Warren Buffet Victimized by Ponzi Scheme
It turns out anyone can be victimized by investment fraud, even Warren Buffett.
Buffett’s firm Berkshire Hathaway recently posted a $377 million loss related to investments in a fraudulent solar energy company, according to Bloomberg News. The firm gave $340 million to California-based DC Solar with the expectation that it would be able to use tax credits for solar energy investments to trim its tax bill.
Federal prosecutors say DC solar, a mobile solar generator producer, took money from Berkshire Hathaway and other new investors to pay off older investors. The company produced only a fraction of the some 12,000 mobile units it claimed to have in circulation.
That has left Berkshire Hathaway, Bank of America, JPMorgan and others scrambling to take charges on what they had previously reported as tax breaks.
“In December 2018 and during the first quarter of 2019, we learned of allegations by federal authorities of fraudulent income conduct by the sponsor of these funds,” Berkshire said in a May filing with the U.S. Securities and Exchange Commission. “As a result of our investigation into these allegations, we now believe that it is more likely than not that the income tax benefits that we recognized are not valid.”
Inside the Solar Scam
Here’s how the scam worked, according to prosecutors.
DC Solar sold mobile solar generators to investors for $150,000 a pop. The company had investors only plop down $45,000 in cash, however, which is the maximum amount of tax credit that can be claimed per generator. DC Solar said it would then lease the devices and use the income to pay down the rest of the purchase price, with any additional profits divided. Instead, the feds say the company used the purchase money to pay off earlier investors and mostly did not lease out the devices.
Federal investigators became aware of the situation when a former DC Solar employee tipped them off that the company appeared to be inflating the number of mobile generators it had manufactured.
The company was founded by husband and wife duo Jeff and Paulette Carpoff, who focused on providing small solar generators instead of the larger panels usually used to harness the energy. They marketed the product heavily on the professional racing circuit, sponsoring NASCAR drivers and events.
Consult an Experienced Investment Fraud Attorney
Unfortunately, investment scams like the one that DC Solar is accused of operating are a dime a dozen. The morale of this story is that no one is immune from the threat.
The good news is that a person or company that is victimized by Ponzi and other similar schemes has a number of legal tools to go after the perpetrators. A seasoned investment fraud attorney can provide vital assistance in ensuring that fraudsters are made accountable.
At Glancy Prongay & Murray, our attorneys have been representing people in a wide range of consumer and other fraud cases for more than 25 years. We have a strong track record of success in these cases and we are pleased to be able to represent clients through a variety of fee arrangements. Call us at (310) 201-9150 or contact us online to speak with an investment fraud attorney.