US Attorneys Unseal Criminal Fraud Charges Against Former CQC Executives
US attorneys and the Federal Bureau of Investigation have charged former executives of CQC Impact Investors with alleged criminal fraud for manipulating cookstove carbon project data to inflate credit issuances and secure an investment of more than $100 million, the Department of Justice announced
Wednesday.
The charges were brought against former CQC CEO Ken Newcombe and former CQC Chief of Carbon and Sustainability Accounting Tridip Goswami.
CQC is also known as C-Quest Capital.
Both allegedly manipulated data from their former company’s Africa-based cookstove projects in order to issue millions of carbon credits that did not represent real emissions reductions. Newcombe was also accused of using manipulated data to obtain an investment in CQC of up to $250 million, DOJ said
in a news release.
Former CQC COO Jason Steele cooperated with law enforcement and pleaded guilty to three fraud charges “in connection with the conduct,” according to the release.
In a statement Thursday, a spokesperson for Newcombe denied the charges. Goswami could not be immediately reached for comment.
Southern District of New York US Attorney Damian Williams said in the release that the “alleged actions of the defendants and their co-conspirators risked undermining the integrity of [the voluntary carbon market], which is an important part of the fight against climate change. Protecting the sanctity and
integrity of the financial markets continues to be a cornerstone initiative for this office, and we will continue to be vigilant in rooting out fraud in the market for carbon credits.”
US attorneys declined to charge CQC itself because the company “truthfully and completely disclosed all criminal conduct in which officers, employees and agents of CQC had been engaged promptly after becoming aware of it,” DOJ said.
Allegations of the cookstove project data manipulation were announced in June by CQC. The company said in June it had “uncovered wrongdoing” by Newcombe “that resulted in the over-issuance of millions of carbon credits … in connection with its clean cooking programs registered with the carbon credit registry Verra.”
Newcombe had previously stepped down from his role in February and was succeeded by Jules Kortenhorst, a former partner at private equity firm Vision Ridge, one of CQC’s minority investors.
CQC said in June it had informed US law enforcement of wrongdoing. It also pledged to cancel the credits it had been improperly issued and revamp its monitoring, reporting and verification (MRV) processes as a result.
Verra, in turn, suspended the company’s 27 projects registered with the standard and launched its own investigation into the matter, the organization said at the time.
Following the announcement, a spokesperson for Newcombe denied the allegations and said they were “part of a coordinated scheme” by Vision Ridge “to coerce Dr. Newcombe into giving up his majority shareholding in C-Quest Capital.”
The Washington Post, citing anonymous sources at CQC, reported in September that it was Newcombe and “others” who had initially identified the over-issuances.
“Newcombe pushed for reforms, including a ‘more reliable measurement-based surveying approach, suspending crediting processes and re-training staff,'” the Post reported, citing Newcombe’s spokesperson.
Cookstove carbon projects operate by providing devices to households that use emissions-heavy means, such as burning charcoal in open fires, to prepare their food. To verify and validate their emissions reductions, CQC surveyed cookstove recipients about the use of their devices.
DOJ said on Wednesday that in 2020, Newcombe “set a new direction for CQC and decided to rapidly and aggressively increase the size” of its projects. In order to hit expansion goals, “CQC had to rely on partners that did poor work installing stoves; installed stoves in locations that were outside of a
project’s scope” and at times “claimed to install stoves that were never installed,” DOJ said.
Survey data collected to verify projects’ emissions reductions indicated that the projects were roughly half as effective as the company hoped. In internal communications between Newcombe, Steele and Goswami, the latter suggested they “revise” the survey results, DOJ said.
DOJ alleged that ultimately, “Newcombe, Goswami and Steele agreed to manipulate the survey data for the Malawi and Zambia projects and enlist a person from outside CQC to fill out fraudulent survey forms to reflect the manipulated numbers.”
Newcombe’s spokesperson said in the most recent statement that the 77-year-old Newcombe is dying of cancer.
Knowing that the DOJ case “will likely be a futile exercise resulting in dismissal and knowing that its futile filing could hasten his death, one can fairly wonder whether the word Justice is still fairly included in its name,” they said.
Cookstove Credits, Suspected of Over-Issuances, Trade at a Discount
In recent years, numerous carbon credit project types have been criticized for engaging in lax MRV. A study published in Nature Sustainability in July 2023 found that cookstove projects overestimated their emissions reductions by a factor of 9.2.
This alleged lack of integrity has caused the credits produced by cookstove credits to trade at a discount to others in the market, sources have told OPIS. On Thursday, OPIS heard offers for vintage 2022 credits from Africa-based projects in the range of $3.50/metric ton to $4/mt.
The offers were still stronger than the weakest offers for REDD+ forestry credits, a project type that has also been accused of over-crediting. V16 credits from an Asia-based REDD+ project were heard offered as low as 40cts/mt on Thursday.
Still, these offer indications fall well below OPIS assessment averages, which take into account the full range of price indicators in the market. The OPIS REDD+ V22 Credits Average was calculated at $9.25/mt on Wednesday.
Nature-based removal credits, such as those issued by afforestation, reforestation and revegetation (ARR) and blue carbon projects, which restore coastal environments, trade stronger still.
OPIS calculated the ARR V22 Credits Average at $22.177/mt and the Blue Carbon V22 Credits Average at $29.677/mt on Wednesday.
Reporting by Henry Kronk, hkronk@opisnet.com
Editing by Bridget Hunsucker, bhunsucker@opisnet.com
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