Trial aims to explain how a Utah polygamist used an alleged Armenian gangster to launder biofuel money to Turkey

(Courtesy of Davis County jail) Lev Aslan Dermen, also known as Levon Termendzhyan, is a suspect in a fraud scheme.

The possible witness list for the trial of Lev Aslan Dermen includes the Utah polygamist prosecutors say the defendant both conspired with and extorted, the businessman who laundered money to a Turkish airline and a pharmaceutical company, the guitarist for a 1990s Irish rock band, a crooked cop alleged to have worked for Dermen, and a man said to have also extorted the polygamist.

Maybe that’s why the trial, which has been delayed to Nov. 4 and could be pushed to next year, is scheduled to last for six weeks in Salt Lake City’s federal court.

Jurors are likely to hear about the president of Turkey, a corrupt U.S. Immigration and Customs Enforcement agent, luxury homes and vehicles, a character named “Grandpa,” another known as “Commissioner Gordon,” below-standard gasoline that was sold to drivers in Southern California, and a Utah biofuel company that participated in a $511 million fraud that spanned both U.S. coasts, down to Central America and across the ocean to Istanbul.

(Leah Hogsten | Tribune file photo) WRE — of Washakie Renewable Energy — employs 40 people. The largest biodiesel producer in Utah, Washakie Renewable Energy, held an open house in Plymouth on Thursday, September 1, 2011 to showcase its new production facility.

The proceedings could imprison the 53-year-old Dermen for life if the jury finds him guilty of the 10 counts in an indictment centered on conspiracy, fraud and money laundering. Jury selection was supposed to have begun last week, but the trial has been delayed as lawyers continue to argue over what evidence will be admitted.

There are also four boxes of financial records, at least some of which are written in Turkish, that arrived Tuesday in Salt Lake City from Luxembourg, a European country where prosecutors say fraud proceeds were laundered.

To convict Dermen, who has pleaded not guilty and is being held in the Salt Lake County jail, federal prosecutors will portray him as an Armenian gangster who drove the fraud at Utah-based Washakie Renewable Energy and as the man who used his law enforcement connections to cover up those crimes — or at least make it appear as though he could pull off a cover-up.

Dermen’s high-powered defense attorneys have indicated they will argue it was Washakie’s owners, brothers Jacob and Isaiah Kingston, and other Dermen associates, who committed the crimes. The defense also is expected to tell the jury nothing Dermen did with the blended biofuels broke the law.

Dermen’s team is lead by Los Angeles attorney Mark Geragos, who has represented music stars Michael Jackson and Chris Brown, actors Winona Ryder and Jussie Smollett, and former NFL quarterback Colin Kaepernick. The U.S. Department of Justice prosecutors come from a Washington, D.C., group focused on tax crimes.

(Richard Vogel | AP file photo) Attorney Mark Geragos talks to the media during a news conference in downtown Los Angeles on Sept. 2, 2016.

The trial has its roots in Washakie, which promoted itself in advertising across Utah as taking used cooking oils and agricultural byproducts and converting them into biodiesel. The fuel was eligible for reimbursement from the U.S. government of up to $1 per gallon.

But instead of manufacturing biofuel, Washakie was frequently buying and trading the biofuel, forging papers to make it appear as though the product was manufactured at its plant near the Utah-Idaho line, and submitting those documents to the U.S. government to collect the tax credit. Prosecutors have said the scheme collected $511 million from taxpayers.

The mastermind?

Jacob and Isaiah Kingston are members of the Davis County Cooperative Society, also known as the polygamous Kingston Group, or the Order. When Jacob and Isaiah Kingston were first indicted with Dermen, it appeared as though Dermen was only a peripheral player. Jacob Kingston, Washakie’s CEO, was listed as the lead defendant and faced the most charges. Later, prosecutors also indicted the brothers’ mother, Rachel Kingston, and Jacob Kingston’s first wife, Sally Kingston.

Dermen is an Armenian immigrant once named Levon Termendzhyan. He has since become a naturalized U.S. citizen and changed his name. He was once acquitted of assaulting an undercover police officer. He also was cleared in a California trial accusing him of defrauding consumers who bought gas at service stations he owns in the Los Angeles area. Regulations limit biofuel to 20 percent of the gasoline’s mixture; Dermen was accused of selling gas that was half biofuel.

(Weber County Sheriff's Office via AP file) Jacob Kingston, left, and Isaiah Kingston, two executives of Washakie Renewable Energy, a Salt Lake City biodiesel company linked to a polygamous group .

Since the four Kingstons pleaded guilty in July, the prosecutors’ theory changed. They now contend that, as early as 2010, the fraud and money laundering were largely directed by Dermen.

The complete witness list has been sealed — as have many briefs arguing what evidence Judge Jill Parrish should allow jurors to hear. In a public hearing Sept. 30, prosecutor Arthur J. Ewenczyk contended it was Dermen who helped Jacob Kingston find biofuel to buy and told him where to launder the proceeds.

Ewenczyk described Dermen as connecting Jacob Kingston to biofuel producers in the East and Midwest, and instructing that biofuel be shipped to the L.A. gas stations Dermen owned.

Dermen, the prosecutor explained, also introduced Jacob Kingston to a Turkish businessman named Sezgin Baran Korkmaz, who took Washakie money to invest millions in an airline, pharmaceuticals and Turkish energy projects.

The investments led to a photo opportunity in September 2017 for Jacob Kingston, Korkmaz and Turkish President Recep Tayyip Erdoğan.

“Mr. Kingston was privy to a lot of things,” Ewenczyk told the judge, “the government was not privy to until his guilty plea.”

(Courtesy of Ihlas Haber Ajansı) In this September 2017 photo, Jacob Ortell Kingston, left, the chief executive of Washakie Renewable Energy, meets with Sezgin Baran Korkmaz, chief executive of SBK Holding, Turkish President Recep Tayyip Erdoğan and Caglar Sendil, the president of Mega Varlik Corporation. According to the Turkish news agency Ihlas Haber Ajansı, the four discussed Washakie and SBK's planned investments in Turkey.

Home shopping

Court papers also accuse Dermen and Jacob Kingston of making agreements to buy each other assets to hide money. It was Dermen who bought Jacob Kingston and his family a $4 million mansion in Sandy, court records say; Jacob Kingston wired $8.5 million for Dermen to buy a house in Huntington Beach, Calif. Jacob Kingston also has acknowledged buying Dermen a 2010 Bugatti Veyron — a French sports car with a sticker price upward of $1.7 million.

Korkmaz has become a contentious figure in the pending trial. Parrish is weighing a defense motion asking that she order the Justice Department to produce him as a witness. Korkmaz appeared to be cooperating with federal investigators, but Ewenczyk said in court that Korkmaz lied about important issues, and the prosecution no longer plans to call him to testify.

Geragos argued, however, that Korkmaz has “exculpatory” testimony favorable to Dermen and should be compelled to testify.

“If [prosecutors are] not going to provide for safe passage,” Geragos said, “if they’re not going to bring him and we can’t, that’s fundamentally unfair.”

Korkmaz has not been charged, though prosecutors contend that at the same time he and Dermen were helping the Kingstons break the law, they were also duping the family into paying Dermen millions of dollars in protection money.

Dermen, according to prosecution briefs, said he had an “umbrella” of law enforcement personnel ready to apprise him of what local, state and federal officers were doing, and was capable of making investigations go away.

Prosecutors contend an ICE agent smuggled an immigrant into the U.S. at Dermen’s behest. The former agent, Felix Cisneros, was convicted in April 2018 in federal court in Los Angeles of five counts, including helping an “alien” enter the country, falsifying records and lying to federal agents.

Court records also describe former Glendale, Calif., police officer John Saro Balian as a cooperating witness. Balian was sentenced in March to 21 months in federal prison for bribery, obstruction of justice and making false statements related to his connections with Armenian and Mexican organized crime.

Prosecutors have filed a motion saying Jacob Kingston also saw Dermen pay a cash bribe to then-Los Angeles County Sheriff Lee Baca. In 2017, Baca was convicted of charges relating to obstructing an FBI investigation and was sentenced to three years in prison.

Yet prosecutors contend Dermen’s claims of being able to offer protection from prosecution were largely a ploy. In the weeks before Jacob Kingston was arrested in 2018, when he knew from the subpoenas he was receiving that prosecutors were closing in, Ewenczyk said Jacob Kingston was selling assets — even his son’s truck — to come up with the $6 million Dermen said he needed to make the Washakie probe disappear.

A second person also was pushing what prosecutors have described as a protection scam on Jacob Kingston. A one-time Washakie employee named Santiago Garcia took the pseudonym “Commissioner Gordon” and sent Jacob Kingston texts saying he could bribe or intimidate high-ranking figures in the Justice Department, according to court records. Garcia later became a witness for prosecutors.

Impact on Kingston Group

It’s unclear whether polygamy or the Kingston Group will be discussed in Dermen’s trial. Prosecutors have said some of the fraud proceeds went to other companies affiliated with the group, and the Justice Department has moved to seize homes, office buildings and agricultural property purchased by Kingston Group members with Washakie money.

(Rick Egan | Tribune file photo) Sally Kingston, the wife of Jacob Kingston, leaves the federal courthouse, after a hearing for Jacob and Isaiah Kingston on Wednesday, Aug. 29, 2018.

(Rick Egan | Tribune file photo) Rachel Ann Kingston, the mother of Isaiah Kingston, leaves the federal court house after a hearing for defendants Jacob and Isaiah Kingston Wednesday, Aug. 29, 2018.

In the Sept. 30 hearing, Ewenczyk referred to conversations between Dermen and a woman the prosecutor described as Jacob Kingston’s “fourth wife.” Another lawyer in the courtroom later corrected that it was his third wife.

Jessica Christensen, star of the reality television show “Escaping Polygamy” and half sister to Jacob and Isaiah Kingston, said the guilty pleas already have provided a glimpse into other Kingston Group businesses. But she worries Jacob Kingston is testifying to “control the narrative” rather than to admit wrongdoing.

“We will see how the story unfolds,” Christensen wrote in a message to The Salt Lake Tribune, “but hopefully it’s an opportunity where oppressed members of the Order have a moment of clarity and realize it’s OK to stand up and tell the truth.”

Prosecutors also indicated they plan to have Sally Kingston testify. It’s less clear if Isaiah and Rachel Kingston will do so.

Other potential witnesses include a variety of people who did business with Dermen and Washakie, including Brendan Morrissey. He was the guitarist for the Irish rock band My Little Funhouse, which signed with a major record label in 1991 and opened on the road for Guns N’ Roses. After My Little Funhouse broke up, Morrissey went into business, creating both biofuel and entertainment companies in which Jacob Kingston invested.

Morrissey already gave a deposition in Dublin for prosecutors and defense attorneys that is expected to be played for the jury.

Dermen’s trial figures to have intrigue even beyond a verdict. At the Sept. 30 hearing, Ewenczyk referred to a figure in the case called “Grandpa.” There’s nothing in the public filings indicating who that is or what the person’s relationship is to the indictment against Dermen.

Maybe that will come out at the trial.