Attorneys seek leniency for Ruffatto in Two Elk fraud case

Attorneys for Wyoming’s Two Elk power plant promoter Michael J. Ruffatto have asked a federal court to consider his advanced age, poor health, family responsibilities and community service when weighing a possible five-year prison sentence for criminal fraud.

Meanwhile, federal prosecutors said this week that they were in “ongoing discussions” with Ruffatto and his attorneys to reach a settlement on millions of dollars in civil penalties under the U.S. False Claims Act.

Ruffatto, 70, pleaded guilty Oct. 21 in Pittsburgh federal court to one count of fraud in what prosecutors said involved $5.7 million in false charges to a federal stimulus grant. The grant was supposed to create new jobs researching the underground carbon dioxide storage potential at his Two Elk power plant site south of Gillette, Wyoming.

“Mr. Ruffatto regrets his actions and accepts responsibility for this crime and the damage he has caused,” defense attorney Jason Schall wrote in a January court filing.

Sentencing in the case, originally set for February, has been rescheduled for April 6 before Pittsburgh U.S. District Judge Joy Flowers Conti.

Prosecutors said that instead of using the $9.9 million in federal grant money to conduct research and generate employment under the Obama administration 2009 economic stimulus program, Ruffatto spent most of it on personal expenses and luxury purchases, including a Mercedes car, jewelry, carpets, a Neiman-Marcus charge account and payments on his 11,433-square-foot, six-bedroom, 10-bathroom, $13-million home in suburban Denver.

Alarmed by numerous accounting irregularities, Department of Energy officials suspended the grant in January 2012, but by then $7.3 million had already been spent.

“Millions of dollars of the government’s [stimulus] award monies were never used on the project but spent and dissipated by the defendant on extravagant personal expenses, totally unrelated to the project,” Assistant U.S. Attorney Mary McKeen Houghton told the court in October.

Ruffatto also used the stimulus funds in 2010-11 to pay himself and his North American Power Group Vice President Brad Enzi — son of Wyoming’s senior U.S. Sen. Mike Enzi — more than $1.2 million in salaries even though little or no work was done.

The younger Enzi claims he did not know how stimulus funds were used to pay his salary as North American Power Group’s chief Wyoming representative. Brad Enzi has not been charged in the case and because Ruffatto pleaded guilty did not have to testify in federal court.

Sen. Mike Enzi has said that he was unaware of details about his son’s work for Ruffatto’s Colorado-based North American Power Group and that he had never met or had any dealings with Michael Ruffatto, his son’s boss for more than eight years.

Sen. Enzi once called the federal stimulus program “bailout baloney.”

Ruffatto faces a maximum five years in prison, a $250,000 fine, and full restitution of the $5.7 million.

Read reporter Tempest’s complete Two Elk Saga here

In recent federal court filings Ruffatto’s attorneys have asked that Ruffatto not be imprisoned because of his sincere remorse, age, poor health, family commitments, and his ongoing efforts to repay the full $5.7 million the government says he used for extravagant personal expenses.

“At 70 years old,” defense attorney Schall argued in his January sentencing memo, “Mr. Ruffatto is nearing the end of his life and any period of incarceration may well be a life sentence.

“ Mr. Ruffatto’s advanced age becomes particularly pertinent when considering his numerous medical conditions, including coronary heart disease, hypertension, high cholesterol, type 2 diabetes, obesity, and hypothyroidism, all of which will undoubtedly make incarcerating Mr. Ruffatto unduly burdensome on both the Bureau of Prisons and Mr. Ruffatto.”

According to court records, Ruffatto made a $700,000 payment to the government in January, adding to the $3 million he had previously returned. However, he still owes $2,019,821.92 in restitution. In his scramble to come up with this money before April 6 sentencing, Ruffatto has put his Colorado home up for sale as well as his half interest in four aging California power plants.

Ruffatto faces additional damage payments

But prosecutors say he still faces the possibility of up to $17.1 million in additional damages under the federal False Claims Act.

“We are not finished yet,” assistant U.S. Attorney Paul Skirtich, a specialist in False Claims Act prosecutions, said after Ruffatto pleaded guilty to the criminal fraud charge in October.

More than five months later the government has yet to file any civil action in the case, already one of the largest criminal fraud actions to come out of the 2009 federal stimulus program. David J. Hickton, U.S. Attorney for the Western District of Pennsylvania, who presided over the criminal case, was the first federal prosecutor to resign after the election of Donald J. Trump in November.

But this week the Pittsburgh U.S. attorney’s office confirmed “ongoing discussion with both sides” to reach some kind of civil settlement before the April 6 sentencing hearing. In the end, Ruffatto may avoid spending time in prison but could be obligated to pay the government double or triple — $11.4 million to $17.1 million — damages to avoid a civil trial.

Even before his involvement in the federal stimulus program, Ruffatto had a long history of tapping into local, state and federal monies to support his various unrealized Two Elk power plant schemes in Campbell County.

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Beginning in 1997, he received allotments totaling $445 million in tax-exempt industrial bonds from two successive Wyoming governors, Republican Jim Geringer and Democrat Dave Freudenthal. Efforts to attract investors in those bonds ultimately were unsuccessful.

The state of Wyoming invested $11 million in sales tax revenues to build infrastructure for a Two Elk power plant east of Wright, Wyoming, that was never built.

In his federal court appeal for leniency at time of sentencing, attorney Schall characterized Ruffatto as a military veteran and “successful businessman with a long and stable work history.”

“Despite his material success,” Schall wrote of Ruffatto, “he continued to devote much of his time in his 50-year career to serving others.”

Even after the federal criminal charge was filed against him Ruffatto and his socialite second wife, Eve Kornyei Ruffatto, have remained active in several Orange County, California charity causes, including serving as patrons of the Segerstrom Center for Performing Arts and the marine environmental group, Oceana.

On July 30, 2016, Ruffatto and his wife were named “2016 Ocean Champions for their dedication to ocean conservation and generous support” at a star-studded gala in Laguna Beach. Ten days later he was charged with criminal fraud in Pittsburgh federal court.

Ruffatto’s first wife Joan Ruffatto died of lupus in 2007 and his only daughter Katherine is afflicted with the disease. Ruffatto, who once gave $5 million to the University of Denver for a campus building bearing his daughter’s name, has long been an active and generous supporter of the Lupus Foundation of America.

Attorney Schall cited Ruffatto’s relationship with his daughter and her two children as another reason that the court should not imprison him.

“Mr. Ruffatto’s first wife, Joan, died from the effects of Lupus,” Schall wrote.  “His daughter, Katherine, also has the disease, limiting her ability to be the primary caregiver to Mr. Ruffatto’s two granddaughters. If sentenced to a lengthy custodial sentence, Mr. Ruffatto will be unable to provide any support [to] his daughter and granddaughters.”