Jeff and Paulette Carpoff were charged with masterminding a billion-dollar Ponzi scheme involving mobile solar generators.
According to court documents and the plea agreement Jeff Carpoff, 49, pleaded guilty to conspiracy to commit wire fraud and money laundering, faces up to 30 years in prison. Paulette Carpoff, 46, pleaded guilty to conspiracy to commit an offense against the United States and money laundering and faces up to 15 years in prison.
The couple agreed to pay restitution of between $800 million and $1.6 billion.
Malcolm Segal, an attorney for Mr. Carpoff, told the Wall Street Journal, DC Solar was started as a legitimate business, “but as it grew, it overwhelmed Mr. Carpoff.”
“Because of that he began committing acts he knew were wrong and illegal,” Mr. Segal told the Journal. “But he tried to salvage the business and failed.”
Mr. Carpoff is forfeiting personal and business property to pay back investors, Mr. Segal said.
Bill Portanova, an attorney for Ms. Carpoff, told the Journal she “recognizes what she has done wrong over these past several years and she will be working for many years trying to make things right.”
As previously reported federal agents seized over $60 million in personal property and liquid assets when they raided the DC Solar offices and the Carpoff’s Martinez home in December 2018. A safe in Jeff Carpoff’s office at the Benicia headquarters contained $1.7 million.
Accord to the plea agreements, the couple will forfeit the millions seized by federal agents, as well as their interests in a Napa Valley winery, a cafe and various businesses, vehicles and villa at the Four Seasons Resort on St. Kitts in the Caribbean, court papers say.
Various vehicles were auctioned off late last year and generated $8.2 million in revenues.
The Securities and Exchange Commission also sued the Carpoffs in a civil complaint filed in Sacramento. The SEC said the couple, whose business is in bankruptcy, siphoned off at least $140 million of investor funds to pay for their personal expenses, which included the sports cars, dozens of properties, and a share in a private jet service.
The investors were eligible for a 30% tax credit, which roughly covered the amount of cash they initially placed with DC Solar, the SEC said. The investors generally assumed an obligation to contribute millions more to the business through promissory notes, the SEC’s lawsuit says.
The value of the promissory notes was roughly $1.8 billion, the SEC said, meaning the face value of total investor commitments to DC Solar was over $2.7 billion.
The SEC’s lawsuit alleges the couple committed securities fraud and seeks disgorgement of illegal profits and payment of civil penalties.
The Carpoffs are scheduled to be sentenced May 19.
Department of Justice press release
Top Executives Plead Guilty to Participating in a Billion Dollar Ponzi Scheme—the Biggest Criminal Fraud Scheme in the History of the Eastern District of California
SACRAMENTO, Calif. — The owners of DC Solar, a Benicia-based company, pleaded guilty today to charges related to a billion dollar Ponzi scheme— the biggest criminal fraud scheme in the history of the Eastern District of California. The government’s investigation has resulted in the largest criminal forfeiture in the history of the District with over $120 million in assets forfeited that will go to victims, and has returned $500 million to the United States Treasury, with more to come, U.S. Attorney McGregor W. Scott announced.
Jeff Carpoff, 49, of Martinez, pleaded guilty today to conspiracy to commit wire fraud and money laundering. His wife, Paulette Carpoff, 46, pleaded guilty today to conspiracy to commit an offense against the United States and money laundering. According to court documents, between 2011 and 2018, DC Solar manufactured mobile solar generator units (MSG), solar generators that were mounted on trailers that were promoted as able to provide emergency power to cellphone towers and lighting at sporting events. A significant incentive for investors were generous federal tax credits due to the solar nature of the MSGs.
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, and obtaining false lease contracts, among other efforts to conceal the fraud. In reality, at least half of the approximately 17,000 solar generators claimed to have been manufactured by DC Solar did not exist.
U.S. Attorney Scott stated: “This billion dollar Ponzi scheme hurt investors and took money from the United States Treasury. This case represents not only the largest criminal fraud scheme in the history of the District, it also represents the largest criminal forfeiture in the history of the District with over $120 million in assets forfeited. All of this money will be returned to the victims. This scheme also targeted the United States Treasury, and we have returned $500 million to the Treasury to date. Agents, investigators and attorneys from various federal agencies are still working to continue to return money to victims and the United States Treasury. Today’s guilty pleas sends a strong message that fraudsters will get caught and will pay for their crimes. You can run, but you cannot hide.”
The forfeiture included seizing and auctioning 148 of the Carpoffs’ luxury and collector vehicles, including the 1978 Firebird previously owned by actor Burt Reynolds. This historical auction resulted in recouping approximately $8.233 million for victims. In addition to their collection of luxury and collector vehicles, Jeff and Paulette Carpoff used money from the scheme to pay for a minor-league professional baseball team and a NASCAR racecar sponsorship; to purchase luxury real estate in California, Nevada, the Caribbean, Mexico, and elsewhere; a subscription private jet service; a suite at a professional football stadium; and jewelry.
“The Carpoffs and their co-conspirators wove a web of lies and deceit in a massive fraud scheme. Meticulous review and analysis of millions of documents revealed the operation and true intention of the scheme,” said Special Agent in Charge Sean Ragan. “The FBI is committed to our partnerships with the Internal Revenue Service Criminal Investigation, Federal Deposit Insurance Corporation Office of Inspector General, and U.S. Marshals Service. Together, we seek to uncover fraud that exploits investors and taxpayers, ensuring criminals face justice.”
“By all outer appearances this was a legitimate and successful company,” said Kareem Carter, Special Agent in Charge IRS Criminal Investigation. “But in reality it was all just smoke and mirrors — a Ponzi scheme touting tax benefits to the tune of over $900 million. IRS CI is committed to investigating those who take advantage and impact the financial well-being of others for their own personal gain.”
“The Federal Deposit Insurance Corporation, Office of Inspector General (FDIC-OIG) is pleased to join our law enforcement colleagues in announcing these guilty pleas,” stated Special Agent in Charge Wade Walters for the FDIC OIG San Francisco Regional Office. “The defendants conspired with others to create a fraudulent business venture that duped unsuspecting entities, including banks, to invest approximately $1 billion, which the two later used to support a lavish lifestyle. They also knowingly engaged in a money laundering transaction involving criminally derived property. The FDIC-OIG is committed to ensuring that those who use our Nation’s banks to undermine the integrity of the financial system will be held accountable.”
Four defendants have previously pleaded guilty to federal criminal charges related to the fraud scheme since October. Joseph W. Bayliss, 44, of Martinez, and Ronald J. Roach, of Walnut Creek, each pleaded guilty to related charges on Oct. 22, 2019. Robert A. Karmann, 53, of Clayton, pleaded guilty to related charges on Dec. 17, 2019. Ryan Guidry, 53, of Pleasant Hill, pleaded guilty to related charges on Jan. 14, 2020. A seventh co-conspirator is scheduled to plead guilty on Feb. 11. The investigation into the fraud remains ongoing.
This case is the product of an investigation by the Federal Bureau of Investigation, IRS‑Criminal Investigation, and the Federal Deposit Insurance Corporation Office of Inspector General. Assistant U.S. Attorneys André M. Espinosa and Kevin C. Khasigian are prosecuting the case.
Jeff and Paulette Carpoff are scheduled to be sentenced by U.S. District Judge John A. Mendez on May 19. Jeff Carpoff faces a maximum statutory penalty of 30 years in prison. Paulette Carpoff faces a maximum statutory penalty of 15 years in prison. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.