In September, the U.S. Securities & Exchange Commission (SEC) sued California lawyer Ari J. Lauer in California’s Eastern District Court over his role in alleged violations of federal securities laws. The lawsuit accuses Lauer of assisting in a multi-year energy tax Ponzi scheme in which the owners of two solar companies promised investors revenue from leasing mobile solar generators when, in fact, thousands of those generators were never manufactured, let alone put into use.
According to the SEC’s Complaint, Lauer is a California attorney who played a key role in the scheme. From 2009 to 2018, he acted as general counsel to DC Solar Solutions Inc. and DC Distribution Inc. and lent “the imprimatur of a lawyer to the operation.”
The solar companies were owned by Jeff and Paullette Carpoff, who used false financial statements and fake lease contracts to raise over $910 million for their mobile solar generator business. Eventually, the companies ceased making generator products altogether but continued to accept new investments and sell thousands of units that did not exist.
In November 2021, Jeff Carpoff pled guilty to conspiracy to commit wire fraud and money laundering and was sentenced to 30 years in prison. Paulette, his wife, also pled guilty to conspiracy to commit an offense against the United States and money laundering and was sentenced to 11 years and 3 months in federal prison.
Robert A. Karmann, the former Chief Financial Officer of the DC Solar entities, was sentenced to 6 years in prison and ordered to pay $624 million in restitution for his role in the Ponzi scheme.
According to the SEC, Lauer is implicated for his role in hiding material facts from investors, creating and sending misleading transaction documents, and misleading investors about the amount of lease revenue, despite knowing that such revenue was virtually nonexistent.
The SEC has accused Lauer of fraud and aiding and abetting fraud and has requested that he be permanently prohibited from violating securities laws, disgorge his ill-gotten gains, and pay civil penalties.
Named after its inventor, Italian businessman Charles Ponzi, a Ponzi scheme dupes investors into paying into a business under the mistaken belief that profits are being generated through legitimate business activities when, in fact, the profits are coming from other investors. Operators often promise high returns with little to no risk.
Ponzi schemes and pyramid schemes are similar in that both require money from investors to sustain the illusion of profitability, and operators promise high returns with little risk. While the two are similar, there are slight differences.
In the traditional Ponzi scheme, the owner uses new investors' money to pay existing ones without generating revenue. In a pyramid scheme, the victim is given the opportunity to make money by recruiting more people into the scam. A Ponzi scheme typically only requires an investment of money with promised returns at a later date, while a pyramid scheme offers the investor an opportunity to “make” money by recruiting more people into the scam. In both, the owner eventually becomes unable to deliver on their promises, and the scheme unravels.
The federal government aggressively investigates and prosecutes people for suspected involvement in Ponzi schemes and pyramid schemes.
Federal prosecutors do not use one particular statute to target people they believe are participating in these schemes. Instead, they charge defendants with various forms of financial fraud and conspiracy to commit fraud. People under investigation for alleged involvement in a Ponzi scheme often face multiple criminal charges, such as mail and wire fraud, securities fraud, and conspiracy.
Critical issues in defending against charges of participating in a Ponzi scheme are (1) whether the defendant intended to take money from investors without providing a benefit and (2) the extent to which the defendant was aware that the company was taking money from investors without providing a benefit.
Because most Ponzi schemes are prosecuted in federal court, it is crucial that you work with a lawyer who is well-versed in federal law and particularly the various statutes that the government will use to charge you with a crime. Defending against charges of fraud and other financial crimes almost always requires extensive analysis of volumes of financial records.
Fraud cases often turn on the extent to which the defendant actively participated in business operations. A successful defense should address the extent to which the defendant willfully participated in the alleged fraud and whether the defendant intended to defraud investors. Showing that the defendant had no intent to commit fraud or was unaware of key decisions that were being made by others can often be successful.
Defending against allegations of fraud is incredibly complicated and should not be attempted without the assistance of an experienced federal criminal defense lawyer.
Penalties for fraud are severe. To defend yourself, you need a lawyer who will prepare a customized defense that accounts for your specific participation, or lack thereof, in the alleged Ponzi scheme and focuses on your lack of intent to defraud investors.
While federal fraud charges are complex and difficult to defend against, a federal criminal defense lawyer who has experience handling fraud charges can successfully work to minimize the severity of the penalties you could be facing or even negotiate an outright dismissal of the case.
New York City federal criminal defense attorney Hope Lefeber has extensive experience defending people in federal court cases involving allegations that they committed white-collar crimes. Her clients describe her as a strategic, effective, and fearless lawyer who fiercely defends her clients.
If you are under investigation or have been accused of participating in a Ponzi scheme, Hope Lefeber should be your first call. Learn more about Hope Lefeber and the cases she handles, read testimonials from other people she has helped, then contact Hope Lefeber today.