HAMPTON, GA. – An affidavit buried among hundreds of pages of bankruptcy documents for former NASCAR team sponsor DC Solar reveals a complicated corporate structure that utilized new investors to pay off old investors in what FBI agents have described as an $800-plus million Ponzi scheme, Kickin’ the Tires has discovered.
DC Solar sponsored Chip Ganassi Racing’s No. 42 Xfinity car, which was once driven by Brennan Poole and promised to Ross Chastain for the 2019 NASCAR season. The company also partially sponsored the No. 42 Cup Series car driven by Kyle Larson. However, after the FBI raided DC Solar’s corporate office and several private locations connected to the company on December 18, 2018, those sponsorships, along with sponsorships at numerous race tracks ended.
In the affidavit, FBI special agent Christopher Phillips stated that he recognized the flow of investor money from a company that manufacturers mobile solar generators (MSG) to a firm responsible for leasing those units to third parties and then from that company to investments funds as permitting DC Solar owner Jeff Carpoff (Individual 1) and others to conceal the absence of third-party leases. That process created the appearance that the mobile solar generators were generating lease revenue when they were not, Phillips stated.
MSGs are solar powered generating units built on trailers using solar panels and batteries, which are leased to third-party companies for emergency power and lighting needs. DC Solar had a contract with a telecom company to lease its units.
“In my training and experience, the use of investor money to lull investors into believing the transaction is legitimate and profit-making is evidence of a Ponzi-type investment fraud scheme,” Phillips said in the affidavit.
Both companies described in Phillips’ affidavit are run by Jeff Carpoff and his wife, Paulette (Individual 2).
The federal criminal case, which is still pending, alleges the Carpoffs committed wire fraud, conspired to commit tax fraud and made monetary transactions with criminally-derived funds. During the December 18 raid of the Carpoffs’ business locations and residence, agents found $1.7 million in cash inside a safe in Carpoff’s office and another $150,000 in cash in various locations throughout the office suite. Search warrants for four properties were signed December 13 along with 150 asset seizure warrants based on allegations and evidence indicating possible wire fraud, conspiracy and money laundering.
The FBI believes the Carpoffs obtained money from investors and diverted 70 percent of those funds to a second company that disbursed the money to a litany of personal and investment accounts. In an effort to attract investors, Carpoff played up the tax benefits for investing in alternative energy sources, which are significant based on the tax code, “of up to 30 percent of the total
investment.” The investments were used to purchase MSGs in the amount of $150,000 each from the company that manufactured them, but only $45,000 was used to pay for the units. The remaining money was placed into numerous investment funds. The investment funds then paid expenses and other monies to the MSG manufacturer, which was controlled by the Carpoffs and their adult children.
Phillips’ investigation concluded the Carpoffs used most of the money from the 57 bank accounts he found for personal gain, including the purchase of real property and, at least, 90 vehicles.
“The $45,000-per-unit amount is the maximum amount of the tax credit the investors are able to claim per unit,” Phillips states in the affidavit. “Essentially, the Company has structured the deals so that the total amount of money the investors initially pay to Company S (the MSG manufacturer) per unit can be immediately claimed as a dollar-for-dollar tax credit. Thereafter, the investors also can claim depreciation with respect to each of the MSGs for a five-year period.”
The FBI’s investigation identified more than a dozen investors, who made deals with the company to fund MSGs through 33 investment funds.
“Some of the investors have invested through more than one fund,” Phillips stated. “The investors, through the investment funds, have collectively deposited by interstate wire transfer approximately $675,649,000 into bank accounts for the funds that were set up by the Company (DC Solar) for the transactions. Additionally, two other financial institutions (ST Bank & CM Bank) transferred collectively $86,420,000 to the Company as part of a similar transaction for the purchase and lease of MSGs.”
The investment funds were managed by another company – SM Inc. – and used lease revenue from MSGs sent by the leasing company to pay down the debt held by the manufacturer. Records indicate a small about of money was then used to pay investors on a monthly basis.
“The purported lease revenue from third parties was a critical component of the transaction because the investment funds provided no money other than that initially contributed by the investors that covered only approximately 30% of the transaction,” according to the affidavit. “Without some mechanism for payment of the remaining approximately 70% of the sales transaction, the transaction would facially be a sham. As such, the existence of lease revenue from third parties to Company D (the leasing company) was required in order for the investors to obtain their tax benefits and to entice investors to make the initial investment of $45,000 per MSG.”
A chart showing the flow of money highlights how third-party lessors would provide money to the leasing company, which would then pay it into the multiple investment funds that would in-turn pay the manufacturing firm. Overall, the total amount of investor money through the transactions, as well as money from financial institutions provided to DC Solar is approximately $810,738,000. No less than $795,738,000 has been identified as money provided to DC Solar in connection with the sale and lease of MSG, according to records.
In the affidavit Phillips stated that as a result of his investigation, he believes Carpoff and others have knowingly misrepresented the existence of lease revenue from third parties that was integral to all of DC Solar’s transactions. DC Solar claims the leasing company has generated tens of millions of dollars in lease revenue from third-party leases, according to the affidavit.
However, the investigation into the MSG manufacturing and leasing companies, show that 90 percent of the funds that the leasing company claimed as revenue was actually money that was transferred from the manufacturing company in a circular banking pattern to make it look like there was a constant revenue stream. It was also discovered during the FBI’s investigation and questioning of DC Solar employees and former employees that GPS units used to track the MSGs were buried in locations to indicate they had been deployed for use, when they were not actually in the field.
Numerous attempts to contact Carpoff for comment have been unsuccessful.