Ken Newcombe, ex-CEO of C-Quest Capital, faces criminal charges for multi-year carbon credit fraud

“The charges are a blow to the carbon offset development industry.”

On 2 October 2024, the US Attorney’s Office for the Southern District of New York announced criminal charges against Ken Newcombe, ex-CEO of carbon credit project developer, C-Quest Capital LLC. Newcombe was indicted on wire fraud, commodities fraud, and securities fraud. If found guilty, he faces up to 20 years in prison.

In February 2024, Newcombe resigned as CEO of C-Quest Capital, the company he set up in 2008. C-Quest is incorporated in the tax and secrecy haven of Delaware.

Newcombe was a major promoter of carbon trading, having worked at the World Bank, Climate Change Capital, and Goldman Sachs, before launching C-Quest Capital.

He was a member of Verra’s board from 2007 to December 2023.

In June 2024, C-Quest Capital announced that it “uncovered wrongdoing by its former Chief Executive Officer, Kenneth Newcombe, which resulted in the over-issuance of millions of carbon credits to the Company in connection with its clean cooking programs registered with the carbon credit registry Verra.”

C-Quest reported the alleged wrongdoing to U.S. federal law enforcement, regulators, and Verra. In a statement in response to the allegations, Verra wrote that it “is suspending the 27 implicated projects pending the outcome of a review”.

In early 2024, C-Quest hired a law firm to review its operations. As a result of the review, C-Quest named Jules Kortenhorst as CEO, to replace Newcombe. Kortenhorst was previously a partner with sustainable investment firm Vision Ridge.

An investigative report by the Washington Post of C-Quest’s cookstove project in Mozambique found that “the pressure to produce carbon credits at a low cost led the company to cut corners in a way that ultimately backfired on the people it was trying to help”.

The company “failed to take steps to ensure that its clay and metal cookstoves were being widely used and working properly,” the Post reported.

The indictment

The charges are against Newcombe and Tridip Goswami, former head of C-Quest’s carbon and sustainable accounting team. Jason Steele, C-Quest’s ex-chief operating officer pleaded guilty and is cooperating with the US authorities.

The indictment accuses Newcombe and Goswami of carrying out a fraud from 2021 to 2023 that resulted in their company CQC Impact Investors LLC “fraudulently obtaining carbon credits worth tens of millions of dollars”.

They are accused of “fraudulently altering data to show that CQC’s cookstoves achieved increased fuel savings and by manipulating the data-collection process to make it appear that more of CQC’s stoves were operational than was actually the case”. CQC allegedly received millions more carbon credits than it otherwise would have done because of this fraud.

Newcombe is also accused of using the fraudulently obtained carbon credits to deceive an investor into agreeing to invest up to US$250 million in CQC. The deal also included the investor buying some of Newcombe’s shares for more than US$16 million.

C-Quest’s cookstove methodology

In 2020, C-Quest wrote a methodology for “Energy Efficiency and Fuel Switch Measures in Thermal Applications” (VMR0006). Verra approved the methodology on 8 September 2020. Newcombe was on Verra’s board at the time.

The indictment states that,

Newcombe was in favor of the Cookstove Methodology because he believed it would allow CQC to generate more VCUs than existing methodologies.

Also in 2020, Newcombe decided to dramatically increase the size of C-Quest’s cookstove projects, according to the indictment. He started raising money for the projects through special purpose vehicles. Between 2021 and 2023, Newcombe committed C-Quest to installing about 1 million stoves a year.

“CQC’s rapid growth caused significant problems for the quality of its Cookstove Projects,” the indictment states. Stoves were poorly installed, stoves were installed in suburban areas instead of rural areas “because it was easier to meet targets in more populated areas”, and some stoves were never installed.

The indictment states that,

Even when CQC’s partners installed stoves properly, the scale of CQC’s growth made it difficult for the company to check on installed stoves and teach stove recipients how to use the new devices. Employees of CQC communicated those problems to Newcombe and other members of leadership, often in weekly calls about operational issues.

Manipulating monitoring data

When it came to monitoring the cookstove projects, the indictment includes extracts from emails between Newcombe, Goswami, and Steele showing that they agreed to manipulate the data in order to generate more carbon credits. The indictment accuses them of hiring someone from outside C-Quest “to fill out fraudulent survey forms to reflect the manipulated numbers”.

The manipulated data was used in C-Quest projects in Malawi, Zambia, Angola, Zimbabwe, Thailand, Cambodia, and Vietnam, among other places, according to the indictment.

Also on 2 October 2024, the Commodity Futures Trading Commission separately filed a complaint against Newcombe and CQC Impact Investors.

In June 2023, the CFTC announced that it was calling for whistleblowers to report “violations connected to fraud or manipulation in the carbon markets”. And the following month CFTC established an Environmental Fraud Task Force to address misconduct in carbon markets.

“A blow to the carbon offset development industry”

C-Quest is one of the largest voluntary carbon credit project developers in the world. Bloomberg comments that,

The charges are a blow to the carbon offset development industry, in which Newcombe and C-Quest were leading players.

In June 2023, after C-Quest reported the alleged wrongdoing, a spokesperson for Newcombe told Carbon Pulse that,

Dr. Newcombe categorically denies the allegations made against him, which are part of a coordinated scheme by private equity firm Vision Ridge to coerce Dr. Newcombe into giving up his majority shareholding in C-Quest Capital, a company he founded and built over decades.

It is clear that Vision Ridge – a minority shareholder that has gained de facto control of C-Quest’s board of directors and is behind the company’s press release – is driven by financial opportunism and is willing to engage in public relations gamesmanship and other misconduct to get what it wants: a windfall profit at Dr. Newcombe’s expense.

Following the indictment, Bloomberg reports that,

A spokesman for Newcombe, 77, denied the allegations in a statement and also said the former CEO was dying of cancer. “He is confident that if he lives to see a jury hear this case, that jury will reject these false charges and return his good name to him,” the spokesman said.

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