(Bloomberg) -- A pioneer in developing carbon offsets was accused by federal prosecutors of faking emissions-reduction data as part of a scheme to obtain millions of carbon credits and secure more than $100 million in investment.
Former C-Quest Capital LLC Chief Executive Officer Kenneth Newcombe, who stepped down as CEO in February, was indicted Wednesday in New York on wire fraud and commodities fraud charges. He faces up to 20 years in prison if convicted on the most serious charges.
C-Quest develops emission-reduction projects to earn carbon credits that can then be sold to companies or other entities that wish to offset their own emissions. Newcombe, a onetime Goldman Sachs Group Inc. managing director and World Bank official, founded C-Quest in 2008.
The charges are a blow to the carbon offset development industry, in which Newcombe and C-Quest were leading players. The investors Newcombe allegedly deceived weren’t identified by prosecutors, but C-Quest lists on its website Macquarie Group and Temasek Holdings’ GenZero as among its backers.
A spokesman for Newcombe, 77, denied the allegations in a statement and also said the former CEO was dying of cancer. “He is confident that if he lives to see a jury hear this case, that jury will reject these false charges and return his good name to him,” the spokesman said.
Prosecutors claim Newcombe and other C-Quest employees manipulated data to make it seem that certain of the firm’s projects were more successful than they actually were. Many of its projects involved providing cooking stoves in African and Asian countries that were touted as lowering emissions. Newcombe allegedly sought aggressive growth in these projects but also covered up data showing they reduced emissions by a lower amount than anticipated.
Tridip Goswami, C-Quest’s former head of carbon and sustainability accounting, was charged along with Newcombe. Goswami is in India and couldn’t immediately be reached for comment. Prosecutors said another executive, former Chief Operating Officer Jason Steele, has pleaded guilty and agreed to cooperate with the government.
The Commodity Futures Trading Commission separately sued Newcombe earlier on Wednesday.
C-Quest said in July that it had reported Newcombe to law enforcement for alleged wrongdoing in obtaining millions of carbon credits. Verra, the leading issuer of carbon credits, said at the time it was suspending C-Quest projects and reviewing the matter.
Prosecutors said Wednesday they declined to charge C-Quest itself because the company self-reported the alleged wrongdoing and cooperated.
The case is US v. Newcombe, 24-cr-567, US District Court, Southern District of New York (Manhattan).
(Updates with detail on charges.)
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