A ponzi scheme that used inflated sales numbers to bring in a billion dollars has ended with the owners of the company behind the scheme pleading guilty in federal court in Sacramento.
DC Solar sold 17,000 mobile solar generators from 2011 to 2018, but it only built about 6,000. The company told prospective investors those sales were final.
DC Solar’s owners, Jeff and Paulette Carpoff, pleaded guilty to two federal counts each in Sacramento January 24.
The U.S. Attorney's Office in Sacramento says the scheme paid for the owners' lavish lifestyle and provided a way to pay off the original investors.
"These were very large, very sophisticated, some very well-known investment firms and they were investing hundreds of millions of dollars," said U.S. Attorney McGregor Scott at a news conference at the Robert Matsui Federal Courthouse on Friday. He also said, “It was a classic ponzi scheme.”
The Carpoffs were shut down in 2018 and forfeited property, homes, cars and other valuables which were auctioned off for $120 million, but that’s a fraction owed to victims. A home in St. Kitts and a replica of the car used in “Smokey and the Bandit” and once owned by actor Burt Reynolds were among the items seized.
The US Treasury issued a billion dollars in tax credits for the generators. It has recouped about $500 million, or half of the value of those credits, from consumers who never received their generators.
The Federal Bureau of Investigation, Federal Deposit Insurance Corporation, US Marshals Service, Internal Revenue Service and Security and Exchange Commission were all part of the investigation. They say the DC Solar case should make investors more cautious.
"For us at the SEC, this case is a reminder that fraudsters often try to lure investors by associating themselves with trendy or new or emerging technologies like solar generators or even novel securities like the tax credit investment funds that are at issue here,” said SEC Regional Director Erin Schneider.
The SEC announced that they now face charges of securities fraud.
Jeff Carpoff faces 25-30 years in prison. Paulette Carpoff faces 10-15 years for being “complicit” to her husband’s plan for these charges.
Scott estimated the two would serve about 80 percent of their sentences and had no choice but to plead guilty. “The walls were closing in,” he said.
The two are scheduled to be sentenced May 19.
Six other people have pleaded guilty in the scheme. There is one more case to be adjudicated.
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