SEC: $1B Ponzi Scheme Was Smoke And Mirrors From Solar Companies

They had The Bandit’s car and solar generator companies that were mostly smoke and mirrors, according to the U.S. Attorney and the Securities and Exchange Commission.

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By the time Jeffrey and Paulette Carpoff pleaded guilty to federal charges on Jan. 24, they and conspirators in their two solar companies had gone through nearly $1 billion from 17 investors such as Warren Buffett’s Berkshire Hathaway, according to court documents.

Between 2011 and 2018, the Carpoffs, of Martinez, Calif., offered investment contracts through two solar generator companies, DC Solar Solutions and DC Solar Distribution, and promised investors tax credits, lease payments and profits from the operation of mobile solar generators for sporting and entertainment events, along with emergency response, according to court documents.

The companies took in $2.5 billion, according to the U.S. Attorney in California’s Eastern District, and lost $910 million. Besides paying old investors with the money from new investors, the couple funded their lifestyle of the rich and infamous by acquiring 150 luxury and sports cars, dozens of properties and a share in a private jet service, according to court documents. Among the cars was a 1978 Pontiac Trans Am once owned by Burt Reynolds, who drove such a car as the lead rascal in the movie, Smokey and The Bandit.

The companies were supposed to manufacture solar generator units mounted on trailers. The company touted the versatility and environmental sustainability of the generators and claimed that they were used by cellphone companies to provide emergency power to cell towers in the case of a power failure, a U.S. Attorney complaint said. The companies used favorable alternative energy tax treatment as a lure for investors.

Investors bought the generators by paying a percentage of the sale price and financing the rest with the companies. The investors were not take possession of the generators, which instead were supposed to be leased back to the companies and then leased to third parties.

“In reality, most of the generators were never manufactured, and the vast majority of the purported lease revenue paid to investors in fact came from new investor funds,” according to the SEC. “As part of the scheme, the Carpoffs arranged for investors to receive false documents, including financial statements, lease arrangements, and generator certifications.”

Jeffrey Carpoff pleaded guilty to conspiracy to commit wire fraud and money laundering, according to court records. Paulette Carpoff, admitted to money laundering and conspiracy to commit an offense against the U.S., according to the U.S. Attorney.

The SEC also charged the couple with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, as well as Rule 10b-5. The SEC has charged three others in the case.

“This is a sad day for the Carpoffs,” Malcolm Segal, a lawyer for Jeff Carpoff, told The Los Angeles Times. “The business started with the best of intentions.”

Steven A. Morelli is editor-in-chief for AdvisorNews. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at smorelli@adnewsfeedback.com.

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