EDITORIAL: US DOJ criminal charges against Ken Newcombe rock an already 'rocky' VCM

10 Oct 2024

Quantum Commodity Intelligence – The news that the FBI and the US Attorney for the Southern District of New York have brough criminal changes against Ken Newcombe, the former chief executive of project developer C-Quest Capital (CQC), and two colleagues, is the latest in a growing list of scandals rocking the voluntary carbon market (VCM).

In parallel, the two major US financial regulators the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) brought up civil charges against Newcombe, who has been accused of being the mastermind of a complex fraud involving the wrongful issuance of 6 million carbon credits.

The charges come several months after the company itself admitted "wrongdoing" by Newcombe during his tenure at the company. Newcombe has denied the charges and previously the allegations of wrongdoing by CQC.

The situation is now further complicated by news that Newcombe is in hospital suffering with terminal cancer, leaving him with "virtually zero chance of surviving to exercise his constitutional rights to defend himself and confront his accusers", according to a statement made on behalf of Newcombe quoting "medical experts".

CQC's former head of the carbon and sustainability accounting team, Tridip Goswani, is also facing the charges, while another ex-company executive, former chief operating officer Jason Steele, has pled guilty to charges of fraud and pledged to cooperate with the government.

The accusation is that Newcombe, Goswami, Steele and others manipulated field data received from several projects in Malawi and Zambia to boost the volume of carbon credits thus generated, while false and misleading information was provided about the number of operational stoves in CQC's projects.

"Members of the conspiracy manipulated data to make it appear as if certain of the cookstove projects were far more successful in reducing carbon emissions than was actually the case," the Justice Department said.

"Beginning in or around 2020, Newcombe set a new direction for CQC and decided to rapidly and aggressively increase the size of CQC's cookstove projects. CQC's rapid growth caused significant problems for the quality of its cookstove projects," it said.

The Justice Department also accused the associates of instituting a practice of having CQC employees rebuild or fix stoves in samples that were missing or broken, and then reporting those stoves as operational. Statistical survey results that seek to estimate overall cookstove usage rates are a key input into carbon credit issuances, because there are too many stoves for surveyors to check manually.

"Rather than writing off and not claiming credits for stoves that were missing, broken, or not installed in correct locations, Newcombe, Goswami, and Steele conspired to conceal from Issuer-1 the true extent of problems with CQC's cookstove projects," the Justice Department also said. 'Issuer-1' has not been named but is understood to mean the US-based registry Verra.

Whatever the eventual outcome of these charges, the controversy has already caused more reputational damage to an already reputationally-damged VCM, with mainstream media jumping on the story as you would expect.

That damage doesn't just stick to one company but to all, no matter how reputable they are. And what is also galling is that this is related to a sector of the market that does such obvious good – the distribution of cleaner cookstoves.

Not only is this a sector that has cut greenhouse gas emissions, but is also one that provides clear co-benefits, such as improved health for users. Cleaner cooking is also the area that is attracting government support under the Paris Agreement's Article 6 mechanism, with many of the carbon credits currently deemed Art. 6-eligible from this project type.

 One wonders if authorities' scrutiny will turn to other developers, be they in the cleaner cookstoves sector or developers of other types of projects? There are enough integrity issues already to deal with in the VCM without more high profile attention.