(BCN) — A Lafayette attorney has been indicted on 23 federal counts of fraud for his role in what the U.S. Attorney’s Office is calling the biggest criminal fraud scheme in the history of the Eastern District of California, prosecutors announced Tuesday.
Ari Lauer, 59, is a licensed California attorney who served as outside counsel for DC Solar, which was associated with a $1 billion dollar Ponzi scheme.
A Martinez couple, Paulette and Jeff Carpoff, ran the scheme and used their gains to fund luxury real estate in Lake Tahoe, Las Vegas, the Caribbean and Cabo San Lucas; over 150 luxury and collector cars, their own private jet service, and lavish jewelry, prosecutors said.
Lauer provided legal and business advice to DC Solar, which was bilking people out of millions.
The crimes were sophisticated and complex, but involved mobile solar generators (MSGs) that were mounted on trailers. DC Solar claimed they could provide emergency power to cellphone towers and lighting at sporting and other large events. DC Solar reeled in investors by pointing out that there were generous federal tax credits to be had due to the green energy the MSGs offered.
According to prosecutors, investors would buy the MSGs without ever taking possession of them, paying a percentage of the sale price and financing the balance with DC Solar. Then the investors leased the MSGs back to the company, which in turn purported to lease them to third parties. A portion of the lease revenue was supposed to go to the investors and a portion would be used to pay the investors’ debts to DC Solar.
Enter the Ponzi scheme. According to the DOJ, when the third-party leases generated little income, the company paid early investors with funds contributed by later investors. Generators were sold that didn’t even exist — at least half DC Solar claimed to have manufactured — making it look like MSGs existed in locations that they did not.
False financial statements and false lease contracts were created to keep the con going. Prosecutors determined that approximately 94 percent of the revenue claimed by DC Solar actually came from transfers of new investor cash.
In June 2012, Lauer and Jeff Carpoff met to discuss the failure to generate third-party lease revenue sufficient to meet their financial obligations to the investors, prosecutors allege. The conspirators agreed to conceal the lack of third-party lease revenue from current and prospective investors by shuffling funds around in a circular payment system that Lauer and others allegedly dubbed “re-rent.”
Lauer is accused of creating sublease agreements with concealed addendums that altered the terms of the contracts. These agreements were used to defraud investors.
Jeff Carpoff was given 30 years in federal prison in 2021 and ordered to pay a whopping $790,600,000 in restitution. His wife Paulette was given 11 years and three months.
Several other co-conspirators were given hefty sentences and fines: Joseph Bayless of Martinez got 3 years in prison and a fine of $481,300,000; Robert Karmann of Clayton got 6 years in federal prison and a fine of $624 million; Alan Hansen received 8 years in prison; Ryan Guidry of Pleasant Hill was sentenced to 6 years and 6 months with a restitution amount of $619,415,950.
Ronald Roach of Walnut Creek is due to be sentenced on Nov. 14 and is facing 10 years in prison for his role in the giant fraud.
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