Judgment day comes in DC Solar fraud case as owner is sentenced in $1 billion scam

Prosecutors say the scam may be the largest in the history of the U.S. Attorney’s Office in Sacramento, one that bilked investors out of nearly $1 billion and generated a lavish lifestyle for its perpetrators that included more than 150 exotic sports cars and antique vehicles, vacation villas from Lake Tahoe to the Caribbean and even ownership of a minor league baseball team.

On Tuesday in federal court in Sacramento, Jeffrey Carpoff, the man behind the massive fraud, learned the penalty for his crimes: a 30-year prison sentence and an order to pay more than $790 million in restitution.

“You were selling air,” U.S. District Judge John A. Mendez told Carpoff before sentencing him to the maximum allowed. “There was nothing there. You knew that.

“You can blame the lawyers and the accountants all you want. But you’re the heart of this.”

Carpoff and his wife, Paulette, pleaded guilty in January 2020 to taking part in the Ponzi scheme involving their Benicia-based DC Solar Solutions company, plea deals that came after months of negotiations.

Jeffrey Carpoff pleaded guilty to conspiracy to commit wire fraud and money laundering. His wife pleaded guilty to conspiracy to commit a crime against the United States and money laundering and is scheduled to face sentencing next week.

Carpoff acknowledged his guilt Tuesday, saying he took responsibility for the losses, but he insisted that he tried to make his investors whole by telling prosecutors about company assets that they did not know about.

“I can’t apologize enough,” Carpoff, 50, said. “I can’t apologize to the investors, to the government.

“I can’t apologize to my family It really got out of hand, and it’s horrible.”

Acting U.S. Attorney Phil Talbert said after sentencing that the punishment was appropriate.

“Jeff Carpoff orchestrated the largest criminal fraud scheme in the history of the Eastern District of California,” Talbert said. “He claimed to be an innovator in alternative energy, but he was really just stealing money from investors and costing the American taxpayer hundreds of millions in tax credits.

“Today’s substantial sentence reflects the seriousness of the offense and provides just punishment.”

Carpoff attorney Malcolm Segal told the judge that his client was simply an automobile mechanic who came up with a business that got out of hand as lawyers and accountants moved in to take advantage of tax credits offered for the solar devices.

“He’s not Bernie Madoff,” Segal said. “He is an automobile mechanic who was making good at the beginning of the business until he could not keep up with sales.”

The case involved the lease of mobile solar-powered generators that DC Solar was marketing for use at racetracks, concert venues and other locations, and prosecutors say Carpoff lied to investors about how many of the devices his company actually had produced, eventually inducing others to commit crimes along with his, court papers say.

“Carpoff deliberately targeted the greed and moral vulnerabilities of his co-conspirators, recruiting many others into his schemes who now face substantial prison sentences,” Assistant U.S. Attorneys Chris Hales and Kevin Khasigian wrote in their sentencing memorandum. “He undertook years of complicated financial dealings, representing himself as an innovator in alternative energy, when he was really just a fraud stealing money from investors and costing the American taxpayer hundreds of millions in tax credits.

“This fraud had no greater purpose than the gluttonous and thoughtless accumulation of wealth.”

Feds: Scam led to purchase of luxury homes, cars, Napa winery

What sort of wealth?

Interest in a Napa Valley winery, ownership of luxury homes that included a villa on St. Kitts in the Caribbean for which they paid $5.375 million in cash, a $19 million private jet service and, perhaps most famously, a fleet of 150 exotic cars and vehicles that included actor Burt Reynolds’ replica of the 1978 Pontiac Trans-Am he drove in “Smokey and the Bandit.”

Prosecutors say they seized 32 properties the Carpoffs shelled out $35 million in cash for, and say that when the FBI raided DC Solar in December 2018 they found $1.7 million in cash in an office safe and another $150,000 in cash in other spots around the office.

The fraud dwarfs most others prosecuted in the Sacramento-based Eastern District of California, which has jurisdiction from the Oregon line south to Bakersfield.

“Jeff Carpoff headed a vast fraud conspiracy unlike any this district has seen,” prosecutors wrote. “Carpoff’s crimes spanned nearly eight years, 35 investment funds, at least 17 victim investors, and nearly $1 billion in invested funds.”

Even after pleading guilty, Carpoff continued overspending, the judge said, noting that in August he was reported to be spending $4,000 a month on groceries for a family of six.

“It’s an incredible fraud scheme,” Mendez said. “It’s amazing how much money investors put into this.”

DC Solar sold same generators to different buyers

The scale of the Carpoffs’ wealth did not mean DC Solar was successful, however. Prosecutors say the company started out as a legitimate solar firm, but by 2011 had run into trouble keeping up with its ability to manufacture its mobile generators.

So, prosecutors say, the company simply kept selling the same devices to different buyers, with 17,000 sold to investors despite the fact that only 6,000 had been made. To cover up the ruse, prosecutors say the company scraped off VIN numbers from the trailers and placed new ones on them to be able to sell them more than once.

“After investigators executed the search warrants, Carpoff instructed co-conspirator Joseph Bayliss to get a burner telephone and travel to a company warehouse in Nevada to destroy evidence, including 1,000 replacement VIN stickers and hundreds more to be scraped off mobile-solar generators; Bayliss did as Carpoff instructed,” court documents say.

“While the search warrants were being executed, Carpoff called co-conspirator Ryan Guidry to ask if the Carpoffs’ passports were still on his desk; when Guidry said they were not, Carpoff replied “Oh f---” and hung up. On another occasion, Carpoff told Guidry that ‘snitches get stitches.’”

Segal portrayed his client in a more favorable light, describing him in court papers as a man who had come from a difficult, deprived childhood who used hard work and his “exceptional natural mechanical skills” to create his financial empire, which once included the Martinez Clippers minor-league baseball franchise.

Lawyer says Carpoff clawed way out of difficult childhood

“As a young boy he lived in a house in Martinez, within a bedroom which overlooked a ‘biker bar,’ with accompanying late-night fights and other bad conduct,” Segal wrote. “He was not well treated and as a very young boy came home one day to find that his bunk bed had been sold by his parent, who wanted the money.

“He was told to sleep on the floor and find jobs to buy a bed for himself. Over the next several years he worked at jobs after school and into the night using caustic chemicals to clean used tires at a nearby shop and then at night restocking the shelves of a neighborhood liquor store until he could buy a bed to sleep in.”

Carpoff graduated from high school and started an auto repair shop that was so successful a buyer approached him and offered to make a down payment and have the Carpoffs carry the balance as a loan.

“They sold the business to that buyer who, after making some payments under the buy-sell agreement, rode it into the ground and defaulted on the payments,” Segal wrote. “The buyer took the business into bankruptcy, where the Carpoffs lost everything owed them on the sale of the business and were left with no other source of income.”

Despite the setback, Carpoff went into the solar business and designed the mobile generators his company eventually began selling. but Segal says his client was a “hands-on mechanic,” not an “entrepreneur, hustler or salesman,” and that he eventually fell victim to business dealings by accountants and others he hired to keep the company afloat.

“These efforts were only short-term solutions and Jeff Carpoff knew it was dishonest,” Segal wrote, adding that Carpoff still feels guilt about the scheme, suffered high blood pressure and sleep apnea and at times drank too much to try to get to sleep.

Carpoff had been scheduled to be sentenced last month, but that was postponed after he developed COVID-19 symptoms and had to quarantine, court documents say.

The judge ordered Carpoff to surrender to prison by 2 p.m. on Jan. 18.

This story was originally published November 9, 2021 at 11:41 AM.