Tesla’s SolarCity settles alleged fraud claims with federal government
SolarCity Corp. has decided to end a five-year investigation by the U.S. Department of Justice (DOJ) and — denying claims it overstated the costs of installing solar panels to receive overblown federal grant monies — has agreed to pay the government $29.5 million.
As part of the settlement, SolarCity and its affiliates also will release all pending and future claims against the United States for additional payments under the 2009 American Recovery and Reinvestment Act’s (ARRA) Section 1603, a solar industry stimulus program that provided federal cash grants equal to 30 percent of a company’s cost to install or acquire solar energy systems.
Chad A. Readler, acting assistant attorney general of DOJ’s Civil Division, said the Section 1603 Program was designed “to cover legitimate costs of renewable energy properties,” which are not what SolarCity ended up having, according to the DOJ. The department began investigating several solar companies in 2012 and alleged that SolarCity violated the False Claims Act by submitting inflated claims on behalf of itself and affiliated investment funds to the U.S. Treasury Department to receive larger cash awards.
“This program expired, but this settlement demonstrates that the government will still hold accountable those who sought to take improper advantage of government programs at the expense of American taxpayers,” Readler said in a Sept. 22 statement.
SolarCity, owned since November 2016 by Tesla Motors Inc., rebuts such allegations.
“SolarCity accurately valued the solar energy systems in the applications it submitted for cash grants under the Treasury’s program, and it was entitled to the full amounts that Treasury ultimately approved and paid to the company after reviewing its applications,” a company spokesperson told Daily Energy Insider in an email Monday.
Between 2009 and 2013, SolarCity said it installed approximately 29,000 solar energy systems that were eligible for cash grants under the Treasury-operated program.
“SolarCity took its responsibilities under the program very seriously, and far from trying to overstate the value of those projects, it went to great lengths to determine accurate values,” wrote the spokesperson, who said that SolarCity:
- Engaged independent appraisers and accountants with industry expertise;
- Hired attorneys familiar with the rules and regulations for such programs;
- Solicited input from government regulators and market participants on valuation methods and assumptions;
- Regularly reviewed and updated the assumptions and data it provided to the appraisers; and
- Repeatedly sought direction and clarity from Treasury on the program’s requirements.
“Independent appraisers, accountants and investors gave those projects a total value of approximately $1.8 billion,” the spokesperson said.
However, after conducting its own independent review, including a comparison to Treasury’s internally developed benchmarks, Treasury valued the projects at about $1.7 billion, and as required by federal law, paid SolarCity and its affiliates 30 percent of that amount, or $510 million, in cash grants, said the spokesperson.
Then in 2012, “Treasury began to reconsider some of its own valuations and revisited the amounts it had previously approved and paid,” the spokesperson said, and consequently alleged that SolarCity falsely overstated the cost bases of its solar energy properties in its certified Section 1603 claims to Treasury resulting in “inflated grant payments” to SolarCity and its affiliates.
SolarCity subsequently countersued the federal government seeking money it claimed Treasury owed it for the grant-qualifying systems that were installed by the program’s December 2016 deadline. “SolarCity filed a federal lawsuit alleging that Treasury failed to follow the law,” the company spokesperson wrote.
But as part of this settlement, SolarCity agreed to dismiss the lawsuit — filed in the Court of Federal Claims by two investment funds affiliated with SolarCity — and will release any other potential claims for additional Section 1603 payments.
“It is telling that after an exhaustive five-year investigation, the government did not bring any lawsuit accusing SolarCity of any wrongdoing of any kind, and that it has agreed to drop all its claims upon SolarCity repaying approximately 5 percent, or $29.5 million, of the cash grants that Treasury previously reviewed, approved and paid,” the spokesperson wrote.
The joint investigation — conducted by Treasury, Treasury’s Office of Inspector General and the Civil Division’s Commercial Litigation Branch — determined otherwise, however. Treasury Inspector General Eric Thorson said Friday that work to investigate instances of fraud impacting the ARRA grant programs operated by Treasury are ongoing.
And DOJ added in a statement: “The claims resolved by the settlement agreement are allegations only and there has been no determination of liability.”
“As SolarCity has said all along,” the spokesperson said, “its projects were valued correctly, and the methods used to value its projects were sound.”
