Michael J. Ruffatto, promoter of the never-built Two Elk project near Gillette, pleaded guilty to federal criminal fraud charges
From WyoFile
PITTSBURGH — A federal judge sentenced Two Elk power plant promoter Michael J. Ruffatto to 18 months in prison and three years’ probation for stealing $5.7 million from a 2009-2010 Department of Energy stimulus grant for a study of carbon storage potential in Wyoming’s Powder River Basin.
Ruffatto also agreed to pay the government a total of $14.4 million in restitution, penalties and interest, according to a proposed civil settlement signed by Ruffatto and filed by his attorneys Tuesday in federal court. If he fails to meet scheduled payments, the civil settlement states, the government can seize his interest in two California power plants, his multi-million dollar estate in Colorado and other unspecified assets.
In his last appeal for leniency, an emotional Ruffatto told the court that he was “ashamed” of what he had done and then turned and tearfully asked forgiveness from his daughter Katherine and wife Eve who were in the large, nearly empty courtroom in the Pittsburgh Federal Courthouse.
As his wife and daughter wept and held their heads in their hands, Ruffatto, looking grey and haggard, ended by begging mercy from U.S. District Judge Joy Flowers Conti.
“Please do not send me to prison,” he said.
Ruffatto and his attorneys had asked for a sentence of probation only.
Although she appeared to be moved by his emotional appeal, Judge Conti told Ruffatto that the “sentence has to reflect the seriousness of the crime and a non-incarceration sentence would not do that.” Conti then asked Ruffatto where he he would like to serve his time. He responded that he would prefer the minimum security Lompoc Prison Camp in southern California and Judge Conti said she would consult with the federal Bureau of Prisons to see if that could be arranged.
Ruffatto will remain at large on bond until the prison system contacts him about his assignment, which could take several weeks.
The 18-month sentence was still considerably less than the 36-47 months in prison requested by Assistant U.S. Attorney Mary Houghton, the main criminal prosecutor in the case.
“How would the criminal justice system look if a rich man were able to steal $5.7 million dollars and not serve jail time?” Houghton asked. “The answer is the criminal justice system would look like it favors rich defendants, allows sentences that may be bought. A sentence of 37-46 months is sufficient, but not greater than necessary.”
Before Judge Conti announced her decision, Ruffatto attorney Chad D. Williams made a last-ditch plea for leniency by arguing that Ruffatto showed remorse and demonstrated good faith by agreeing to the $14.4 million civil settlement — one of the largest penalties assessed against a stimulus grant recipient.
But Williams’ appeal came immediately after Judge Conti had systematically rejected all of Ruffatto’s previous arguments for leniency, including his claims that he was too old, too ill and had family responsibilities that prison would interrupt.
“Ruffatto chose to commit his crimes while elderly,” Conti noted unsympathetically in her tentative findings and rulings filed on the eve of sentencing.
Ruffatto attorneys argued that because Ruffatto, 72, suffers from a variety of ailments including coronary artery disease, type 2 diabetes, high blood pressure and hypothyroidism, the Bureau of Prisons would not be able to efficiently care for him and that he risks dying in prison.
“Ruffatto has not provided any evidence to support this assertion,” Judge Conti concluded tersely.
As for Ruffatto’s claim that he is needed as a “caregiver” for his 38-year-old son and 35-year-old daughter, both of whom have medical conditions, Judge Conti concluded: “Ruffatto is not a direct caregiver. Ruffatto splits his time between his residence in Englewood, CO, and his second wife’s residence in Corona Del Mar, CA. His children from his first wife are both independent adults.”
Conti, chief federal judge for the Western District of Pennsylvania, did give Ruffatto some credit for accepting responsibility for his crime, cooperating with prosecutors, and for having no previous criminal record. But the judge determined those factors only marginally reduced the potential maximum punishment of five years.
The case against Ruffatto was filed in Pennsylvania because the National Energy Technology Laboratory that awarded Ruffatto and his Colorado-based North American Power Group the stimulus grant is based in Pittsburgh.
Conti also dismissed Ruffatto’s claims of strong community ties and charitable activities, saying that most of those activities were initiated by his second wife, Eve Kornyei Ruffatto, and not Ruffatto himself. “There is no evidence that the defendant’s personal participation is exceptional,” Conti wrote.
The federal prosecution has been a humbling chapter for Ruffatto, who first burst on the scene in Wyoming in the late 1990s as an audacious promoter of a series of power plants in the Powder River Basin. His grand plan, he told investors, was to create in Wyoming a coal-fired power giant to rival Arizona’s 3.3-gigawatt Palo Verde nuclear power complex.
“Wyoming’s Palo Verde,” he called it.
But even his first power plant project, the modest 320-megawatt Two Elk proposal south of Gillette, never really got off the ground except for the construction of a road, an aluminum shed and a concrete boiler platform.
Despite his consistent lack of progress on the much ballyhooed Two Elk plant, Ruffatto managed to entangle local, state and federal governments at almost every turn.
He began with a very creative interpretation of federal tax laws. Because his proposed plant would burn “waste coal” from nearby mines — lower-grade coal rejected by the national coal companies — Ruffatto somehow convinced the IRS that his proposed smoke-spewing Two Elk power plant would actually be a “solid waste disposal and recycling facility.”
This then qualified him to apply to Campbell County and two successive Wyoming governors, Republican Jim Geringer and Democrat Dave Freudenthal, for $445 million from the state’s allotment of tax-exempt industrial bonds that are generally reserved for public works projects such as airports and sanitation facilities.
Thrilled with the idea of a new job-producing power plant in Campbell and adjacent Wyoming counties, state officials pitched in with $11,066,396 of state sales and use tax monies to build roads, sewers and other infrastructure to support the phantom plant.
But after a flurry of initial enthusiasm, public confidence in Ruffatto and his plans subsided. Many residents of Wright, the town nearest to the site, began referring to the project derisively as “No Elk.”
Notwithstanding and despite the lack any noticeable progress at the site, Ruffatto managed to keep his Two Elk project alive — receiving repeated renewals of permits from the state Industrial Siting Council — for nearly two decades after it was first proposed.
During that time Ruffatto was also a frequent contributor to the campaigns of Wyoming governors, including incumbent Republican Gov. Matt Mead ($12,000 in 2010) and his predecessor, Freudenthal ($3,000 in 2006). In the fall of 2010 Mead attended a fundraiser for his campaign at Ruffatto’s sprawling Colorado home in the exclusive Cherry Hills Village community. Wyoming governors appoint members of the Industrial Siting Council.
Although the contribution to Mead’s campaign PAC was made in 2010, Federal prosecutors have not said whether they think federal tax dollars from the stimulus program were used.
From 2006 until 2017, Ruffatto employed Brad Enzi, the son of Wyoming senior U.S. Sen. Mike Enzi, as his North American Power Group vice president and agent in Wyoming. During that time, it was Brad Enzi, the affable 6-foot 8-inch former University of Wyoming walk-on basketball player, who represented Ruffatto before all the state agencies, winning extension after extension. In 2006, the younger Enzi also made a $1,000 campaign contribution to Gov. Freudenthal.
While things were looking most grim for Ruffatto’s Two Elk project in 2009, the federal government came to his rescue by granting his North American Power Group two successive stimulus grants totaling $9.9 million ostensibly to study CO2 storage potential under Ruffatto’s Two Elk site.
Ruffatto hired Brad Enzi, son of U.S. Sen. Mike Enzi, to be vice president of Ruffatto’s North American Power Group.
The Department of Energy grants were controversial from the very beginning when North American Power Group was given an extraordinary one-week extension in its application and because Ruffatto, a lawyer and former Air Force navigator, and his NAPG vice president Enzi, a UW communications major, did not have the scientific or engineering credentials of most of the others who got similar grants.
Ruffatto immediately began using the stimulus grant money to pay himself, Enzi and other NAPG employees. In the two year period, Ruffatto paid himself more than $1 million and Enzi more than $110,000 with stimulus money. Brad Enzi, who said in an interview that he did not know the source of his salary during this period, was not named in the federal fraud case.
After a DOE Inspector General audit discovered massive accounting irregularities in the NAPG Two Elk project, the grants were suspended in January 2012 but not before $7.3 million had already been spent.
Federal investigators determined that at least $5.7 million of that money was illegally and fraudulently siphoned off by Ruffatto and used to indulge his expensive tastes in cars, homes, carpets and jewelry.
On Aug. 9, 2016, Ruffatto — who once prosecuted a massive fraud case as an assistant attorney general in Arizona — was charged with filing a false claim against the United States. On Oct. 21, 2016, he pleaded guilty.
“Records show that millions of dollars [from the stimulus grants] were never used on the project,” Assistant U.S. Attorney Mary Houghton said at the 2016 hearing, “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.”
