Authorities Arrest Former California Economics Teacher in Alleged Energy Scheme
By Andrew Blazier, San Gabriel Valley Tribune, Calif. -- June 18
A former Caltech economics instructor and co-creator of one of the Southland's most revolutionary clean-air programs is under arrest on claims she misused the program to defraud an energy company of at least $12.5 million.
Eleven years ago, Sholtz helped the South Coast Air Quality Management
District design the Regional Clean Air Incentives Market.
Known as RECLAIM, the pollution-control program allows the state's 350
largest polluters to exchange "pollution credits' among themselves while
limiting the total amount of poisonous exhaust they generate from their
factories and plants.
According to the charges, Sholtz, through a Pasadena-based auction house,
conducted the scheme between October 1999 and April 2001. She allegedly told AG
Clean Air that Exxon Mobil wanted the credits and would buy them from the New
York firm if it purchased the credits from Sholtz.
When AG Clean Air tried to resell the fictitious credits to Exxon Mobil at a
profit, the AQMD disallowed the trade, costing AG Clean Air $12.5 million,
according to the charges.
Sholtz faces seven felony counts bearing a maximum sentence of 35 years in
federal prison and fines of $250,000 per count.
"These are serious offenses," Assistant U.S. Attorney Dorothy Kim
said Thursday.
Sholtz worked at Caltech as an economics instructor, part-time lecturer and
research fellow between 1992 and 1995, according to Caltech. Spokeswoman Jill
Perry said Sholtz does not serve on any university committees and has had no
official connection to the university for several years.
Perry said Caltech has "no official position" on the accusations.
During her stint at the university, Sholtz was one of several consultants on
RECLAIM, AQMD spokesman Sam Atwood said.
The agency began an internal investigation into "suspicious trading
activities' in April 2002. It turned over the results to the Environmental
Protection Agency's criminal investigation division in Pasadena later that year.
"Some credits were basically being sold to several parties. It was akin
to selling the same stock over and over," Atwood said.
Apart from the allegations against Sholtz, the AQMD has found no other cases
of fraud related to the credit-trading system, Atwood said.
"I suppose there's a note of irony in there," he said. "People
who try to game the system and sell phony credits eventually are going to get
caught and are going to face very serious consequences."
Sholtz was still being held late Thursday on bail of $100,000. A preliminary
hearing has been set for June 30, followed by a July 6 arraignment.
Several companies have filed civil lawsuits against Sholtz alleging they lost
tens of millions of dollars in the scheme. Those allegations have not been
included in the criminal charges.
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