Solar firms engaged in ‘massive fraud’ — court ruling

Source: Christa Marshall, E&E News reporter • Posted: Friday, October 12, 2018

Solar energy companies defrauded the federal government of $50 million as part of an “abusive” tax scheme, a federal judge ruled this month.

The order from a Utah federal court concluded that RaPower-3 LLC and International Automated Systems Inc. and its leaders had engaged in a decadelong “massive fraud” by claiming their solar lens technology was groundbreaking and telling customers they were eligible for federal tax credits and deductions that would “zero out” their tax liability.

In reality, the solar thermal lenses designed for solar arrays never worked, power purchase agreements were not signed, and power was never sold to a local utility, despite claims to the contrary from R. Gregory Shepard, one of the defendants and a RaPower official, according to the ruling. Neldon Johnson, founder of International Automated Systems, also was a defendant.

“We are gratified by the court’s decision, which mitigates the harm to the United States Treasury caused by defendants’ unlawful tax scheme,” said Principal Deputy Assistant Attorney General Richard Zuckerman.

The order from Judge David Nuffer said businesses typically are eligible to claim tax deductions for some expenses while generating income and can claim “energy credits” if they meet specific requirements. The requirements, however, were not met in this case, Nuffer said, and the defendants “knew, or had reason to know, that their statements about the tax benefits purportedly related to buying solar lenses were false.”

The lenses also were sold at a “gross” premium of $3,500, when their raw cost and value were much lower, according to the court.

The court required that further marketing materials state that a court has determined the solar energy technology is “without scientific validation,” and ordered the return of $50 million in gross receipts that “belonged to the U.S. Treasury.” It also ordered Johnson and Shepard to stop claiming that purchasers of the lenses can lawfully claim solar energy credits or make a tax deduction based on depreciation, and remove tax information from the company websites.

Johnson and Shepard could not be reached immediately for comment, but they denied the charges in earlier statements.

“Defendants’ acts were taken in good faith, and were fully justified and reasonable under the circumstances,” said the original response to the lawsuit.

Shepard called the charges “bogus” three years ago (Greenwire, Nov. 24, 2015).