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Whistleblower

DC Solar’s Billion-Dollar Green Energy Con

Earmark Team · February 7, 2025 ·

The following article is based on the “Burned by Solar” episode of the Oh My Fraud podcast, which provides a behind-the-scenes look at how DC Solar orchestrated one of the largest green energy frauds in U.S. history.

In December 2018, 175 federal agents from the FBI, IRS, and U.S. Marshals raided the headquarters of DC Solar and the California home of its CEO, Jeff Carpoff (sometimes spelled “Karpov” in news reports). This dramatic event unveiled one of the largest frauds ever prosecuted in the Eastern District of California—a scheme that claimed to sell 17,000 portable solar generators when, in reality, only about 6,000 existed.

Origins and Ambitions

Jeff Carpoff spent most of his life in Martinez, California. After failing to run successful auto repair shops and briefly selling drugs, he sobered up and co-founded a shop specializing in Land Rover repairs. Eventually, he latched onto a promising idea—creating portable, solar-powered generators he called the “Solar Eclipse.” This invention would supposedly replace traditional gas or diesel generators on movie sets, at disaster sites, and even in stadium parking lots during tailgates.

DC Solar marketed these generators as versatile, eco-friendly power sources that could be towed anywhere to provide clean energy. While the vision looked sound, it was the business model—centered on a lucrative federal tax credit—that truly turned heads among investors.

The 30% Tax Credit Hook

The U.S. government offered a 30% tax credit for investments in alternative energy equipment, including solar. DC Solar pitched a straightforward proposition to prospective investors:

  1. Purchase DC Solar’s generators, sold at a hefty price of $150,000 each.
  2. Pay only 30% of that cost upfront (the exact amount investors would recoup via the federal tax credit).
  3. DC Solar would cover the remaining 70% of the purchase price through lease revenue.

In theory, investors could fully offset their upfront cost with tax credits—and possibly earn additional returns if leasing income exceeded loan payments. Companies like Sherwin-Williams, T-Mobile, and even Warren Buffett’s Berkshire Hathaway bought into the hype, hoping to cut their tax bills while backing a “green” initiative.

Early Warning Signs

Despite its promise, DC Solar’s operations quickly drew skepticism. During a visit to one of the company’s facilities, Sherwin-Williams representatives discovered only a few rows of fully assembled units. Behind them, dozens of unfinished generator shells suggested the product was far less complete than advertised. Confronted about it, Carpoff reportedly brushed the issue aside.

Other troubling red flags emerged:

  • Performance Failures: Some trailers lost power on major film sets and at concerts, forcing DC Solar to sneak in diesel generators to cover the outage.
  • Lease Rate Discrepancies: DC Solar claimed that 80–90% of its generators were leased out, but internal accounts put the rate closer to 5%.

Faced with cash flow pressures, the company devised a “circular” approach: using money from new investors to fulfill lease payments it had promised to earlier investors. Internally, DC Solar employees allegedly referred to this patchwork as “re-renting,” but investigators later described it as classic Ponzi activity.

Fraudulent Tactics

To sustain the illusion, DC Solar:

  • Faked VINs: Employees scraped VIN stickers off certain generators and reapplied them onto others, matching whatever batch investors expected to see.
  • Synthetic Tracking: GPS transponders were buried in vacant fields so investors believed their units were deployed.
  • Paper Leases: Executives fabricated large, long-term leasing contracts with major telecom and entertainment companies, sometimes enlisting outside patsies to sign phony agreements in exchange for sizeable payouts.

Meanwhile, Carpoff and his wife, Paulette, enjoyed the spoils. They amassed a fleet of 149 classic cars—many of them gas-guzzling muscle cars, paradoxically funded by a “green energy” enterprise—purchased stakes in a Napa winery, rented private jets, and even sponsored a NASCAR race (the DC Solar 300). They also bought the Martinez Clippers, an independent league baseball team, and emblazoned their company parking spots with initials like “JMFC,” short for “Jeff Motherf***** Carpoff.”

The Whistleblower and the Raid

The scheme began to unravel when a DC Solar employee, Sebastian Giuliano, realized the company was paying old investors with new investor money and filed a whistleblower report to the SEC. Suspicions deepened when the IRS audited some of DC Solar’s earliest deals, concluding that the actual fair market value of each generator was around $13,000—far below the $150,000 asking price.

In December 2018, armed with information from the whistleblower and their own investigations, federal agents descended on DC Solar’s facilities and the Carpoff residence. They seized $1.7 million in cash from a safe, confiscated the entire muscle car collection, and gathered further evidence of fraud.

Aftermath and Sentencing

DC Solar collapsed into bankruptcy by early 2019, owing millions to creditors, NASCAR, racetracks, and various vendors. Major investors, including Berkshire Hathaway, announced the probable loss of hundreds of millions of dollars in invalidated tax credits.

Criminal charges soon followed. In 2020, Jeff Carpoff pleaded guilty to conspiracy to commit wire fraud and money laundering; he was sentenced to 30 years in prison. His wife, Paulette, received an 11-year prison term. Several other executives, including the CFO and outside conspirators who fabricated leases or faked verification reports, also received prison sentences ranging from three to eight years.

Lessons and Oversight Gaps

DC Solar’s downfall highlights several vulnerabilities in green energy tax credit oversight:

  1. Physical Verification: Authorities relied too heavily on documents without insisting on direct, thorough inspections. Fake VINs and strategically placed GPS devices allowed DC Solar to fabricate nearly 11,000 nonexistent generators.
  2. Valuation Transparency: Inflated price tags ($150k vs. $13k real value) went unchecked, maximizing undeserved credits.
  3. Circular Financing Scrutiny: Leasing revenue was artificially maintained with new investor funds, a hallmark of Ponzi schemes, yet it initially escaped scrutiny.
  4. Due Diligence and Audits: Complex alternative energy incentives require rigorous checks to confirm the actual equipment, usage, and economic substance of each deal.

For accountants, attorneys, and investors, the DC Solar saga is a sobering lesson. Fraudsters can exploit these incentives no matter how appealing a tax benefit or environmentally friendly pitch may sound. Robust financial controls, thorough audits, and consistent physical verifications are key to safeguarding genuine green energy efforts.

For a more in-depth exploration of DC Solar’s rise and fall—and the comedic twists along the way—listen to the Oh My Fraud podcast episode linked above. The story of DC Solar stands as a testament to how easily good intentions and generous credits can be warped into massive fraud when accountability is lax.

The Whistleblower’s Dilemma: Exposing the Truth in the Face of Adversity

Earmark Team · March 27, 2024 ·

Whistleblowers play a crucial role in maintaining the integrity of financial markets. By exposing fraudulent practices and other misconduct, these brave individuals help protect investors, employees, and the public from the devastating consequences of corporate wrongdoing. However, as recent high-profile cases have shown, whistleblowers often face significant challenges and obstacles in their pursuit of justice.

One such case is that of Tony Menendez, a former employee of Halliburton who blew the whistle on the company’s improper revenue recognition practices. In a recent episode of the “Oh My Fraud” podcast, Menendez shared his experience and the lessons he learned from his ordeal.

High-profile whistleblower cases like Menendez’s reveal common challenges faced by those who speak out against wrongdoing in the accounting industry. These cases emphasize the need for stronger protections and more effective enforcement of existing laws to maintain public trust and ensure market integrity.

Notable Whistleblower Cases in the Accounting Industry

Menendez’s story began in 2005 when he joined Halliburton as a technical accounting expert. He soon discovered that the company was using “bill and hold” transactions to recognize revenue prematurely. Despite raising concerns with his superiors, Menendez was met with resistance and was told to stop looking into the issue.

“I drafted a memo saying, ‘Here’s what we’re doing, and this is what we should be doing.’ We spent months because we had to get this right,” Menendez recalled. “At this time, I also established a relationship with the auditor on the account, and I brought it to his attention. He’s like, ‘Yeah, this is a big freaking deal. This is how they recognize revenue all across the globe.'”

Menendez’s experience is not unique. Other high-profile whistleblower cases in the accounting industry, such as the Enron scandal and the WorldCom scandal, have exposed similar patterns of misconduct and retaliation against those who spoke out.

In the Enron case, Sherron Watkins, a vice president at the company, warned CEO Kenneth Lay about accounting irregularities. In the WorldCom case, internal auditor Cynthia Cooper uncovered billions of dollars in fraudulent accounting entries.

These cases had a profound impact on public perception of the accounting profession, eroding trust in the industry and increasing skepticism towards financial reporting.

Common Obstacles Faced by Whistleblowers

Whistleblowers in the accounting industry often face significant obstacles, including retaliation from their employers. In Menendez’s case, he experienced isolation and loss of job responsibilities after raising concerns about Halliburton’s accounting practices.

“My job was working with the auditors every day. That was my job and everybody else’s,” Menendez said. “All of a sudden, the auditors basically flat out told the company they would not communicate with me in any way. They would not attend any meetings if I was going to be in the meeting.”

The fear of losing one’s job or facing legal action is a common deterrent for potential whistleblowers. Additionally, a lack of support from regulatory bodies can make it even more challenging for whistleblowers to come forward.

In Menendez’s case, the Securities and Exchange Commission (SEC) failed to investigate his claims against Halliburton thoroughly. “The SEC just abdicated the responsibility,” Menendez said. “They didn’t do an investigation. They just turned around and said, ‘Hey, Halliburton, investigate yourself.'”

The role of political influence in deterring proper investigations cannot be overlooked. As Menendez’s attorney told him, “As long as Dick Cheney’s the vice president of the United States, there’s no way in hell they’re going to touch this case.”

Whistleblowing can also take a significant emotional and personal toll. The stress and anxiety of speaking out against one’s employer can impact personal relationships and mental health.

The Importance of Maintaining Market Integrity 

Maintaining market integrity is essential for the health of the global economy. Accurate financial reporting is crucial for maintaining investor confidence, and CPAs play a vital role in upholding ethical standards and reporting wrongdoing.

The consequences of failing to address improper accounting practices can be severe, including potential widespread economic damage and further erosion of public trust in the accounting profession.

Proposed Solutions to Improve Whistleblower Protections

Several solutions have been proposed to address the challenges faced by whistleblowers in the accounting industry. These include strengthening legal protections for whistleblowers, such as enhancing provisions of the Sarbanes-Oxley Act and increasing penalties for companies that retaliate against whistleblowers.

Improving enforcement of existing laws is also critical. This can be achieved by encouraging proactive investigations by regulatory bodies and allocating more resources to the SEC for whistleblower investigations.

Creating a supportive culture within the accounting profession is another key component of protecting whistleblowers. This involves encouraging open communication and reporting of unethical behavior, as well as providing resources and support for whistleblowers within the industry.

For More, Listen to Oh My Fraud

Whistleblowers play a crucial role in maintaining market integrity, but they often face significant challenges and obstacles. High-profile cases like Tony Menendez’s experience at Halliburton reveal the common challenges faced by whistleblowers in the accounting industry and emphasize the need for stronger protections and more effective enforcement of laws.

As CPAs, we are responsible for advocating for whistleblower protection within our organizations and supporting industry-wide efforts to improve whistleblower laws and regulations.

To learn more about Tony Menendez’s experience and the lessons it holds for the accounting profession, I encourage you to listen to the full “Oh My Fraud” podcast episode. His story serves as a powerful reminder of the importance of speaking out against wrongdoing and the need for robust whistleblower protections in our industry.

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