement action in the case. Moreover, the plaintiff, a veteran newsman with more than 45 years experience as a working journalist, has interviewed dozens of persons who participated in or have knowledge of the stimulus grants, only one of whom said he was interviewed by federal representatives regarding the case. Several others of those whom I interviewed said they would like to talk to federal investigators but had not been contacted. At no point in the course of this reporting did the plaintiff find a clear trail of a serious ongoing investigation or pending enforcement action.”
Having covered federal courts for a number of years, I knew that the last thing you want to do in any case is actually go to trial.
Stotter advised me to call the assistant U.S. attorney representing the government and make it clear from the very beginning that I was willing to settle the case in exchange for the release of significant documents.
Assistant U.S. Attorney Nick Vassallo was a real gentleman throughout our dealings. We exchanged the various filings and motions common to such cases and met in chambers with Judge Freudenthal for a pretrial conference, all the time inching toward a settlement to avoid a trial.
Finally I was asked to submit the names of possible witnesses I intended to call to support my case. I listed several engineers and academics familiar with the case and Brad Enzi, North American Power Group vice president.
Shortly after this filing, I got a call from Nick Vassallo saying that the DOE had come up with a number of documents relevant to my request that they would release to me in exchange for my dropping the lawsuit.
The documents they offered answered the main question I had asked in my initial FOIA requests: Why had DOE suspended the Two Elk stimulus grants in January 2012?
The answer, contained in the documents, was that the government had disallowed $5.6 million of the disbursement to the Two Elk project and had demanded immediate repayment. When repayment was not forthcoming, the grant was suspended with more than $2 million yet to be disbursed.
The documents also revealed a reversal of the government’s original position. The National Energy and Technology Laboratory had decided that the $1.23 million in salaries and fringe benefits paid to Ruffatto, Brad Enzi and others at North American Power Group were “questionable.”
This contradicted a national laboratory chief counsel R. Paul Detwiler 2011 statement to me that the Two Elk grants had been reviewed and audited by DOE and that “no issues were identified during the audits.”
Detwiler had added that “The salary and benefits being paid to Mr. Ruffatto and Mr. Enzi are appropriate for their skill set and the work they perform.”
I reviewed the documents offered by the government, accepted the settlement agreement and dropped the lawsuit.
It had been at least a small victory for journalism and open records.
The documents the government released produced one of the most important stories in the Two Elk coverage:
Published on WyoFile on Feb. 3, 2015, the dozens of letters and documents in the file showed without a doubt that a massive fraud had been committed.
But it would take another 18 months before the long-promised enforcement action occurred. As WyoFile detailed in an Oct. 4, 2016 story, Ruffatto was eventually charged with a felony in federal court.
The big surprise came later in October when Ruffatto, looking grey and forlorn, pleaded guilty to the charge in Pittsburgh federal court. I was one of three reporters in the courtroom when Ruffatto announced his guilt, resulting in an Oct. 21, 2016 story:
Assistant U.S. Attorney Mary Houghton told the court that Ruffatto’s crime went far beyond the single fraud count with which he was charged. In total, Houghton said, Ruffatto had stolen $5.7 million and converted it to his personal use. Federal investigators had subpoenaed his bank records and tracked his spending habits.
“Millions of dollars of the government’s [stimulus] award monies were never used on the project,” 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.”
Four days later I followed with another more detailed story:
It included interviews with people in Wyoming’s Campbell County, rancher Dan Tracy whose property abuts the Two Elk site, and former Wright, Wyoming, Mayor Joe Robidoux and his wife Brenda.
The Robidouxes had expanded their hardware business to accommodate Ruffatto’s proposed Two Elk power plant, but later had to declare bankruptcy when the business failed to materialized.
“I just want these guys to squirm because of what they did to Wright and our people,” Brenda Robidoux said. “They just gave us hope and then they took it away.”
After his Oct. 21, 2016 guilty plea it would be another 20 months before Ruffatto was sentenced. During that time he was granted nine continuances — delays — in his sentencing hearing, mostly because he claimed to be gathering money to pay restitution and civil penalties.
In pre-sentence filings, Ruffatto’s attorneys argued that he was elderly and in poor health. A prison sentence, they said, would be tantamount to a death sentence for their frail client, whom they said suffered from a variety of health conditions including diabetes.
WyoFile marked each of these delays with a story exploring different aspects in the case, including Rufatto’s efforts to sell his interest in two California power plants and his Colorado estate.
A June 13, 2017 story detailed the main unanswered questions in the Two Elk fraud case: How did the seemingly unqualified Ruffatto and his North American Power Group win $9.9 million in stimulus grants in the first place? And why was Ruffatto granted an extraordinary one-week extension in order to file his application for the grant?
Normally such extensions require extensive paperwork. But when I filed a Freedom of Information Act request for details, all the National Energy Technology Laboratory could come up with was an email saying the extension had been approved.
This surprised 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,” a puzzled Bauer told me. “For there to be an extension it has to be in a folder. It is a matter of public record.”
Finally, more than six years after the DOE suspended the Two Elk stimulus grant for numerous accounting regularities, 72-year-old Michael J. Ruffatto had his day of reckoning in Pittsburgh federal court.
U.S. District Judge Joy Flowers Conti had reached her limit on delays in the case. In a memorandum filed just before the June 27, 2018 sentencing hearing, she rejected each of Ruffatto’s appeals for leniency in the case, including that he was old and in poor health.
“Ruffatto chose to commit his crimes while elderly,” Conti noted unsympathetically.
When I got to the fifth floor courtroom on the day of sentencing, I could see Ruffatto and his family consulting with his Denver-based lawyer, Chad Williams, in the dark hallway outside the judge’s chambers. Their shoulders were slumped. I had the impression that Williams, having talked to the judge, had just informed them that Ruffatto was likely to be sentenced to prison.
It reminded me of a scene — not so much from Balzac as MacKinnon had suggested — but more from the courtroom sketches of another Frenchman, the “Lawyers and Justice” artist Honoré Daumier.
The enormous courtroom, with its judge’s bench beneath a modern painting of a Pittsburgh street scene, was nearly empty. Except for a reporter from a legal website, I was the only journalist.
I listened as attorney Williams made his final pitch for sparing Ruffatto a prison term, talking about his client’s ”admirable life” and his service as a U.S. Air Force “fighter pilot.” (‘No,’ I thought, ‘he was a navigator.’)
I watched as Ruffatto declared to the judge that he was “ashamed” of his actions and as he turned to apologize to his weeping daughter and wife.
“I can’t begin to tell you how deeply sorry I am for what I have done,” Ruffatto said. “I am a convicted felon. I’ve lost my right to vote. I’ve lost my reputation. What I’ve done is all over the internet.”
I wondered if Judge Conti, so forceful and determined in her sentencing memorandum, had been moved by the emotional final appeals for mercy. She seemed impressed by Ruffatto’s Stanford education and appeared to buy attorney William’s description of Ruffatto’s exemplary life before he committed this massive fraud.
“Inexplicable, simply inexplicable,” she repeated several times. “Baffling.”
In the end, however, the judge said she had determined that the crime could not go unpunished.
She sentenced Ruffatto to 18 months in prison and three years probation. In addition, Ruffatto agreed to pay $14.4 million in restitution, penalties and fines.
Ruffatto requested that he be sentenced to the minimum security federal prison in Lompoc, California. Judge Conti said she would see what she could do.
The Two Elk story, at least this chapter, was over.