FORMER COMPANY VICE PRESIDENT INDICTED FOR CONSPIRING TO FALSIFY DATA ON MILLIONS OF GALLONS OF REFORMULATED GASOLINE

NEWARK – A former vice president of a multinational petroleum products testing company was indicted today on charges of conspiring to violate the federal Clean Air Act and a variety of fraud statutes, as well as for obstructing justice, U.S. Attorney Christopher J. Christie and Tom Sansonetti, Assistant Attorney General for the Department of Justice's Environment and Natural Resources Division announced.

Thomas M. Hayes, 51, of Rockaway Township, N.J., formerly vice president of Western Hemisphere operations at Saybolt Inc., is charged with conspiracy to violate the Clean Air Act, to make false statements to the federal Environmental Protection Agency, to commit mail fraud and to tamper with a witness. The second charge in the Indictment is for obstructing justice by tampering with a witness, whom Hayes directed to alter and destroy documents.

Saybolt's primary business is to conduct quantitative and qualitative testing of bulk commodities, such as petroleum, gasoline, and other petrochemicals. Saybolt typically performs testing and inspection services for oil and gas refiners and importers.

The indictment alleges that Hayes and others conspired to falsify the results of qualitative tests on petroleum products, including Reformulated Gasoline (RFG), which is a cleaner burning gasoline required to be used in major metropolitan areas of the country where national air-quality standards have not been met, including New York and New Jersey. The indictment alleges that Hayes and others hindered an investigation by the EPA into that testing.

In July 2001, three former employees of Saybolt pleaded guilty to conspiracy to violate the Clean Air Act. Each of them signed cooperating plea agreements and are assisting in the government's investigation. According to the government's charges against those employees, the fraud was designed to keep Saybolt customers by allowing them to sell substandard RFG and other products.

In January 1999, Saybolt, Inc. entered a corporate guilty plea in U.S. District Court in Boston to conspiracy and wire fraud. Saybolt's parent company, Saybolt North America Inc., pleaded guilty to related charges as well. Saybolt North America is owned by a holding company, Saybolt International BV, in the Netherlands.

Hayes is accused of carrying out the conspiracy as early as September 1992 to approximately November 1996 at Saybolt's facilities in New Jersey and Woburn, Mass. The conspiracy centered on, but did not exclusively involve, the testing of the oxygen content of RFG. RFG is blended to meet environmental specifications for various chemical and physical properties, including oxygen content.

Hayes and his co-conspirators routinely inflated the oxygen content of its customers' RFG in reports that were submitted to the EPA, according to the indictment. Saybolt allegedly falsified its data, reporting results that were not actually obtained in the lab to generate higher oxygen figures. In some instances the falsified reports enabled refiners and importers to sell RFG that did not meet minimum government requirements. In other instances, sellers received undeserved "credits" for selling RFG that purportedly exceeded minimum environmental specifications.

The indictment also alleges that Hayes and his co-conspirators falsified lab results in areas unrelated to RFG, reporting as "on-specification" lab results for other petroleum products, such as home heating oil, regardless of the actual test results. Often, these instances of data falsification involved commercial, rather than environmental, specifications.

If convicted, Hayes faces a maximum statutory prison term of five years and $250,000 on the conspiracy count; and a maximum 10 years in prison and a $250,000 fine on the tampering count.

Pleading guilty last July before U.S. District Judge William G. Bassler to one-count Informations charging conspiracy were:

• William N. Koeck, of Bricktown, N.J., from 1976 to 1997, an assistant vice president and the general manager of Saybolt's east coast operations.
• Nabil Mohtadi, of South Plainfield, N.J., between 1990 and 1997, manager of the Saybolt laboratory in Kenilworth, N.J.
• David Loane, of Franklin, Tenn., who obtained accounts for Saybolt and, in 1996, was primarily responsible for overseeing RFG testing at the Woburn facility on behalf of a Saybolt customer identified in the Information only as "ABC Company."

Under U.S. Sentencing Guidelines, the Judge to whom the case is assigned, would, upon conviction, determine the actual sentence based on a formula that takes into account the severity and characteristics of the offense and the defendant's criminal history, if any. Parole has been abolished in the federal system. Under Sentencing Guidelines, defendants who are given custodial terms must serve nearly all that time.

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