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SolarCity agrees to pay $29.5 million to settle allegations of lying to government

Issue stems from government paying for solar panel installations

SolarCity, the solar energy company that was acquired by Tesla last year, will pay $29.5 million as part of a settlement with the government, which accused the company of lying to the government about the costs of solar energy systems.

The issue stems from an Obama-era government program that repaid companies for a portion of the installation of solar energy systems.

Specifically, Section 1603 of the American Recovery and Reinvestment Act of 2009 stipulates that the Department of the Treasury would pay a cash grant equal to 30% of the eligible cost basis to construct or acquire qualified renewable solar energy systems placed in service before Dec. 31, 2016

As part of the program, the Treasury required applicants to certify that each Section 1603 grant application accurately stated the cost of the system, and that all supporting information was “true, accurate, and complete.”

In this case, the government accused SolarCity of violating the False Claims Act by falsely overstating the cost of its solar energy properties in its claims to the Treasury, which resulted in the company allegedly receiving inflated grant payments from the government.

As part of the settlement, SolarCity will pay $29.5 million to the government and will also release all pending and future claims against the United States for additional Section 1603 payments.

“The Section 1603 Program subsidized the renewable energy industry through cash grants to cover legitimate costs of renewable energy properties,” Acting Assistant Attorney General Chad Readler of the Justice Department’s Civil Division, said in a statement. “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.”

Additionally, as part of the settlement, SolarCity agreed to dismiss a lawsuit filed by two investment funds affiliated with the company, stemming from allegations that Treasury underpaid certain Section 1603 applications, and to release any other potential claims for additional Section 1603 payments.

While that’s the way the Department of Justice framed the settlement, SolarCity tells a different story.

According to a lengthy statement from a SolarCity spokesperson, the company accurately valued the solar energy systems in question, and conducted all appropriate due diligence on the pricing of said solar energy systems.

“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,” the SolarCity spokesperson said in a statement.

In the statement, SolarCity provided more details on how the two sides came to this settlement.

According to the company, between 2009 and 2013, SolarCity installed approximately 29,000 solar energy systems that were eligible for cash grants under the Treasury program.

SolarCity said that it 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.”

SolarCity said that it also used “expert 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 itself on the requirements of the program,” when participating in the program.

According to SolarCity, independent appraisers, accountants, and investors gave the solar projects in question a total value of approximately $1.8 billion.

The company said that after submitting its claims the government, the Treasury valued the projects at approximately $1.7 billion, paid SolarCity and its affiliates 30% of that amount, or $510 million, in cash grants. 

Then, around 2012, the Treasury began to reconsider some of its own valuations and revisited the amounts it had previously approved and paid, leading to the allegations that SolarCity overcharged the government for the solar energy systems, the company’s spokesperson said.

In the wake of those allegations, SolarCity filed its own lawsuit, accusing the Treasury of violating federal law by questioning the payments to SolarCity.

According to SolarCity’s spokesperson, the government then engaged in some questionable legal maneuvers in order to get its money back.

“To defend its decision to ignore valuations by independent appraisers, accountants and investors and instead substitute its own judgment about value, Treasury hired an academic, Dr. John Parsons, whose testimony was thrown out of court in a similar lawsuit last year after the judge found he had lied under oath about his history of publishing articles in Marxist academic journals,” the company’s spokesperson stated.

“With its expert discredited and a trial of SolarCity’s claims approaching, the government agreed to drop its case in exchange for a settlement,” SolarCity’s spokesperson said.

SolarCity’s spokesperson also said that the government did not accuse the company of any wrongdoing, nor did the company engage in any. Additionally, the company is paying back on a small percentage of the money it got from the Treasury in the first place in order to end the case.

“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%, or $29.5 million, of the cash grants that Treasury previously reviewed, approved, and paid,” the company’s spokesperson concluded. “As SolarCity has said all along, its projects were valued correctly, and the methods used to value its projects were sound.”

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