ESG Enforcement Tracker

Key facts:

In October 2024, the New York State Attorney for SDNY, Damian Williams, and the Assistant Director in Charge of the New York Field Office of the FBI, James E. Dennehy, announced the unsealing of charges against C-suite executives of CQC, a company that ran projects to generate carbon credits, including a type of credit known as the voluntary carbon unit (VCU), by reducing emissions of greenhouse gases. CQC sold VCUs to companies seeking to offset the impact of greenhouse gases they emit in the course of business.

Charges were filed against the Chief Executive Officer of CQC, Newcombe, and the Head of CQC’s Carbon & Sustainability Accounting Team, Goswami, in connection with a scheme to commit fraud in the carbon markets from around 2021 to 2023. The scheme resulted in CQC fraudulently obtaining carbon credits worth millions of dollars and fraudulently securing an investment of over US$100 million. On the same day, CQC’s Chief Operating Officer, Steele, entered a guilty plea for conspiracy to commit wire fraud, commodities fraud, and securities fraud. A sentencing date for Steele has not yet been scheduled.

Newcombe and Goswami have been charged with:

1. Submitting manipulated data to an issuer of VCUs about CQC’s projects in Malawi and Zambia, tricking the issuer into giving CQC VCUs for emission reductions that, according to the issuer’s methodology for calculating such reductions, had not been achieved.
2. Sending data to a private equity fund, which invests in assets in the energy, transportation and agricultural sectors, about the amount of VCUs that CQC had received and expected to receive from existing CQC projects, which was based on false statements and material omissions made by Newcombe and Goswami.

In September 2024, the Office of the US Attorney for SDNY had previously declined to prosecute CQC in connection with the scheme to fraudulently inflate the number of VCUs issued to CQC. The declination was based on a number of factors, including, but not limited to CQC’s:

1. voluntary and prompt disclosure of all criminal conduct in which its employees and/or agents had been engaged, which misconduct had not been made public previously and was not already known to the US Attorney’s Office or any other component of the US Department of Justice;
2. full and proactive cooperation in this matter and an agreement to continue cooperating with the ongoing investigation and any prosecution that may result in the future from the investigation;
3. timely remediation and institution of appropriate compliance measures to prevent and detect similar misconduct in the future; and
4. agreement to cancel or void a number of VCUs equal to the number of VCUs it had improperly obtained through the fraudulent scheme.

The US Commodity Futures Trading Commission and the US Securities and Exchange Commission filed parallel civil actions in connection with this matter in October 2024.