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Fuel distributor Center Oil Co., one of the region’s largest private companies, unwittingly bought more than 1.3 million bogus renewable fuels credits in 2010, according to two lawsuits the company filed last month in St. Louis County Circuit Court.

The credits, worth hundreds of thousands of dollars, are tied to a much larger credit counterfeiting scandal wreaking havoc for biodiesel producers and petroleum companies across the country. The dustup has given new ammunition to critics of the six-year-old federal renewable fuel mandate.

Over the last four months, the federal government has identified two companies that allegedly sold millions of dollars worth of bogus credits. And the owner of one of the companies, Clean Green Fuels LLC of Baltimore, has been charged with selling $9 million of worthless fuel credits and spending the money on exotic sports cars, homes and jewelry.

The fallout from the scandal hasn’t been fully realized. But already it has meant increased scrutiny for biodiesel producers and an expensive headache for more than two dozen companies facing possible fines for buying the worthless credits, even if they did so unknowingly.

The federal Renewable Fuel Standard was approved by Congress in 2005 and expanded two years later to require even larger volumes of biodiesel and ethanol as a way to reduce dependence on foreign oil, cut greenhouse gas emissions and create jobs in rural America.

For 2012, the law requires the use of 15.2 billion gallons of renewable fuel, an amount that will steadily increase to 36 billion gallons by 2022.

Oil refiners and fuel importers can meet obligations either by blending biodiesel and ethanol with petroleum-based or purchasing the credits from producers of the renewable fuels.

The fuel credits, known as renewable identification numbers, or RINs, are 38-digit serial numbers that represent biodiesel and ethanol made in or imported to the United States. For biodiesel, each RIN represents 1.5 gallons.

Center Oil didn’t say in the lawsuits what consequences it might face for purchasing and re-selling the worthless biodiesel credits. The lawsuit doesn’t specify the amount of damages it’s seeking.

Company officials didn’t return a call seeking comment.

Center Oil filed the lawsuits on Jan. 20 and Jan. 24, accusing separate companies of breach of contract and breach of warranty for selling bogus RINs.

The suits claim Center Oil bought 943,000 phony RINs from Miami-based International Exchange Services LLC in April 2010 and 441,000 bogus RINs from OceanConnect LLC, based in White Plains, NY, six months later.

Both of the companies being sued were identified by federal prosecutors as having bought RINs from Clean Green Fuels.

It’s unknown how many companies and brokers unknowingly bought or sold some of the 80 million phony fuel credits so far identified by the EPA. Often, RINs are re-sold multiple times before they’re retired.

But the EPA has already issued notices to two dozen companies, including some of the country’s largest oil companies, warning them that they may have violated federal regulations for submitting worthless biodiesel credits.

Center Oil was not among those companies, and according to its lawsuit, it subsequently re-sold the credits.

Those who work in the biodiesel industry believe RIN fraud is rare. But the issue has nonetheless made oil companies and brokers more careful about whom they buy from.

And that has had the unfortunate effect of making it difficult for lesser-known small producers to sell their credits into a jittery market, said Wayne Lee, a biofuels consultant in Little Rock.

“It’s having a severely negative effect on the smaller producers,” he said payday loans lenders. “The vast majority of biodiesel producers are straight up, honest small plants doing what they’re supposed to be doing. These guys are trying to eke a living out of the ground.”

The National Biodiesel Board, an industry group based in Jefferson City, said it has long been aware for the potential for RIN fraud - a reason it long ago included a link on its home page to anonymously pass on tips about suspect RIN transactions to the EPA.

And at the group’s annual conference last week, it announced plans to form a task force made up of parties from the petroleum industry, biodiesel producers and the EPA to look at ways to strengthen the RIN program.

“There is significant disruption in our market right now because of these cases,” said Ben Evans, a spokesman for the biodiesel group. “We are happy to see the EPA cracking down on any potential fraud because we think it’s going to send a strong signal to the market that if people can’t get away with this type of thing.”

Not everyone is as pleased with how EPA is handling the matter.

Not only is the agency is pursuing companies allegedly selling bogus fuel credits, it also issued notices of violation to two dozen companies last fall, including several of the nation’s largest oil refiners, for using some of the invalid RINs to satisfy the biofuels mandate.

Under the market-based RIN system, EPA is maintaining a “buyer beware” policy for companies that claim they unknowingly purchased worthless fuel credits. That’s true even though both companies accused of generating bogus RINs had been required to register with the agency.

“I think it’s a tragedy that EPA has hid in the shadows on this one,” said Charles Drevna, president of the Washington, D.C.-based American Petrochemical Manufacturers Association, which has long opposed the renewable fuel mandate for a variety of reasons. “They allow con artists to register with them and then they say buyer beware.”

The outcry from oil companies has also captured the attention of some in Congress, including longtime critics of the EPA and the renewable fuels law.

Within the past two months, Republican lawmakers have sent letters to the EPA asking the agency to defend its position. Just this week, Sen. James Inhofe called for a Senate Environment and Public Works Committee hearing on RIN fraud.

The EPA has defended its enforcement actions, saying it long ago worked with producers, refiners and other parties to develop the market-based system for renewable fuel credits. The agency said that system includes are protections built into existing regulations to help prevent fraud, including a requirement for independent verification that fuel producers have appropriate equipment and fuel production capacity.

However, EPA said, buyers must do “due diligence” before buying RINs.

“EPA does not have the capacity to validate or certify the actual production of renewable fuel and associated RINs before RINs are generated,” the agency said in an email response to questions.

Meanwhile, the biofuels industry is trying to focus attention on the fact, in its view, the renewable fuel standard is working. Biodiesel production surpassed 1 billion gallons last year for the first time, helping create more jobs and diversify the nation’s fuel system, said Evans, the biodiesel industry spokesman.

“We don’t want to downplay (problems in the RIN market),” he said. “It’s creating significant disruption in our industry. But let’s not throw the baby out with the bathwater.”

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Companies slowed their hiring in January, according to a report by payroll processor ADP.

The private sector added 170,000 jobs in the month, ADP said Wednesday, missing forecasts of 200,000 jobs that economists polled by Briefing.com had predicted.

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Obama battles job crisis

Before Obama even took office, America had lost 4.4 million jobs. Track his progress since then.

The previous month was also weaker than originally reported. December’s strong number — first reported as 325,000 jobs — was revised down to 292,000.

In January, small businesses — those with fewer than 50 employees — made up more than half of the job gains, hiring 95,000 people.

"Those jobs were mostly in the services sector and match some optimism we have seen in small business lending," Diane Swonk, chief economist for Mesirow Financial, said in a note.

A Federal Reserve survey released earlier this week showed demand for small business loans picked up in the fourth quarter — a trend that could reflect growing optimism about the economy.

Meanwhile, the report showed large companies with 500 or more employees hired only 3,000 new workers, and medium-sized businesses added 72,000 to their payrolls.

ADP typically sets the tone for the government’s highly anticipated monthly jobs report, due Friday, but its figures aren’t always a good predictor of the government’s numbers.

Economists surveyed by CNNMoney expect the Labor Department’s data to show 130,000 jobs were added last month, including 150,000 from the private sector and a loss of government jobs.

That would mark a steep slowdown in hiring from December, when 200,000 jobs were created.

The unemployment rate is expected to rise to 8.6%. 

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Much work remains to maximize U.S. employment and stabilize prices, and the central bank will do its part, an influential Federal Reserve official said on Friday.

The pace of the U.S. economic recovery remains “sluggish” and is likely to slow somewhat this year, said New York Fed President William Dudley. Unemployment is likely to remain “unacceptably high” for some time, he added, while inflation is likely to be below the Fed’s new 2-percent objective for several years.

“Clearly, much work remains to achieve the Fed’s dual mandate of maximum sustainable employment in the context of price stability,” Dudley told reporters in a regular briefing.

The Fed, which has kept interest rates near zero for more than three years, “has done and will continue to do its part in supporting the recovery - but it is not all-powerful,” he added.

“Other complementary policy actions in housing, fiscal policy and structural adjustment or rebalancing of the economy will be essential if we are to achieve the best available recovery.”

Aside from the low rates, the Fed has also bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades. Yet the recovery has been slow and the outlook issued by the Fed this week was bleak, leading the central bank to say it expects to keep rates “exceptionally low” at least through late 2014.

Dudley, a permanent voter on the Fed’s policy-setting committee, added that he expects “moderate” growth this year, and warned the risks are skewed to the downside in part because of Europe’s debt crisis business cards design.

The economy continues to operate with “significant excess slack,” he said, adding: “Inflation has retreated and may be headed down further.”

On Wednesday, Chairman Ben Bernanke said the Fed stood ready to offer more stimulus in the form of bond purchases if inflation remains below 2 percent - a formal target unveiled earlier that day - and if unemployment, now at 8.5 percent, remains high.

The speech by Dudley, a policy dove focused on driving down the high jobless numbers, could add confidence to those who, since the Wednesday meeting, see another round of asset purchases - including mortgage-backed securities - as all but inevitable.

Still, the slow overall recovery has cast some doubt on the U.S. central bank’s far-reaching strategy, with some, including congressional Republicans, warning that the massive quantitative easing efforts over the last few years could crimp the Fed’s ability to tighten policy when the time comes.

The Fed’s ultra easy monetary policy stance, to nurse the recovery, got some support from data on Friday showing U.S. gross domestic product expanded at a 2.8 percent annual rate in the fourth quarter of 2011.

It was a sharp acceleration from the 1.8 percent clip of the prior three months and the quickest pace since the second quarter of 2010. But it was a touch below economist expectations in a Reuters poll for a 3-percent rate, and nearly 2 percentage points were attributed to the build-up in business inventories.

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A four-year economic crisis has left societies battered and widened the gap between the haves and have-nots, financial leaders conceded Wednesday _ with one suggesting that Western capitalism itself may be endangered.

With the global economic outlook gloomy at best as Europe struggles with its debt crisis, there’s a sense at the heavily guarded World Economic Forum in the Swiss Alps that free markets are on trial.

There’s a widespread acceptance that more must be done to convince critics that Western capitalism has a future and that it can learn the lessons of its massive failures.

For David Rubenstein, the co-founder and managing director of asset management firm Carlyle Group, leaders must work fast to overcome the current crisis or else different models of capitalism, such as the form practiced in China, may win the day.

“As a result of this recession, that’s lasted longer than anyone predicted and will probably go on for a number more years … we’re gonna have a lot of economic disparities,” said Rubenstein.

“We’ve got to work through these problems, if we don’t do in 3 or 4 years … the game will be over for the type of capitalism that many of us have lived through and thought was the best type,” he added.

His stark appraisal may have been an outlier, but there was a clear defensive posture among many participants on this opening day of the World Economic Forum in Davos.

There were numerous references to the need to innovate, the need to consult with employees and the realization that power in the world is shifting from the west to the east. While the traditional industrial economies of the United States and Europe have limped through the last few years, often from one crisis to another, many economies in Asia and Latin America have been booming.

As Ben Verwaayen, the chief executive of Alcatel-Lucent, said, there’s a “very different view” of capitalism in Brazil.

“This is a very different discussion depending where you are,” Verwaayen said.

Many rejected the suggestion from Sharan Burrow, the general secretary of the International Trade Union Confederation, that capitalism has lost its “moral compass” and needed to be “reset.” Still, representatives of the business community insisted they were learning from the mistakes that dragged the world into its deepest economic recession since the World War II.

Bank of America’s CEO Brian Moynihan said the excesses of banks in the run-up to the banking crisis of 2008 reflected the economies they were operating in, so it was important that policymakers don’t overreact.

Moynihan, whose bank was forced to back down on plans to start charging a $5 debit card fee after protests by the Occupy movement and others, said banks have “done a lot” to reduce excesses. He also noted that boom and bust cycles are a part of the Western capitalist structure.

Many outside the confines of the Davos conference center disagree, after years of crisis in which hundreds of millions of people have lost their jobs even as top executives have continued to reap huge pay packets.

Davos activists on Wednesday sent aloft big red weather balloons carrying a huge protest banner reading “Hey WEF, Where are the other 6.9999 billion leaders?”

The activists were from the Occupy WEF movement, a small group camping out in igloos here and following in the footsteps of the Occupy Wall Street movement that spread to cities around the world.

Davos is a hard-to-reach place to protest, tucked in the Swiss Alps. Some 2,600 of the world’s most influential people are gathered for the forum this week, amid increasing worries about the global economy and social unrest due to rising income inequalities.

The CEO of accounting giant Deloitte, Joe Echevarria, talked about developing “compassionate capitalism.”

“You’re going to have to deal with regulation _ balancing the need to protect society along with stifling growth,” he told The Associated Press in an interview. “I think that has to manifest itself through the choices that governments and businesses make.”

While the bigwigs debated at Davos, key Greek bondholders were holding closed-door meetings in Paris to discuss how _ and whether _ to continue talks central to resolving Europe’s debt crisis that would forgive 50 percent of Greece’s enormous debt.

Mark Penn, global CEO of the public relations firm Burson-Marsteller, told AP “the whole crisis has raised larger questions about how is capitalism working, how do you redefine fairness in the 21st century?”

Later Wednesday, German Chancellor Angela Merkel may chart her course for Europe’s crisis in her keynote speech at the Davos forum.

In an interview with six European newspapers published Wednesday, Merkel drove home the need for reform in debt-troubled eurozone nations instead of spending more to beef up the region’s bailout fund.

Surveys ahead of the meeting showed pessimism among world CEOs and plunging levels of public trust in business and government leaders and concerns that fragility in the U.S. and European economies will bring the whole world’s economy down.

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Sales of previously owned homes rose to an 11-month high in December and the supply of properties on the market tumbled to a near 7-year low, pointing to a nascent recovery in the housing market.

The National Association of Realtors said on Friday existing home sales increased 5 percent month over month to an annual rate of 4.61 million units.

November’s sales pace was revised down to a 4.39 million-unit pace, previously reported as a 4.42 million-unit rate.

Economists polled by Reuters had expected sales to rise to a 4.65 million-unit sales pace. Sales in December were up 3.6 percent from a year ago. A total of 4.26 million homes were sold in 2011, up 1.7 percent from the prior year.

“A sector of the economy that has been a large weight on growth has started to stabilize over the last few months and we will continue to look for momentum in 2012,” said John Doyle, currency strategist at Tempus Consulting in Washington.

The third straight month of gains in sales added to hopes that a tentative recovery in the housing market was starting to take shape, but progress will be painfully slow given a glut of unsold properties that is weighing down on prices.

Data this week showed single-family home starts rose for a third straight month in December and optimism among builders this month was the highest in four-and-a-half years.

But the sector, responsible for the 2007-09 recession, remains challenged by an oversupply of homes amid an 8.5 percent unemployment rate. In addition, declining prices have left many Americans with homes that are worth less than their mortgages.

But there are tentative signs of improvement. There were 2.38 million unsold homes on the market last month, the fewest since March 2005. That represented a 6.2 months’ supply at December’s sales pace, the lowest since April 2006, and compared to 7.2 months’ supply in November.

However, the inventory of unsold homes tends to decline in winter. A supply of 6 months is generally considered as ideal and anything above indicates further declines in house prices. The median sales price fell 2.5 percent to $164,500 from a year ago.

Sales last month rose across all four regions, with gains in both the multifamily home and single-family home segments.

Single family home sales rose 4.6 percent, while multi-family dwellings advanced 8.7 percent.

But the road to recovery will be bumpy. Distressed properties, foreclosures and short sales which typically occur at deep discounts, accounted for 32 percent of overall sales last month, little changed from November.

A third of pending existing home sales contracts were canceled, the NAR said.

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OTTAWA

Retail sales rose at the weakest pace in seven months in December as consumers pulled back late in the holiday shopping season, cutting purchases at department stores and spending less on electronic gadgets.

Total retail sales increased 0.1 percent after rising by an upwardly revised 0.4 percent in November, the Commerce Department said on Thursday.

Economists polled by Reuters had forecast retail sales climbing 0.3 percent last month.

The upward revision for November sales suggests consumers likely frontloaded their holiday shopping. The government had initially estimated retail sales gained 0.2 percent in November.

Spending at electronics and appliance stores fell 3.9 percent in December, while shopping at department stores slipped 0.2 percent.

Fueling the overall increase in retail sales during December, receipts for motor vehicles and parts increased 1 Internet Payday loans.5 percent, adding to the prior month’s 0.9 percent gain.

Excluding autos, retail sales fell 0.2 percent, the first decline since May 2010.

Sales at food and beverage stores fell 0.2 percent in December. Also holding back the overall gain in sales, receipts at gasoline stations dropped 1.6 percent last month after rising 0.9 percent in November.

Core retail sales, which exclude autos, gasoline and building materials, dropped 0.1 percent in December after advancing 0.3 percent the prior month.

Core sales correspond most closely with the consumer spending component of the government’s gross domestic product report.

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Richard Cordray

Treasuries (YCGT0025) had the biggest annual return since the depths of the financial crisis in 2008 as Europe