Lawsuits fly in RaPower fraud cash recovery
Written by Matthew Ward Published: 30 October 2019
Dozens of federal civil cases filed seeking return of solar energy scheme proceeds
Civil lawsuits are flying as the receiver in the RaPower3 case seeks to meet a deadline this week for recovering monies fraudulently transferred during the massive $50 million tax scheme.
Dozens of federal civil cases were filed this month against recipients of commissions who sold “lenses” as part of the years-long solar energy tax scheme centered right here in Millard County.
R. Wayne Klein, the court-appointed receiver who was given court authority last year to claw back ill-gotten proceeds from the scheme, utilized forensic accounting to identify where funds from the fraud ended up. He said the investigation uncovered several categories of individuals who profited from the scheme and who now face the prospect of either paying back the funds or fighting the receiver’s effort in court. By selling “lenses” and collecting commissions, the receiver’s legal theory argues, the recipients expanded a fraudulent scheme and thus aren’t entitled to keep the funds.
Klein said he expects the number of lawsuits to fall somewhere between 75 and 80 before he’s finished.
About two dozen people have already either settled their cases or have settlement agreements ready to be approved by Utah’s U.S. District Court in the next week or more.
The most recent lawsuits demand anywhere from $9,000 to as much as $481,000 from individuals or business entities all across the country who received commission payments.
On Thursday, a one-year deadline to recover ill-gotten gains outside of the state’s statute of limitations will expire. The state’s fraudulent transfer statute provides a four-year window for recovery of fraud proceeds, meaning any proceeds gained more than four years before the court ruled RaPower3 was a fraud become unrecoverable after the deadline.
Meanwhile, the receiver said another round of lawsuits is just starting that will target other actors, such as accountants, law firms, and “experts” paid by RaPower3 for any professional services done for the defunct company.
“We filed suit back in July, August and September against some of the insiders for payments they received,” Klein said. “Most of the suits recently have been against commission recipients. We also filed, as of Friday, we started filing lawsuits against some of the insiders who were accountants or experts or officers, additional insiders. We also have more lawsuits coming against other categories, which could be credit card companies and law firms.”
Before filing suit, Klein said demand letters were sent out.
Several recipients made arrangements with the receiver to pay back the funds or prove some financial hardship and be released from the obligation. The bulk of lawsuits, however, were filed against people who either did not respond to the letters or claimed they did nothing wrong and so refuse to pay.
“Some of the people have responded by sending us money. Other people have responded by contacting us and saying ‘how could this be, what is this about. This can’t be right, we’ve worked hard to earn this money.’ They had lenses, therefore it’s not fraudulent. They hired attorneys who contacted us,” Klein said. “Those are the lawsuits we’ve been filing. Those who’ve responded and said no we did nothing wrong or who did not respond.”
The receiver said in some cases the people sent demand letters contacted him and requested more time. Klein said he has entered into some “towing” agreements, whereby the person receives an extension of time but only if they agree to forfeit the protections offered by the state’s statute of limitations.
A motion to approve settlement agreements reached with 13 people in September and August offer a glimpse into who the receiver is suing and the amounts he is hoping to recover.
The Sept. 12 motion states the agreements will recover a bit more than $271,000.
Most of those who reached settlements either agreed to pay back the funds or set up payment arrangements based on financial needs. For example, a man named Richard Blackburn received $9,339 in commissions from RaPower3. Based on a review of Blackburn’s personal finances, the receiver agreed to accept $6,000 in settlement. A monthly payment plan was agreed to whereby the man agreed to pay $200 a month for 36 months.
Another commission recipient, Richard Orth, received $20,891 in commission payments from RaPower3. When he received the receiver’s demand for repayment, he quickly sent the full amount and the matter was closed.
A charity named Tiffin Community Foundation received commission payments totaling more than $153,000. The foundation didn’t sell the lenses but was gifted the commission payments as a charitable contribution by someone else. The charity when reached by the receiver agreed to repay the full amount.
Klein says beyond the 13 who have already settled, 10 others await court approval of their settlement agreements.
Klein says he’s surprised more have not come to grips with the obligation to repay the commissions. Some who have been sued have even hired the same law firm RaPower3 hired to defend itself in court.
“In prior receiverships I have done, filing lawsuits have prompted people to call up and say, okay, what do I have to do. That hasn’t happened here and I don’t know if it’s premature, or if these people are all such believers in the solar energy scheme that they all intend to fight,” the receiver said.
Motions to stay the lawsuits have been filed in the cases where the same firm was hired by the commission recipients, Klein said.
“Some of the people who we have sued have hired the same law firm that represented RaPower and that law firm has started filing motions to stay,” he said. “They want the court to put all these lawsuits on hold until the appeal is finished. Any appeal ruling is probably going to be nine months down the road. And I am unwilling to put those on hold, so we will be opposing those motions.”
In another bid to slow down the process, the receiver said he’s also having to defend against counterclaims filed by some of the scheme’s insiders.
“Some of the insiders we have sued have filed counterclaims against me, accusing me of acting beyond my authority by destroying their personal property when I canceled the trading of IAS shares,” he said, referring to a publicly-traded company formed by RaPower’s chief insider Neldon Johnson. The company’s shares have since been canceled.
“We responded by saying that I did it by court order. So you can not say it was without authority when all he was doing was implementing a court order,” Klein said, referring to shutting down IAS. “That doesn’t stop them from filing counterclaims, et cetera.”
Multiple facets of the RaPower3 case continue, including sales of assets and properties tied to the defunct company, hundreds of acres of which reside in Millard Country.
A threat of jail also still possibly looms for Johnson and several family members who were earlier accused of failing to cooperate with the receiver’s efforts, defying a court order and being held in civil contempt. It’s unclear from court records whether the judge in the case has yet made a decision on placing such additional sanctions against the people at the heart of the fraud scheme.
The original article is here