Kentucky coal executive embezzled from companies and lied on tax returns, indictment says
An Eastern Kentucky coal executive embezzled money from investors and filed false tax returns that didn’t report the income, federal authorities have charged.
One informant told authorities that Rex. G. Fought worked with others to steal millions of dollars between 2014 and September 2019, according to a sworn statement in the case.
A federal grand jury indicted Fought last week on one charge of conspiracy to defraud the U.S. by obstructing tax collection efforts, punishable by up to five years in prison.
The indictment said Fought, 64, was the manager of Catalyst Resources, Rockhampton Energy and Covol Fuels No. 3 during the alleged conspiracy.
Rockhampton mined coal for Catalyst in Bell County and Covol operated a preparation plant for the coal, according to sworn statement from Christopher Hubbuch, an FBI special agent.
Fought allegedly schemed with another person that the indictment identified only by the initials M.M., who was the controller at the companies. M.M. was not charged in the indictment.
In 2014, M.M. withdrew cash from accounts at Rockhampton and Covol at Fought’s request to pass on to him, the indictment alleged.
Fought is no longer with the companies, and efforts to reach him were not successful.
Money through shell companies
M.M. also allegedly funneled money into the accounts of other companies, then passed it on to Fought and another person identified in the indictment as R.A.M.
The indictment identified the other companies as SBJ Leasing and JStar Enterprises, describing each as a “shell company” used in the conspiracy.
Fought and R.A.M. — described as his “romantic partner” — also used a debit card from one of the company’s accounts for personal expenses, the indictment charged.
Much of the money from SBJ Leasing and JStar Enterprises was for Fought’s benefit, but was reported on R.A.M.’s tax returns, the indictment said.
M.M., at Fought’s request, added false expenses to reduce the taxable income that flowed through JStar, the indictment said.
Fought also allegedly had M.M. wire money to R.A.M. out of Rockhampton Energy accounts that was not reported on tax returns. R.A.M. was purportedly an employee at Rockhampton but did little or no work there, the indictment said.
With the help of M.M., Fought filed returns in tax years 2015 through 2018 that didn’t include the income he received in cash or check withdrawals from Rockhampton Energy, Coval Fuels, SBJ Leasing and JStar Enterprises, the indictment charged.
R.A.M. also allegedly filed false returns that underreported income.
Catalyst Resources, one of the companies that Fought managed, was owned by investors. Fought and M.M. created false financial statements and audit documents to provide to investors and lenders, according to the indictment.
A confidential informant said M.M. wrote checks for $2,000 a week to himself and Fought for “supplies.” The money wasn’t for supplies and the two took it, Hubbuch, the FBI agent, said in a sworn statement.
Hubbuch said in the affidavit that in 2015, M.M. started taking up to $5,000 a week from Catalyst, and by 2019 moved $15,000 a month to Fought and another person who was not identified.
M.M. also funneled $10,000 a month to Fought’s girlfriend, R.A.M., according to information Hubbuch received.
The informant said Fought took part in embezzling millions of dollars that came from investors and lendors, sale proceeds and reclamation bonds returned from the state, which should have benefited Catalyst and Covol, according to Hubbuch’s statement.
The informant said that despite what Fought claimed, the Catalyst mine near Pineville was not profitable.
As Catalyst took on debt, M.M. and Fought embezzled money for their own use while misrepresenting the company’s financial status, Hubbuch said.
Hubbuch filed the affidavit in support of a motion by the government to seize a house at 403 Tennessee Ave. in Pineville that Fought and his girlfriend allegedly bought and renovated with money obtained through fraud.
The holding company that owns the house may owe up to $5,500 in delinquent county property taxes from 2019 and 2020, Hubbuch said.
