Jacob Kingston testifies about his polygamous sect and the birth of a multimillion-dollar tax scam

Lev Aslan Dermen might be the defendant on trial, but Jacob Kingston’s name has come up again and again inside Salt Lake City’s federal courthouse.

Jurors put a face to the name Wednesday.

The 43-year-old Kingston took the witness stand for the prosecution about 2:40 p.m. and is expected to answer questions through Thursday.

The first questions were about his background. He was born and reared in Utah and inside the polygamous Davis County Cooperative Society. Kingston explained how members must report their incomes to the group and records are kept of how much each member draws from the cooperative’s accounts.

Kingston’s parents had 13 children together. He told the jury he grew up poor.

“We didn’t have things,” he testified. “We had seven kids in a two-bedroom house.”

While Kingston didn’t use the word “polygamy” or any of its conjugations or synonyms, he said his father, John Daniel Kingston, has perhaps more than 100 children.

“I don’t know all of my father’s children,” he said.

Kingston testified he and his wife Sally have 13 kids ages 2 to 25. He also has a total of seven other children with two other women, though Jacob Kingston did not refer to the women as his wives. Kingston said his 14th grandchild was born last week.

In 2006, Kingston earned a doctorate in mechanical engineering from the University of Utah. During his last year or so in the program, he learned about biofuels. He decided to create a production facility on his father’s ranch in Plymouth. The Box Elder County business was called Washakie Renewable Energy.

“Were you profitable in the first few years?” federal prosecutor Richard Rolwing asked.

No, Kingston responded. Costs rose as the price of commodities such as soybean oil and diesel increased. Federal subsidies to encourage the production of biofuel offset some losses.

In 2009 or 2010, Kingston testified, he met a broker in Colorado who had some grease that could be converted to biodiesel. One part of the subsidy program was ending and another was beginning. To qualify for the money, Kingston said, purchasing contracts between his company and the Colorado firm were backdated.

The fraud was underway.

It was easy, Kingston explained, often requiring completing a one-page IRS form and falsifying papers about where the biofuel originated. The documents said Washakie was making biofuel when more often it was buying and selling the products.

Rolwing didn’t ask about Dermen until about 90 minutes into the questioning and just before court ended for the day. Kingston said a salesman in Texas in 2012 connected him to Dermen, who was then named Levon Termendzhyan.

In this photo provided by the Davis County Sheriff's Office shows Lev Aslan Dermen. Openings arguments are set Wednesday, Jan. 29, 2020, in Utah for a California businessman who prosecutors accuse of being a key figure in a $511 million tax credit scheme carried out by two executives of a Salt Lake City biodiesel company linked to a polygamous group. The men from the polygamous group pleaded guilty last year to money fraud and other charges and are expected to testify against Lev Aslan Dermen, who has pleaded not guilty. (Davis County Sheriff's Office, via AP)

Rolwing will resume his questioning Thursday before the defense asks its queries.

In the witness box, Kingston pivoted his seat back and forth as he answered questions. He wore a light blue, short-sleeve jail jumpsuit and shackles on his wrists and ankles. He has been in jail since his arrest in August 2018.

About 11 months later, Kingston pleaded guilty to 41 counts, including conspiracy, fraud, money laundering and witness tampering. His sentencing has been on hold while he cooperates with the government in the prosecution of Dermen.

Kingston is the witness for whom both sides have been waiting.

Prosecutors maintain Dermen pushed Kingston to escalate a fraud that sought more than $1 billion in federal biofuel credits. They say the company asked for $1.1 billion in tax credits from the U.S. government and received $470 million fraudulently.

Lawyers from a U.S. Department of Justice unit focused on tax crimes have told jurors that Kingston will testify how the 53-year-old Dermen helped him find more biofuel to buy and how and where to launder the money. Financial records, photographs, text messages and emails are supposed to corroborate Kingston’s testimony.

Defense attorney Mark Geragos, in his opening argument, told jurors that Kingston and his family in the polygamous sect have defrauded the government for generations and that Kingston was looking for a way to send the proceeds of his scheme somewhere leaders of the sect couldn’t find them.

To keep his mother and legal wife from going to prison, Jacob Kingston agreed to plead guilty, Geragos argued to the jury, and to “blame Levon.”

Those two women, Rachel and Sally Kingston, respectively, have pleaded guilty to crimes. So, too, has Kingston’s brother Isaiah, Washakie’s chief financial officer. All four are awaiting sentencing.

Isaiah Kingston is also scheduled to testify during the Dermen trial.

It’s not just the lawyers and jurors who want to hear what Jacob Kingston will say. Journalists from Turkey and Belize are in Salt Lake City to listen for testimony about how Jacob Kingston and Dermen sent money to those countries and allegedly bribed government officials there.

(Courtesy U.S. District Court for the District of Utah) Lev Dermen, left, stands with Jacob Kingston at a banquet hall in Southern California in 2014. Federal prosecutors say this photo is evidence of how Kingston purchased the 2010 Bugatti Veyron, left, for $1.72 million to give Dermen, and Dermen purchased the Ferrari, right to give to Kingston to launder money from a biofuel fraud. Kingston has pleaded guilty to crimes. Dermen has pleaded not guilty. Behind the men is a sculpture of a lion's head, the animal Dermen associates himself with.

Reporters in Los Angeles are paying attention, too. Before the trial, prosecutors 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.

Dermen is charged with 10 counts: one count of conspiracy to commit mail fraud, one count of conspiracy to commit money laundering and eight counts of money laundering. He faces up to 180 years in prison.