On the surface it seems an odd partnership: a prominent member of a secretive Utah polygamist sect and the Armenian immigrant owner of a prosperous chain of Southern California truck stops.
But testimony in the federal court criminal trial in Salt Lake City of Los Angeles fuel distributor Lev Dermen is that he and Jacob Kingston, a member of the Mormon breakaway sect known as the Order, as well as relatives of Kingston, engaged in a $470-million fraud of a government biofuel program. Kingston has testified at the trial in exchange for a lighter sentence.
In his opening statement to the jury, Dermen’s attorney, Mark Geragos, said the Kingston sect has a long history of defrauding the government and that Jacob Kingston, not Dermen, as the government claims, was the true mastermind of the alleged fraud.
“The Order has a term that’s called ‘bleeding the beast,’” Geragos said. “‘Bleeding the beast’ is defrauding the government. That’s the model. That’s the ethos. That’s the mantra. That’s what the Order does. They bleed the beast.”
According to prosecutors, Dermen and Kingston together used the money they made through the alleged fraud to go on a wild, four-year spending spree that included luxury homes in Los Angeles and Salt Lake City, million-dollar European sports cars and a villa in Istanbul, Turkey, overlooking the Bosporus strait.
Their fraudulent conduct, it is charged, had both domestic and international political implications.
Tens of millions of dollars from the biodiesel fraud were allegedly laundered through companies owned by a prominent Turkish businessman, Sezgin Baran Korkmaz, who is closely tied to Turkish President Recep Tayyip Erdogan. And on Wednesday, Belize’s prime minister-elect, John Saldivar, resigned after testimony that he received a $50,000 bribe to help Dermen gain Belizean citizenship and diplomatic status.
Court records show Kingston told investigators that he was present at a dinner in 2012 or 2013 when Dermen made a cash payment to then-Los Angeles County Sheriff Lee Baca.
Although he has never been convicted of a crime, Dermen — formerly known as Levon Termendzhyan — has been identified by authorities in California as a suspected crime figure. Central to the criminal case is that Dermen bragged that he could use his connections with state and federal law enforcement officials to protect himself and his alleged co-conspirators from investigators.
The first two weeks of what is expected to be a two-month trial featured the testimony of Kingston, a high-ranking member of the Davis County Cooperative Society, also known as the Order. Kingston told jurors that $30 million from the fraud operation was donated to the sect.
Kingston was CEO of Washakie Renewable Energy Co., which was at the core of the alleged massive fraud to get federal tax credits for what the company falsely claimed was biofuel produced in its Utah refinery. By transporting a load of biodiesel fuel in and out of the country and allegedly falsifying reports to the federal Environmental Protection Agency, Kingston said he and Dermen were able to get more than $2 per gallon in payments and renewable fuel credits over and over again for the same supply of fuel.
Heading out of the country to India and Panama, the fuel would be labeled as “biodiesel,” but coming back into California and Texas ports the same fuel would be relabeled as “feedstock” or any of the various plant oils and cooking grease used in the production of biodiesel. Kingston and company would then falsely claim that they had refined the feedstock in the Utah refinery in order to receive the millions of dollars in federal incentives, according to the federal charges.
At one point in his testimony, Kingston said that he and Dermen arranged to “rotate” the same 15 million gallons of biodiesel so many times that they were able to claim more than $250 million in federal incentives under the environmental program intended to encourage cleaner burning fuels and energy self-reliance.
In a plea deal, federal prosecutors told Kingston, who was indicted on 45 counts of tax fraud, money laundering and conspiracy to commit mail fraud, that they would recommend a 30-year federal prison sentence. Kingston’s brother Isaiah, mother Rachel and legal wife, Sally, also pleaded guilty to multiple charges and are expected to testify in exchange for consideration of a lighter sentence.
Dermen, the only one of the original five defendants to face trial, is charged with 10 felonies that could put him in prison for life, including conspiracy to commit mail fraud, conspiracy to commit money laundering, and money laundering. Like Jacob Kingston, Dermen has been jailed under intense security since he was arrested in August 2018.
Because of his connections in Turkey and elsewhere, Dermen is considered a major flight risk. In 2017 he changed his name officially from the Armenian Termendzhyan to Lev Aslan Dermen to pave the way for his possible emigration to Turkey. “Aslan” is the Turkish word for lion.
Kingston testified that he began the biofuel scam in 2010 before he met Dermen. But the government contends that the fraud really took off after the family partnered with Dermen in December 2011. Between 2011 and 2015, Washakie Renewable Energy Co. asked the government for more than $1.6 billion in tax credits and received $470 million.
“He [Dermen] designed the project,” Kingston testified, contending that it was Dermen who came up with the intricate communication and money laundering schemes that involved investing in Turkish businesses and giving each other homes and expensive cars, including a $1.7-million 2010 Bugatti Veyron that Kingston presented Dermen on his birthday. In exchange, Kingston testified, Dermen gave him a chrome-plated Lamborghini. Kingston bought Dermen a $3.5-million waterfront home in Manhattan Beach; Dermen bought Kingston a $3.2-million home in a Salt Lake City foothill suburb.
Kingston told jurors that Dermen claimed to have an umbrella of protection from state and federal officials he called “the boys.” On the federal level, Kingston said, Dermen claimed to have a mysterious high-level official, code-named “Commissioner Gordon” after the “Batman” character, in his pocket.
In his opening statement, defense attorney Geragos claims that it was his client, not the Kingstons, who was led into a scheme orchestrated by Jacob Kingston.
Geragos, who in the past has represented celebrity clients including Michael Jackson, Chris Brown and Winona Ryder, has characterized Dermen as a rags-to-riches immigrant who came to the United States with his family from Soviet Armenia when he was 13 years old, dropped out of Hollywood High School and worked as a gas station attendant before founding his own successful chain of fuel distribution and trucking companies.
Geragos said that Dermen, before he met Kingston in late 2011, had never dealt in biodiesel tax credits.
In his opening statement and in his cross examination of Kingston, the attorney also spent much time dwelling on the practice of polygamy in the Kingston family sect, saying that sect leader Paul Kingston, Jacob’s uncle, has more than 20 wives and countless children. Jacob Kingston, listed as Number 95 in the sect hierarchy, testified to having three wives and 10 children.
“The interrelationships are astonishing here,” Geragos said. “They are marrying half-sisters. They are marrying cousins. There is a constant inter-incestuous, frankly, organization going on with all these kids.”
Prosecutors have objected to Geragos’ salacious characterization of polygamy. U.S. District Judge Jill N. Parrish ordered the defense team to cease offering evidence or cross-examining witnesses about “alleged practices of incest in the Order and Jacob Kingston’s alleged possession of child pornography or sex with underage women.”
How well Geragos’ strategy will work with the largely mainstream Mormon jury remains to be seen. Under pressure from the federal government, the Church of Jesus Christ of Latter-day Saints officially banned polygamy in 1890. However, the faith’s revered founder, Joseph Smith, and his successor Brigham Young had plural marriages, and many Mormon families had polygamous ancestors.
Despite the sensational facts in the case, much of the early testimony was a methodical review of bills of lading, contracts and terse email exchanges. The Kingstons and Dermen used temporary, unidentifiable “burner phones” and code to communicate. Weather reports mentioning “warm” or “cold,” Jacob Kingston said, were used to indicate the intensity of federal investigations into their business.
Dermen’s name does not appear in any of the falsified bills of lading or EPA forms presented by the prosecution, although it frequently shows up in email exchanges.
In an email introduced as evidence, Kingston reminded an associate in the alleged scheme that “L” did not want his name to appear anywhere in the documentation.
Another witness called by the prosecution, Katirina Pattison, described meetings with Dermen in which he seemed to be very much in control of the fraud scheme.
Pattison, then known as Katirina Tracy, was CEO of a New Jersey company that was engaged in a similar biodiesel fraud and, she testified in court and in an earlier deposition, was seeking to add Washakie Renewable Energy Co. as a partner in crime. She said in her deposition that she and her New Jersey partner, Joe Furando, referred to the scam as “alchemy — turning nothing into gold.”
In 2014, Pattison pleaded guilty to charges of wire fraud, money laundering and securities fraud and agreed to cooperated with the government.
She said she first met Dermen and his entourage that included and bodyguards at the Fontainebleau Hotel in Miami in 2012. She said Dermen impressed her when he insisted on drinking a rare Scotch that cost $150 a glass and then, when he thought he was not being respected by the waitress, by his tossing several $100 bills on the table and telling the waitress to remember him the next time he came in the bar.
Later, over dinner, she said she, Furando and Dermen discussed partnering up in the scheme in detail, using Washakie Renewable Energy to provide fake documents. Kingston was not there.
“I believe that Levon [Dermen] and Jacob were partners and that Levon was in charge of all the decisions related to Washakie,” Pattison said.
Tempest is a special correspondent