Friday, October 30, 2020

California solar company owners plead guilty in Ponzi scheme that cost Warren Buffett $377 million

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The husband-and-wife owners of DC Solar, a California solar company that caused Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) to take a $377 million charge last year, pleaded guilty on Friday to involvement in an estimated $912 million Ponzi scheme.

Jeff Carpoff, 49, pleaded guilty to money laundering and conspiracy to commit wire fraud, while Paulette Carpoff, 46, pleaded guilty to money laundering and conspiracy to commit an offense against the United States.

They entered their pleas in federal court in Sacramento, California. Jeff Carpoff faces up to 30 years in prison and Paulette Carpoff up to 15 years at their May 19 sentencing.

Prosecutors called the criminal fraud scheme the largest in the Eastern District of California, which includes Sacramento.

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They said that from 2011 to 2018, DC Solar entered $2.5 billion of transactions to sell mobile solar generators meant to provide emergency power to cellphone towers and lighting at sports events, attracting investors with associated federal tax credits.

But according to prosecutors, about half of the 17,000 generators did not exist, and the Benicia, California-based company used false financial statements and lease contracts to conceal the fraud.

Authorities said the Carpoffs siphoned money to fund a lavish lifestyle including dozens of properties and vacation homes, a Nascar sponsorship, a stake in a private jet service, a holiday party featuring the rapper Pitbull, and at least 150 cars.

Malcolm Segal, a lawyer for Jeff Carpoff, said in an interview that his client “feels terrible that this business started out intending to provide clean energy and tax benefits to many large corporations, but unfortunately failed and resulted in his committing a number of illegal acts.”

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Paulette Carpoff’s lawyer Bill Portanova said in an interview: “She regrets absolutely what she did, and is looking forward to the difficult job of making amends.”

The U.S. Securities and Exchange Commission filed related civil charges against the couple.

Authorities said more than $120 million has already been forfeited from the scheme, including a 1978 Pontiac Firebird once owned by the actor Burt Reynolds.

Last May, Berkshire said it had taken the $377 million charge in the prior quarter, after concluding that tax benefits it had accepted concerning investments in tax equity investment funds from 2015 to 2018 were “not valid.”

Buffett’s assistant confirmed at the time that the charge related to DC Solar.

Last February, DC Solar filed for Chapter 11 bankruptcy protection in Reno, Nevada.

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