Broker of air pollution credits arrested on federal wire fraud charges

A woman who owned a company that purportedly traded air pollution credits among Southern California businesses has been arrested on federal wire fraud charges alleging that she took $12.5 million from investors who were falsely told that the money would be used to purchase pollution credits that would be sold to a Southern California Mobil refinery.

Anne Masters Sholtz, 39, of Bradbury, was arrested by federal agents yesterday morning. At a court hearing yesterday afternoon, a federal magistrate set bond at $100,000 and ordered Sholtz to return to court on July 6, 2004 for an arraignment.

A criminal complaint filed on Tuesday accuses Sholtz of seven counts of wire fraud, charges that carry a potential penalty of 35 years in federal prison. The affidavit in support of the complaint outlines a scheme in which Sholtz used forged documents and her knowledge of trading pollution credits to defraud AG Clean Air, a New York-based company that trades in energy credits.

“This kind of fraud seriously undermines the public’s confidence in the effectiveness of a very important air pollution control program, and will not be tolerated,” said United States Attorney Debra W. Yang. “The United States Attorney’s Office will continue to review these programs for fraud and will aggressively prosecute those who seek to profit from such frauds.”

In 1993, the South Coast Air Quality Management District, the air pollution control agency that regulates 28,000 pollution-emitting businesses in the Los Angeles metropolitan area, established the Regional Clean Air Incentive Market, or RECLAIM. In 1998, the United States Environmental Protection Agency approved the RECLAIM program, under which each pollution-emitting facility is issued an annual allocation that limits the amount of nitrogen oxides and sulfer oxides that can be emitted. If a facility improves its pollution-control equipment, it may sell part of its pollution-producing allocation via RECLAIM Trading Credits, or RTCs.

Sholtz owed a company called Sholtz & Associates, which later merged with another company and became EonXchange. Through these companies, Sholtz operated a Pasadena-based Internet site called Automated Credit Exchange (ACE), which was a forum for companies to trade and sell RTCs. ACE was closed in August 2002 when it went into bankruptcy.

According to the affidavit, Sholtz approached an officer of AG Clean Air in 1999, telling him that Mobil Corporation needed to purchase a large quantity of RTCs for use at a refinery in Southern California. Over the next two years, AG Clean Air purchased $12.5 million worth of RTCs based on Sholtz’s representations that Mobil would purchase the RTCs for $17.5 million.

Sholtz sent AG Clean Air a $9 million payment, but when AG Clean Air demanded the remaining money, Sholtz claimed that Mobil was having trouble paying for the RTCs. As part of the fraud, Sholtz sent a series of faxes and e-mails to AG Clean Air that purportedly documented ongoing negotiations between Ace and Mobil. In 2002, according to the affidavit, Sholtz finally admitted that she had fabricated documents and had associates pretend to be Mobil employees. She claimed that she was forced into these lies by an ACE employee who sold RTCs without her knowledge. AG Clean Air eventually filed a lawsuit against Sholtz and her company.

The case against Sholtz is part of an ongoing investigation being conducted by the United States Environmental Protection Agency, Criminal Investigation Division, and the South Coast Air Quality Management District.