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COVID-19 Stalls Tax-Fraud-Related Ponzi Scheme Case

Posted on June 12, 2020

A U.S. district court has granted a deadline extension for a case involving a collection of assets found by the government to be part of a Ponzi scheme orchestrated through a tax equity investment fraud.

A joint status report deadline extension was granted in the U.S. District Court for the Eastern District of California for a case stemming from a 2019 civil forfeiture complaint made by the government in rem against millions of dollars of various assets, including bank accounts linked to what the U.S. attorney's office for the Eastern District of California called a billion-dollar scheme.

In the June 9 decision, Judge John A. Mendez cited the logistical difficulties resulting from the COVID-19 pandemic as a reason for the extension.

The assets include bank accounts associated with the solar company DC Solar and its related investment funds, which the government alleges were involved in and contain the proceeds of a Ponzi scheme orchestrated through a tax equity investment fraud.

According to the decision, the March 2019 forfeiture complaint was made against “more than sixty bank accounts, over $1.8 million in U.S. currency, prepaid flight hours with a private jet company, a luxury box with a professional sports team, and various items of jewelry . . . connected to fraud and money laundering crimes in the Eastern District of California and other areas.”

The government also served the complaint to the principals of DC Solar (Jeff and Paulette Carpoff) and provided notice to “any entities or individuals that may have a security interest in the accounts,” the decision said.

Earlier this year, the Carpoffs pleaded guilty to charges related to the scheme, which was called “the biggest criminal fraud scheme in the history of the Eastern District of California” by the district’s U.S. attorney’s office in a January 24 release.

“The conspirators pulled off their scheme by selling solar generators that did not exist to investors, making it appear that solar generators existed in locations that they did not, creating false financial statements . . . among other efforts to conceal the fraud,” according to the release, which stated that generous federal tax credits granted because of the solar nature of the generators had acted as a significant incentive for investors.

Initially, the complaint had identified 87 in rem defendants, and the court had already entered final judgment against all but three. Of those remaining, “one financial institution and one sports franchise have requested extensions of time to file claims and/or answers in this case,” according to the court, which granted the extension from June 10 to September 16.

The case is United States v. Approximately $6,567,897.50, No. 2:19-cv-00485 (E.D. Cal. 2020).

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