2: Into the Lion’s Den

Summary

Kingdom of Fraud – Episode 2: "Into the Lion’s Den"

Podcast: Kingdom of Fraud
Host: Michelle McPhee
Date: May 19, 2026

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Episode Overview

This episode plunges listeners into the improbable and extravagant criminal partnership between Jacob Kingston, a member of a secretive Utah polygamist sect, and Levon Termendzhyan, a flashy Armenian oil-and-gas mogul known as "the Lion." Investigative reporter Michelle McPhee unpacks how desperation, charisma, and a broken regulatory system set the stage for a billion-dollar biofuel fraud—one that will soon draw the attention of every three-letter federal agency.

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Key Discussion Points & Insights

1. A Night with the Lion (03:31–06:08)

• Michelle introduces Nikki Beach, an ultra-exclusive Miami club known for its celebrity clientele. In March 2012, Levon is the center of attention there, celebrating a new biofuel business deal with Katharina Pattison and his entourage.

• Katharina describes her shock and admiration at Levon's brash behavior, such as tossing $100 bills at an inattentive waitress—setting the tone for Levon's world of extravagance and command.

  “He pulled out a series of hundred dollar bills, called the waitress over, threw them down on the table and looked at her and said, next time you will remember me." — Katharina Pattison (05:31)

2. Jacob Meets Levon: Worlds Collide (06:35–12:44)

• Michelle narrates Jacob Kingston's first encounter with Levon at "Noil" (Lion spelled backwards), an unassuming truckstop in gritty LA.

• Jacob, an awkward engineer desperate to save his failing renewable fuel business, is enchanted and overwhelmed by Levon's display of wealth (bodyguards, Escalades, immediate six-figure checks).

• The budding alliance quickly turns personal and extravagant. On Levon's first visit to Utah, he arrives with an entourage via private jet. Their introductory dinner is in Seattle—reached via Levon's jet for a single evening of opulence and Russian entertainment.

  “We was there until three in the morning. I didn't know how to tell him that we needed to go to sleep.” — Jacob Kingston (14:05)

  “He bought everything... 15 boxes brimming with crab and lobster. Now, that sounds like a party to me.” — Michelle McPhee (14:53)

3. The Temptation of Fraud: The First Illegal Deal (16:32–17:51)

• Lavon asks Jacob if they can claim government subsidies on fuel not actually produced by Jacob's company (WRE), implying fraud.

• Jacob hesitates, citing the risk to his employees if they falsify production records. But the enticement of money and Levon's seductive lifestyle outweigh his concerns.

  “I told him that it was not produced by us... In order to claim the subsidy, we had to run it through the facility in Utah. He asked, well, why don't we do that? And I told him that, first of all, that would be illegal.” — Jacob Kingston (16:32)

  “Even if Jacob feels uneasy about it, the world the lion has shown him is kind of irresistible.” — Michelle McPhee (16:58)

4. Biofuel Fraud 101: Broken Systems (22:03–31:41)

• Guest: Doug Parker, former director of EPA's Criminal Investigation Division, explains the regulatory loopholes that made fraud rampant.

• Two major government incentives (tradable RIN credits and $1/gallon IRS subsidies) were designed to boost renewable fuel but were easily exploited with fake production claims.

• The EPA issues Jacob’s WRE a Notice of Violation in 2011, but civil penalties amount to little more than a slap on the wrist. As Doug says:

  "Some companies viewed it as a cost of doing business. I'll write you the check." — Doug Parker (28:43)

  "When you look at all the fraud that took place, it was billions of dollars." — Doug Parker (27:22)

  "The taxpayer gets ripped off and the environment is worse off as a result." — Doug Parker (29:33)

5. Going International: The Panama Scheme (34:55–40:21)

• Jacob and Levon’s fraud escalates from domestic trickery to complex international money laundering.

• They invent convoluted paper trails—shipping fuel to Panama and back—to justify false subsidy claims, making hundreds of thousands on each cycle while splitting proceeds 50/50.

• Jacob’s exposure and labor are significant, but Levon, with his networks and plausible deniability, controls the deal.

  “In reality, this is just a bullshit dirty money paper trail. If it all sounds extremely complicated and difficult to follow, don’t worry, it’s not you. It’s meant to be complicated. That’s the whole fucking point.” — Michelle McPhee (38:30)

  "Levon's fingerprints are nowhere near the fraud. But Jacob is okay with this... if he keeps doing business with Levon, it could finally make WRE profitable and earn him the respect he's so desperate to obtain in the Order." — Michelle McPhee (39:18)

6. Enablers & Expansion: The “Fraudster Speed Dating” (40:21–45:29)

• Katharina Pattison describes the community of scammers networking at biofuel industry conferences—“fraudster speed dating.”

• She recounts her early business deal with Jacob (who instantly refers her to Levon), and seeing Levon's charismatic dominance in negotiations—the deals are brokered around Jacob as a side player.

• Lavon’s power is so pronounced that Jacob is sidelined even in his own scam.

  "It was my belief that it did not matter what Jacob thought, that as long as Lavon was okay with it, everything was fine." — Katharina Pattison (45:19)

7. Entrapment and Desperation (45:29–48:41)

• Jacob’s world unravels further when he receives an IRS audit notice. Panicked, with his business and freedom at risk, he turns wholly to Levon—the man with connections, power, and a willingness to play dirty.
• The episode closes at the cusp of the conspiracy’s explosive growth, teasing how Levon draws Jacob into an ever-more dangerous world.

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Notable Quotes & Memorable Moments

• Levon’s Showmanship:
  “He pulled out a series of hundred dollar bills, called the waitress over, threw them down on the table and looked at her and said, next time you will remember me." — Katharina Pattison (05:31)
• Jacob’s Humble Anxiety:
  “We was there until three in the morning. I didn't know how to tell him that we needed to go to sleep.” — Jacob Kingston (14:05)
• On Regulatory Failure:
  "Some companies viewed it as a cost of doing business. I'll write you the check." — Doug Parker (28:43)
• On the Scope of Fraud:
  "When you look at all the fraud that took place, it was billions of dollars." — Doug Parker (27:22)
• On Theirs Being the Big One:
  "This was the biggest one. This was the big kahuna." — Doug Parker (31:36)
• On Paperwork as Smoke and Mirrors:
  "In reality, this is just a bullshit dirty money paper trail. If it all sounds extremely complicated and difficult to follow, don’t worry, it’s not you. It’s meant to be complicated. That’s the whole fucking point.” — Michelle McPhee (38:30)
• On Levon's Authority:
  “It was my belief that it did not matter what Jacob thought, that as long as Lavon was okay with it, everything was fine.” — Katharina Pattison (45:19)

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Important Timestamps

| Timestamp | Segment | Key Topic | |-----------|-------------------------------------------|---------------------------------------------| | 03:31 | Opening at Nikki Beach | First business celebration with Lavon | | 06:35 | Michelle’s Introduction | Setting up Jacob and Levon’s meeting | | 12:44 | Jetsetting dinner in Seattle | The lavish lifestyle begins | | 16:32 | Subsidy Fraud Proposal | The pivotal temptation moment | | 22:03 | Doug Parker Interview | Explaining the biofuel fraud system | | 27:22 | “Billions of dollars” | Magnitude of fraud discussed | | 34:55 | The Panama Paper Trail Scheme | Trickery moves international | | 40:21 | “Fraudster Speed Dating” at Conference | Katharina identifies Jacob and Lavon | | 45:19 | Levon’s Dominance | Jacob’s impotence in negotiations |

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Recap & Takeaway

This episode expertly illustrates how desperation, institutional loopholes, and charisma combine to ignite a wildfire of industrial-scale fraud. Jacob Kingston, striving for respect and salvation in the eyes of his family’s religious order, is swept into the orbit of Levon Termendzhyan, whose ostentatious hospitality and connections obscure the legal and moral precipice ahead. As the government’s subsidies become easy pickings for well-organized scams, investigators like Doug Parker mount only the beginnings of a fight that will grow into the largest tax investigation in American history. By episode’s end, it’s clear—Jacob is in far too deep, and the web is only beginning to tighten.

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Next episode preview:
Jacob seeks Levon’s "protection" as the IRS comes calling, signaling a deeper descent into crime and dependency—and possibly, the unraveling of the entire scheme.

Transcript

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[Katharina Pattison]

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[Michelle McPhee]

Novel. The EDM is pounding. The champagne is flowing. Waiters in all white are threading through the well heeled crowd, drinks in hand. The writhing, tipsy bodies on the dance floor are mostly topless, drenched in sweat, their feet covered in sand. The whole place is bouncing. It's called Nikki beach and it's probably the most exclusive beach club in all of Miami. The pulsating bass draws a glitzy crowd desperate to be seen here. Leonardo DiCaprio and Paris Hilton are both regulars, but in March 2012, a different clientele is partying it up behind the velvet rope.

[Katharina Pattison]

It was myself, Lavon, and several other members of his family and his bodyguard team.

[Michelle McPhee]

This is Katharina Pattison's first time meeting Lavon Tremendousian, the lion. She's here in south beach on his dime.

[Katharina Pattison]

It was a celebration of a new business relationship.

[Michelle McPhee]

They're here hashing out and celebrating an enormous new deal. A deal to conduct biofuel fraud worth millions of dollars. At just 26, Katerina has found herself deeply embedded in the renewable fuel industry. She's the COO of a biofuel company.

[Katharina Pattison]

We bought and sold B99 rinless biodiesel.

[Michelle McPhee]

She can see Lavon dancing and drinking. He's even taken a shirt off. He's the life of the party. But at drinks earlier that night, Katharina saw a flash of another side to him.

[Katharina Pattison]

The waitress who was serving us, she had a bit of an attitude. She acted like she couldn't care to be there. And that made Lavon very offended. He made a comment about how she should be treating him with respect and Lavon pulled out a series of hundred dollar bills, called the waitress over, threw them down on the table and looked at her and said, next time you will remember me.

[Michelle McPhee]

Katharina has to pick her jar up off the floor.

[Katharina Pattison]

I had never seen that type of behavior before. I was shocked and impressed. It was a very powerful move.

[Michelle McPhee]

This is how Lavon rolls. He's shocking and impressive and irresistible. He lures people in and he's about to do the same to Jacob Kingston. But Jacob, he has no idea what he's in.

[Katharina Pattison]

Foreign.

[Michelle McPhee]

My name is Michelle McPhee and from the teams at Novel and I Heart podcasts, this is Kingdom of Fraud. Episode 2 Into the Lion's Den. Jacob Kingston is driving a rental car down an industrial side street in Commerce, a gritty LA neighborhood under the 405. Train tracks run along one side of the cracked road. Warehouses line the other. Jacob is on his way to meet Lavon Tremendousian for the very first time.

[Jacob Kingston]

Foreign

[Michelle McPhee]

2011 three months before Nikki Beach Just yesterday Jacob was facing ruin. A buyer in India pulled out of a massive deal. Now Jacob's fuel is stranded halfway across the world and he's staring down a multi million dollar barrel. He needs to figure something out and fast. If he doesn't, his company wre could fold and Jacob would have to admit defeat to his family. The order where they believe after you die, debt weighs on your soul forever. But then one of Jacob's guys gives him a lead for an Armenian oil and gas titan in Los Angeles. Lavon, who Jacob hopes can fix this entire mess. Jacob sees his destination and pulls in. It's one of those trucker gas stations. To be honest, it looks a little run down. It's called Noil lion spelled backwards. On a thin strip of grass just by the sidewalk, there are two black lion statues. They're huge, baring their teeth, stalking across the lawn in opposite directions like they're guarding a palace. Jacob drives past them and parks out back. Outside, a double wide trailer, hulking bodyguards stand around two black Escalade SUVs framing the entrance. This is the headquarters of the Lions operation. No one Jacob has ever done business with before has had bodyguards. Why on earth would the lion need them? Jacob steps out of the car and the lion greets him. He's a bulky 5 foot 7, but somehow he still seems to tower over Jacob, who's 6ft tall. These two men are from radically different backgrounds. An awkward engineer from a polygamous sect and a commanding multilingual Armenian businessman. But they quickly find common ground. They sit down in Lavon's well appointed office inside the trailer, and they discuss Levon's business for a while. He dazzles Jacob with details of how much fuel he moves around his network of gas stations and truck stops. And then they get to Jacob's problem very quickly. Lavon offers Jacob a deal. He'll buy all the fuel Jacob has stranded in India. A deal worth $1.3 million. A godsend for Jacob. Lavon sends someone out to get a cashier's check for the first installment. When Jacob unfolds it, he's stunned. It's made out for $140,000. Handing over that much cash to a guy you've just met seems like a crazy move to me. But it all appears to be part of Lavon's plan to pull Jacob in. It's a few weeks later, just after Christmas. Jacob and his wife Sally stand shivering on the tarmac of a small airport outside Salt Lake City. They stomp their feet to get warm and stare at the sky, waiting for Lavon's private jet to land. Jacob wants to make a good impression to please Lavon on his first visit to Utah. He worries that his crappy old Toyota isn't good enough. So he rents two Escalades, identical to the ones he saw outside Levan's office. The lion lands and walks down the plane stairs flanked by his bodyguards. They all greet each other and get into the SUVs and drive through the remote scrubby flatlands to the WRE plant. They arrive and Jacob and Sally hand Lavon a gift basket they've carefully prepared. It's filled with Armenian fruits and topped with a cowboy hat. It seems that Lavon likes the presence. A sigh of relief for Jacob. Lavon then tours the plant. His aura spreads through the corridors along with the smell of his exposure. Expensive cologne. There's a buzz among the workers. They've never seen a client bring an entourage of bodyguards. When the tour is over, Lavon has an idea, one that takes Jacob completely by surprise. Here's my producer, Jake, with Jacob Kingston's testimony.

[Jacob Kingston]

He invited us to go to dinner and Sally and I wanted to go with him. And he said, well, we're going to Seattle. Which I thought was kind of odd that we would fly to Seattle just for dinner, but we decided to go anyway.

[Michelle McPhee]

They all board his private jet and a couple hours later land in Seattle. A friend of Lavon's is waiting for them on the tarmac with some flashy cars, Escalades, obviously, and a Maybach. They drive to Lavon's friend's mansion, and then they party. At least everyone who isn't a Mormon. My producer Jake and I are going through Jacob's testimony about this bash.

[Jacob Kingston]

The way Jacob describes it makes it sound like a really odd party. Jacob says, quote, levan hired a singer from Russia, and he had a lot of sushi there that night, and he sang, and we ate a lot of sushi. And, you know, everyone around Jacob and Sally is drinking that night. I'm picturing fine Russian spirits, ice cold vodka, caviar, the works. But Jacob and Sally can't drink because they're Mormons.

[Michelle McPhee]

Not only are they Mormons, but Jacob talked about his rat and snake infested house, and now they're in a scene that must have felt straight up Sodom and Gomorrah.

[Jacob Kingston]

With all this opulence, it's actually clear in Jacob's testimony, they're so uncomfortable. Jacob says, quote, we was there until three in the morning. I didn't know how to tell him that we needed to go to sleep.

[Michelle McPhee]

I mean, this is clearly well past their bedtime, and it sounds like no one would have been sober enough to drive them back to the jet anyway.

[Jacob Kingston]

So in the end, Jacob does tell Levan that they really need to go. So Levan sends them off to a nearby hotel. But the Seattle John isn't over yet, because the next morning, on their way to the airport, Levan makes them stop at a seafood store, and Jacob testifies, quote, he bought everything. He asked if we like crab and lobster, and we said we did. And he bought all of them.

[Michelle McPhee]

Yeah. I read in the testimony 15 boxes brimming with crab and lobster. Now, that sounds like a party to me.

[Jacob Kingston]

Yeah. Apparently, Levan buys up the store's entire supply of seafood

[Michelle McPhee]

when they return home after a whirlwind night of jet setting to their tiny, shitty house on the Washakie ranch. Jacob and Sally must have been reeling, not to mention their fridge is now groaning with so much seafood, the whole order could eat it for a week. A surreal reminder of their first night out with the lion, one of many more to come. At the end of 2011, WRE officially enters into contract with Noel USA, Lavon's company. As part of the deal, Lavon will buy Jacob's fuel. Stranded in India to keep track of business, Jacob starts flying down to California to visit Lamond and his office nearly every Week, week. They're talking business, logistics or invoicing, whatever. When Lavon asks Jacob the question, that starts it all. You know that fuel from India, could we claim subsidies on it? Jacob, evaluating Levon in that moment, wonders whether the lion is suggesting what he thinks he's suggesting. Fraud. Jacob's done it before, but he doesn't know yet if he can trust Lavon, so he's cautious.

[Jacob Kingston]

I told him that it was not produced by us. It was produced somewhere else. In order to claim the subsidy, we had to run it through the facility in Utah. He asked, well, why don't we do that? And I told him that, first of all, that would be illegal.

[Michelle McPhee]

It would be illegal because WRE didn't produce this biofuel.

[Jacob Kingston]

It would provide exposure to my employees. They would be liable for that.

[Michelle McPhee]

If Jacob and Lavon ran the fuel through the WRE plant, pretending they produced it there, every one of their workers could be co conspirators in a federal crime. For Jacob, this is the pivotal moment. Is he going to put his faith in the lion? Just think, there's been $140,000 advance, private jets and bodyguards, the Seattle sushi adventure, the boxes of lobster. I mean, even if Jacob feels uneasy about it, the world the lion has shown him is kind of irresistible. Coming up next, Jacob takes his first step towards the lion's den.

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[Jody Sweetie]

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[Jody Sweetie]

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[Katharina Pattison]

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[Michelle McPhee]

It's amazing to me that these two men, Jacob and Lavon, were not only becoming fast friends, but were also building a rapid fire criminal conspiracy. I've become fascinated with the seedy underbelly of the biofuel world. How it brings people like Lavon and Jacob together, how common this kind of fraud is, and the sophisticated nature of These sorts of schemes. What I really need is a biofuel Fraud for Dummies book. But no one has written that yet, so I call someone who knows this intricate world very well.

[Doug Parker]

The regulations, the way they were written, left the barn door open.

[Michelle McPhee]

Doug Parker understands biofuel fraud inside and out, because for many years, it was his job to stop it.

[Doug Parker]

I'm the former director of EPA's Criminal Investigation Division.

[Michelle McPhee]

The EPA stands for the Environmental Protection Agency, and they have criminal investigators with guns, badges, and the same authority as FBI agents, only they investigate environmental crimes. Doug says that the problem of biofuel fraud began after George w. Bush signed two different acts passed by Congress, one in 2005 and another in 2007, which introduced a whole host of tax subsidies for companies producing renewable fuels.

[Doug Parker]

So the purpose was to encourage production of renewable fuel. They thought it's going to be better for the environment and make us less dependent on Middle Eastern oil. We were involved in and dealing with the Iraq war, and there was a movement to lessen our demand on foreign oil because they felt like it made us more vulnerable.

[Michelle McPhee]

The intentions may have been sound, but the regulations themselves, not so much.

[Doug Parker]

Some folks who wrote them would admit that they weren't written with enough eye towards enforcement. They were written more with an eye towards encouraging the production.

[Michelle McPhee]

Unlike fossil fuels, you can make renewable fuels out of ingredients you can grow, like soybean, or out of used materials like cooking oil. But the new regulations to encourage renewable fuel production were too lax. The government threw a lot of money at biofuel without keeping tabs on whether it was even going to the right people. So first of all, I want to understand how biofuel fraud actually works. How do you make money? Well, there are two major subsidies. The first one works like this. The government gave big refineries a yearly target of how much renewable fuel they had to produce.

[Doug Parker]

But the refiners didn't necessarily want to have to retrofit all their equipment to all of a sudden produce renewable fuels. And so they developed a tradable credit system. So company A would refine and produce biodiesel, and then an ExxonMobil would essentially buy the credit.

[Michelle McPhee]

So a biofuel company like Jacobs would produce a gallon of biofuel. That gallon then gets issued with a unique number called an rin. I know, it's incredibly abstract. So instead, imagine the biofuel is stamped with, I don't know, a gold star. Then instead of a refinery having to produce a gallon of biofuel themselves, they just buy a gold Star from Jacob at wre. See, I've always found this very confusing because this would be the equivalent of me going to my friend who owns a Tesla and saying, hey, let me buy one of those smog emission tests from you. And I can still drive around in my, you know, shitty, shitty bang bang car and emit a lot of pollution into the air. So does it in any way affect the environment if you're buying these credits?

[Doug Parker]

Ultimately, it is better for the environment if it operates in a transparent, authentic, compliant way. This is ultimately an environmental benefit. That's how it's designed.

[Michelle McPhee]

Whether biofuel is substantially better for the environment than fossil fuels is debatable, but we'll dig into all that later in the series. What this means in terms of fraud, though, is that if a biofuel company is lying about making hundreds of thousands of gallons of biofuel, these gold stars could be worth millions of dollars. But that's not all. There's a second subsidy available. Here's Doug to explain that one, too.

[Doug Parker]

Basically, if you produce a certain amount of biofuel, the government wants to encourage it. You prove that you've produced it, you get paid for that. It's like the government cutting you a check.

[Michelle McPhee]

That check is worth $1 per gallon you produce, or pretend to produce. Those are paid out by the IRS. If you tell the taxman you've produced 100,000 gallons of biofuel, they'll just send you a check for $100,000. That's why this is such a killer fraud. You buy biofuel and pretend you're the one who made it. Then on that same batch of fuel, you get to make money over and over again with these subsidies for just faking paperwork. First, you sell the gold stars on the open market. Second, you claim the dollar per gallon tax credit. And third, you can actually sell the fuel to an end user, like a gas station at a markup. How much money do you think is lost? Our money?

[Doug Parker]

Yeah.

[Michelle McPhee]

To be very clear, this is our money. How much is lost to these sort of fraudsters?

[Doug Parker]

When you look at all the fraud that took place, it was billions of dollars.

[Michelle McPhee]

You can see why this became a gigantic issue inside the Environmental Protection Agency. Doug first realized how much of a shit show it was when one day a colleague pulled him aside.

[Doug Parker]

He literally came up to me coming out of a briefing and he said, you guys really need to focus on fraud in the renewable fuel space. That's what we're seeing popping up everywhere.

[Michelle McPhee]

This guy worked in the EPA's civil enforcement team. Unlike Doug's agents, the civil guys can't arrest anyone. Instead, they do inspections, and if needed, they can issue fines or sue for damages. And more and more often, the civil guys saw companies like Jacobs routinely exploiting loopholes. In fact, at the start of 2011, before Jacob even met Lavon, the EPA zeroes in on WRE. They issue them a notice of violation, which is a problem for Jacob. It means the EPA knows he's been scamming, but the civil division is powerless to really stop him. The notice is basically just a public slap on the wrist with the potential for a big fine.

[Doug Parker]

Some companies viewed it as a cost of doing business. I'll write you the check.

[Michelle McPhee]

One thing was for certain. For many inside the epa, civil and criminal needed to join forces and people needed to start getting locked up. So in 2011, that's exactly what Doug did. He spearheaded a criminal task force to go after these green energy crooks.

[Doug Parker]

My job was to build a team with people a whole lot smarter than I was. And so I gathered a number of really top notch senior investigators. We got in a room and I said, here's the problem.

[Michelle McPhee]

Doug went all in. He pulled in agents from the irs, the Secret Service, the, the FBI. This was going to be a national takedown. What are the stakes of this fraud? Who are the losers? Why is it so dangerous?

[Doug Parker]

Well, the taxpayer gets ripped off and the environment is worse off as a result. If the system is being undermined, then more greenhouse gas emissions are going up into the atmosphere.

[Michelle McPhee]

Back in 2011, the task force set its sights on its first case. This one doesn't take a genius.

[Doug Parker]

There was no biodiesel plant. The address was actually a self storage unit. But this individual was crafty enough to say, that's my address. I'm creating biofuels. And made a bunch of money until he was caught. It was basic, it was easy fraud.

[Michelle McPhee]

A lot of the early cases are like this.

[Doug Parker]

It's like shooting fish in the barrel. But then it gets more complex. It's not just, I have a storage site and I'm just making up these numbers. It's tracking trucks with bogus loads going from Indiana to whatever state and back, and offshore transactions, money laundering. They were getting smarter. They were adapting.

[Michelle McPhee]

The kinds of fraudsters who are attracted to biofuel scams also start changing.

[Doug Parker]

In some cases, these were people who stumbled into fraud. Other instances, there were bad guys, folks with really bad, tough reputations.

[Michelle McPhee]

By the time Jacob and levon Connect In 2012, green energy criminals are extremely sophisticated and they always seem to be one step ahead of the task force.

[Doug Parker]

These are not quick hits like they're complex puzzles you're putting together. Sometimes it's surveillance. A lot of times it's interviewing. It's a months, month, month long process. Years. Often.

[Michelle McPhee]

Doug's team has its hands full. And despite Jacob's slap on the wrist at the start of 2011, he's still not on their radar as a big player. Not yet, at least. But he and Lavan will go on to become the Fed's toughest challenge. Their most elusive targets, Jacob and Levan are at the very beginning of a scheme that will blow everything Doug's team has dealt with out of the water.

[Doug Parker]

This was the biggest one. This was the big kahuna.

[Michelle McPhee]

After the break, their big kahuna fraud kicks off.

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[Michelle McPhee]

Back at Noel Jacob has just agreed to Lavon's proposal. They will fraudulently claim subsidies on the biofuel Jacob is selling to Lavon. I mean, Jacob's done this before. He knows it's easy. Infuriatingly so, for me at least. So they shake hands and it's on. Jacob flies back to Utah, and somewhere in the WRE offices, he and his mom Rachel start faking paperwork. And soon Lavon and Jacob split a big fat government check. 50. 50. It's hundreds of thousands of dollars, which, knowing what's to come now, seems pretty small time. It went so smoothly once and so

[Jacob Kingston]

Lavon asked if we could do it again.

[Michelle McPhee]

I'm sitting down with my producer Jake to talk about this game changing moment in the fraud. So, Jake, this is the moment this scam goes big and worldwide.

[Jacob Kingston]

Yeah. So when Levan suggests doing it all again, this time it doesn't sound like Jacob is taken aback or uncomfortable at all. It seems that after that first deal, he now trusts Levan. But they have to come up with a cheaper, quicker solution than having fuel go all the way to India and back.

[Michelle McPhee]

The fuel moving around internationally creates a lot of legitimate paperwork. They just needed to find a cheaper way to do it.

[Jacob Kingston]

Exactly. So Levan suggests that they just run the fuel through Panama this time.

[Michelle McPhee]

This is how the Panama scheme is born. This deal is important in several ways. First, it essentially cements Jacob and Lavon as a duo like the Al Capone and Bugsy Siegel of biofuel. And second, Panama becomes their prototype. In some ways, the Panama deal is like a Hollywood movie. There's the sleek, polished narrative Jacob is feeding the government, and then there's the behind the scenes Hollywood production that props it all up. Let's start with the story Jacob tells The government. His script is that he's bought vegetable oil from a supplier in Florida, that he's transported it through the Panama Canal. Then he will say he moves it all to Utah, where wre turns the oil into biofuel. The final scene is Lavon buying the biofuel from Jacob to sell at his gas stations. Now here's the below the line scam. Cue the music. Step one, Jacob buys 100 containers of biofuel in Florida. Step two, Jacob doctors the paperwork to say he's bought vegetable oil, not biofuel. Step three, he loads all 100 containers onto cargo ships in Florida and sails them down to Panama. Step four, in Panama, he loads the fuel onto a fleet of 18 wheelers. Step five, they drive the fuel across Panama to the west coast where it's loaded onto container ships again. Step six, the biofuel, which Jacob still pretends is vegetable oil, arrives in la. Step seven, he pretends to ship it to Utah to turn the oil into biofuel. But that never happens. Step eight, Lavan buys the biofuel. And then the big twist. Jacob claims the subsidies. It's all planes, trains and automobiles. But in reality, this is just a bullshit dirty money paper trail. If it all sounds extremely complicated and difficult to follow, don't worry, it's not you. It's meant to be complicated. That's the whole fucking point. These guys want to confuse you and the government with a trail of bogus paperwork they've actually pulled off, making all of it look like a legitimate, albeit complicated, logistical operation. The idea is that if anyone like Doug Parker's big time federal task force investigates, there are real dock workers, real truck drivers who can attest to handling barrels. The whole cycle takes just a few weeks in the spring of 2012. And despite the fact that Jacob has definitely done all the hard work and more importantly, has the most exposure, he splits the proceeds in half with Levant. The only time Levan and his company, Noyel, appear on any of the paperwork is as a buyer of the biofuel. Lavon's fingerprints are nowhere near the fraud. But Jacob is okay with this. It might be because he realizes that if he keeps doing business with Lavon, it could finally make wre profitable and earn him the respect he's so desperate to obtain. In the order. Do you know Jacob Kingston?

[Katharina Pattison]

I do.

[Michelle McPhee]

When did you first meet him?

[Katharina Pattison]

I first met Jacob Kingston at the National Biodiesel Board Conference in Orlando, Florida in February of 2012.

[Michelle McPhee]

This is Katerina Pattison again, the woman you heard partying with Lavon. At the very start of this episode, I've been able to get my hands on the recording of Katarina's deposition where she's being grilled about Lavon under oath. And can you please give a little

[Andrea Barber]

background on where you're living and what you're doing now?

[Katharina Pattison]

Yes. I currently live in Missouri. I am self employed. I work for my parents on their ranch and we raise cattle and goats.

[Michelle McPhee]

How many goats do you have?

[Commercial Announcer]

A lot.

[Katharina Pattison]

Estimate over 700.

[Michelle McPhee]

Aside from her current life as a goat rancher, Catarina is talking about how she first closes a deal with Lavon and wre to commit fraud. It all starts after she meets Jacob at a biofuel conference, which is probably as boring as it sounds. But in the darker corners of the hall, the scammers are making connections. Katarina being one of them. For her and others, this is fraudster speed dating. She's looking around the room and spots Jacob.

[Katharina Pattison]

There had been some rumors that had gone around in the industry that Washaki might be a possible match for us.

[Michelle McPhee]

Katerina finds a quiet spot and pulls Jacob over for a chat.

[Katharina Pattison]

It was a hey, how are you? What are you doing? Who are your customers? What type of needs do you have? Just feeling him out at some point.

[Michelle McPhee]

Did Jacob Kingston tell you that you needed to talk to Lavon Tremendousian?

[Katharina Pattison]

Yes, he did.

[Michelle McPhee]

This is the answer the prosecutor has been trying to get to. Katarina first meets Jacob around the same time. The Panama deal is in full swing and already at that early stage, Jacob is sending people to Levon to handle his new business. A month later, Katerina goes to Miami, where she gets the full lion treatment. Five star hotel, fancy cocktails and that VIP party at Nikki Beach. Katerina has a proposal for Lavon. She has biofuel to sell and she suggests wre could pull their scam claim the subsidies on her fuel and they'd all split the money. Only this time the deal won't be for hundreds of thousands like with Panama, but millions. Lavon likes the sound of that, so he invites everyone to LA to finalize the deal.

[Katharina Pattison]

We were picked up at the airport by Lavon's son George. And I believe it was his nephew, also named George. Had some very nice cars. It was a Bentley and a Rolls Royce.

[Michelle McPhee]

The two Georges are not involved in the fraud, but they drive Katharina and her business partner from LAX to the east side to Lavon's office.

[Katharina Pattison]

It's a trailer, just not very impressive. I expected something more.

[Michelle McPhee]

Katharina is underwhelmed until she Walks inside Lavon's inner sanctum.

[Katharina Pattison]

That's where I saw Lavon and his personality come to life. The furniture in the office was Lamborghini furniture. It was emblazoned with the logos. There was a tremendous spread of food laid out on the table, lots of fruit. There was also a bottle of tequila there.

[Michelle McPhee]

There are a few different people squeezed in there discussing business. Jacob's tucked away in the corner like he's sitting at the kids table. Then, seemingly in the middle of negotiations, Levan does something Katharina thinks is wild.

[Katharina Pattison]

Lavan had gone outside and he had a. I believe it was a GT500.

[Michelle McPhee]

A GT500 is a premium Mustang, so pimped out it looks like a Transformer

[Katharina Pattison]

and started doing donuts in the parking lot.

[Michelle McPhee]

All this time, Katerina is getting incessant calls and texts from her business partner asking for updates on the deal. She gets fed up, so she picks up the phone and says to him,

[Katharina Pattison]

f you talk to Lavon yourself.

[Michelle McPhee]

Lavon and Katerina go outside with her business partner on speakerphone. The three of them discuss the deal. The deal between Catarina's company and Jacob's company. Where was Jacob Kingston in this phone call?

[Katharina Pattison]

He was not present.

[Michelle McPhee]

Was there explicit discussion that Jacob Kingston

[Commercial Announcer]

would fraudulently claim the tax credits and the rins?

[Katharina Pattison]

Yes.

[Michelle McPhee]

Was it odd to you that Jacob Kingston wasn't present?

[Katharina Pattison]

No, because it was my belief that it did not matter what Jacob thought, that as long as Lavon was okay with it, everything was fine.

[Michelle McPhee]

We're only three months in and Lavon is already calling the shots while Jacob sits in the background. Levan pulled Jacob out of a serious hole when the India deal collapsed. Now Jacob is indebted to him and tagging along for the ride. But there's one other reason Jacob is happy to keep his mouth shut in these negotiations. Around the time the Panama scheme is in full swing, Jacob receives some bad news. It's a notice from the irs. As Jacob reads the first few lines, he must be panicking. The IRS is going to audit Wreath, go through all of their accounts and their tax subsidy claims. Jacob is in deep, deep shit. He can only think of one possible solution. His new friend Levan, the guy with the bodyguards and the big black SUVs, and as it turns out, a slew of connections. Next time on Kingdom of Fraud. Jacob finds himself in Lavan's protective and powerful fold. Kingdom of Fraud is produced by novels for iHeart podcasts. For more from Novel, visit Novel Audio. The show is hosted by me, Michelle McPhee and produced by Jake Otajevic. It's reported by me and Jake Otajevic. Our assistant producers are Megan Dean and Amalia Sortland, with additional production from Myron Kaplan and Liz Sanchez. Our editor is Sandra Shmueli. Production management from Cherie Houston, Joe Savage and Charlotte Wolf. Our fact checker is Fendal Fulton. Sound design and mixing by Mark Pittam Original music composed and performed by Nicholas Alexander and Daniel Kempson. Music supervision from Jake Otyvich, Sandra Shmueli and Max o'. Brien. Willard Foxon is creative director at Novel Our executive producers are me, Michelle McPhee, Max O' Brien and Craig Strachan. The Novel and Stephanie Lang, Katrina Norvell and Nikki Itor are the executive producers for iHeart podcasts and the marketing lead is Allison Kanter. Special thanks thanks to Carrie Lieberman, Will Pearson and the whole team at wme.

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