Lion King Before entering Dermen's
Southern California mansion, you have to pass through the golden lion gate. Whether you're a
guest or an Uber Eats driver, Lev Dermen wants you to know one thing about him: he's a lion.
Dermen wanted you to know that he's mighty,
strong, powerful, but most importantly, a king. But a king of what, exactly?
Dermen, in Southern California at least,
was the king of oil and gas. However, he wasn't always rich.
Lev Dermen Dermen was born
in Armenia in 1966. But he didn't stay there long. At 14-years-old, Dermen left
Armenia and immigrated to the United States, specifically the city of angels, Los Angeles.
Dermen wasn't there to be a star, however. He wanted to be an American businessman,
the kind of businessman you see in movies driving red Ferraris,
living in gated mansions, and flying around in leather-seated private jets.
So, when he arrived in LA, Dermen changed his name from Levon Termendzhyan to his current,
more "American" sounding name. Dermen worked hard after arriving in the
states and eventually built up a gasoline-based empire that dominated the Southern Cal region.
Dermen had a hand in every process of the gas business. He owned companies that processed
the oil and turned it into gasoline. He also owned companies that shipped the gas,
usually in the backs of eighteen-wheeler trucks. And, to complete the process,
Dermen owned gas stations where he could sell his product to guzzlers cursed by endless LA traffic.
Noil Energy Group It was a lucrative business
and a borderline monopoly that allowed Dermen to earn millions. Dermen called
his little empire Noil Energy Group. He used his cut to buy all sorts of luxury items.
Dermen lived in a West LA mansion, one of the priciest real estate markets in
the world. His $1.2 million Bugatti sat outside on an expansive stone driveway.
And when his Bugatti wasn't fast enough,
Dermen could always hop into his private jet and go anywhere he wanted. He lived
the American dream. But the feds wanted to know how hard Dermen was really dreaming.
In other words, the authorities were always skeptical of Dermen and how he made his vast
fortune. The feds investigated Dermen throughout the 90s. Eventually, they dug up something
that might take him down. Like Al Capone, they thought they could get Dermen for tax fraud.
The case began in 1993. Federal investigators accused Dermen of a diesel tax fraud scheme.
Prosecutors tried their best, but Dermen was acquitted anyway.
After losing the case, federal investigators took their time,
waiting for Dermen to make a mistake. They had to wait a whole decade,
but Dermen finally made a stupid mistake, one they could easily work with.
Detective Issue One day, in 2003,
Dermen found out a detective was following his cousin. So, he confronted the officer. The meeting
escalated into a physical fight, and Dermen ended up punching the detective in the face.
Assault seemed like a sure-fire way to send Dermen to prison,
or at least jail. However, Dermen found himself acquitted once again.
Investigators, prosecutors, and agents were stunned. They didn't know, and
wouldn't know for another decade and a half, that Dermen had a complex network
in place to protect him from any legal repercussions. He called it his umbrella.
Jacob Kingston Dermen bragged about his
umbrella during a meeting with Jacob Kingston. He told Kingston about his umbrella for one purpose:
to make him feel comfortable carrying out a worldwide tax fraud scheme. Kingston was an
energy man himself, from Utah, and like Dermen, his reputation was marred by controversy.
According to some estimates, his dad has fathered 100 children with various wives.
Kingston, by comparison, boasts rookie numbers. He has 20 kids, 13 kids with his wife Sally,
and 7 with two other women. Kingston refuses to call the other two women his wives.
Like Dermen, Kingston grew up poor. When Kingston set out on his own,
he intended to create a better life for his family. His plan revolved around biofuel energy, a
production system he learned about while studying mechanical engineering at the University of Utah.
After getting his Ph.D., Kingston built a biofuel production facility on his father's
ranch in Utah. He obtained government subsidies and started funding large
orders for customers worldwide. He named the company Washakie Renewable Energy.
The business started well, but they had some money issues. Kingston sold
his fuel to customers from all around the world. Whenever an order came in,
Kingston and his crew manufactured it, poured it in drums, and shipped it out.
The process sounds simple enough. However, one day, a client from India canceled an
order after Kingston manufactured the oil and shipped it overseas.
Now, Kingston had a large order of biofuel with no way to sell it. Washakie risked a
major financial hit if they couldn't make their manufacturing costs back.
Kingston needed help. He contacted a recently-acquainted business associate, Lev
Dermen. By comparison, Dermen had worked in the gas and oil business a lot longer than Kingston.
So, the biofuel maker traveled from his ranch in Utah to Dermen's office in California.
Kingston told Dermen about his problem. Dermen, ever the optimist,
offered Kingston a very risky and super illegal solution.
Dermen's Umbrella At first, Kingston was worried about
getting caught. The scheme that he and Dermen were trying to pull off sounded like a long shot. After
all, the IRS is famous, or infamous, for not letting anyone get away with defrauding them.
But Dermen was reassuring. He told Kingston they would be fine.
His umbrella would protect them from any criminal conviction.
The umbrella sounded like something out of a cheesy spy movie. But it was
real. Dermen's umbrella consisted of several government officials,
high-level law enforcement officers, and unknown individuals investigators never identified.
Two umbrella members emerged: agent Felix Cisneros and detective John
Saro Balian. Both are convicted felons. Cisneros worked for Homeland Security
when he met Dermen. But by the end of their professional relationship,
Cisneros was convicted for using his position to sneak someone across the Mexican-American border.
That someone happened to be Dermen's business partner Santiago Garcia Gutierrez. Dermen had
sent Gutierrez to Mexico to negotiate a business deal with Mexican oil giant Pemex. Dermen was
never charged with anything. Still, Gutierrez was sentenced to one year in federal prison.
Detective Balian's charge was much worse. Balian was a narcotics officer for the Glendale Police
department. Dermen enjoyed a close relationship with Balian until they had a falling out in 2016.
Coincidentally, a cartel member filed a report with the LAPD, claiming detective Balian offered
him and another member $100k to intimidate someone. Not long after the alleged request,
an SUV was peppered with bullets. Dermen's son was riding in the back.
Investigators could never prove Balian orchestrated the attack.
However, they did have enough evidence to convict him of three other felonies.
Those crimes had nothing to do with Dermen, and the SoCal oil magnate escaped once again.
Dermen's umbrella wasn't stable, but he believed it was strong enough to
shield his fraud scheme from the feds. He was wrong.
Laundering The scheme
was complicated. Dermen's big solution involves taking advantage of a tax incentive law. The IRS
created a tax credit to encourage energy companies to manufacture and sell alternative fuel.
Dermen knew the business well, and he certainly knew the tax system well. So,
Dermen told Kingston he would buy his shipment of biofuels, but only if he could ship the fuel
back out to Utah, then back to the California port, and ship the drums out for a second time.
Kingston would receive the tax credit each time he shipped his biofuel to clients.
Dermen received the same credit whenever he transported the biofuel. The credits
were extremely valuable, and since Kingston and Dermen didn't have to pay manufacturing costs,
the credits would basically be free checks signed by the IRS.
As mentioned earlier, Kingston was worried about getting caught. The scheme was so obvious.
It wouldn't take the IRS long to figure out that these mysterious shipments were
fraudulent. Nevertheless, Dermen had the umbrella.
Dermen and Kingston sent millions of gallons of biofuel all around the world,
then back again until the credit was to their satisfaction. They doctored
transportation documents to make themselves look legit.
The dynamic duo accumulated around half-a-billion dollars in tax credits. They also circulated
three billion dollars through various bank accounts during the height of their operation.
But they still needed to launder the money. Dermen had a solution for that problem too,
and it involved a lot of gift-giving between the two fuel barons. For example,
Kingston bought Dermen a 2010 Bugatti for $1.8 million. They also bought each other a
chrome Lamborghini and a gold Ferrari, which they proudly posed with in a photo outside
Dermen's front gate, where the gold lion watches over them in the background.
Dermen felt that his new business partner needed a mansion, so he purchased a three-million-dollar
home for Kingston and his family in Sandy, Utah.
All these extravagant buys would catch the eye of any investigator. They were
so blatant. Dermen knew this and assured Kingston,
who was still worried about getting caught, that the umbrella would hold up.
Dermen reinforced his umbrella by splitting $134
million between companies based in Turkey and Luxembourg. Supposedly,
these companies would protect the duo if anything got dicey with federal officials.
However, the umbrella couldn't hold up underneath the colossal weight of Dermen's scam. Eventually,
authorities caught on to the scheme. And not just any authority, but the big bad IRS,
who didn't take kindly to being robbed of $500 million.
A small army of government agents raided Dermen's mansion. They went through his
business papers and personal documents and even looked at his exotic sports car collection.
The agents arrested Dermen and Kingston for tax fraud and money laundering
not long after the raid.
Third Chance After failing two times,
the feds got a third chance to convict Dermen. If they were going to succeed this time,
they needed Kingston to testify against his former accomplice. He gave them everything.
But only in exchange for a lesser sentence. Kingston didn't have a daring attitude like
Dermen. He was a family man—albeit a triple family man—who wanted his life back to normal.
Dermen, on the other hand, pleaded not guilty. And who could blame him? He still had his umbrella.
Not to mention he'd never heard a jury or judge say the word guilty.
This time, however, would be different. The prosecutors had a slew of evidence
they could use against Dermen. But most importantly, they had Kingston's testimony.
Aftermath In March 2020, the jury
found Dermen guilty of ten finance-related crimes, with fraud and laundering being the primary crimes
committed. Guess the third time's the charm, and it couldn't have come a moment later.
A few days later, Covid put the entire world on lockdown. If Derman's umbrella could have
lasted just 48 more hours, the court would have likely pushed his trial off for a few more months,
perhaps years. Who knows what kind of strings the oil magnate could have pulled in that time.
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