CEO in $2 million fraud involving Eastern KY business sentenced to prison time

The head of an Eastern Kentucky business who was accused of defrauding lenders and investors out of more than $2 million has been sentenced to 14 years and six months in prison.

Douglas William Vance, 54, was sentenced in federal court in Lexington on Monday.

A woman convicted with Vance, Molly McKinnon, was sentenced to 13 years in prison, according to a news release.

Vance, of Richlands, Va., was founder and chief executive office of a company called Nex-Gen that had a facility at the Coalfields Regional Industrial Park near Hazard, in Perry County. McKinnon was chief financial officer at the company, according to court records.

The company’s purported products included biochar, a charcoal-like substance that supporters say has uses that include improving soil quality.

Federal authorities charged that between August 2016 and December 2018, Vance and McKinnon used false paperwork, including bank statements, financial reports and purchase orders, to get money from investors and lenders.

The fake paperwork concealed that Vance and McKinnon misappropriated money, according to a news release from U.S. Attorney Carlton S. Shier IV and Brian Jones, acting special agent in charge of the FBI in Kentucky.

A jury in federal court in Lexington convicted Vance and McKinnon on charges that included conspiracy and wire fraud.

Assistant U.S. Attorney James T. Chapman said in a sentencing memorandum that the loss to a dozen individuals or companies totaled at least $2.3 million.

Several people testified they relied on Vance’s purported business expertise, Chapman wrote.

“When the victims gave (Vance) money based on his representations, they made themselves vulnerable to his lies and fraud, and they ceded to him control over that portion of their financial affairs,” Chapman wrote.

Vance’s attorney, Jeffrey Darling, said in a sentencing memo that McKinnon wrote a letter indicating she was the one who fabricated bank statements and sent them to people using Vance’s email account.

The letter “as much as absolves Doug Vance of any guilt in much of the fraud that occurred in this case,” Darling wrote.

However, the prosecutor pointed out examples in which Vance took part in creating or sending fake documents.

Chief U.S. District Judge Danny C. Reeves sentenced Vance and McKinnon.