TREASURY CASH GRANT litigation mounts.
Four more suits were filed against the US Treasury in March, bringing the total number of pending suits to 20. All four of the latest suits involved payments the Treasury made under the section 1603 program to wind farms.
In April, the government filed a counterclaim against one of the litigants in the 20 lawsuits, LCM Energy Solutions, accusing the company of fraud and asking for $482,504 that the company was already paid in grants on 18 rooftop solar systems back plus denial of its additional claim, civil penalties of up to $220,000 and treble damages of three times the amount the company was already paid, or $1.4 million.
LCM filed suit in May 2012 asking the Treasury for the difference between the $482,504 it was paid and the $889,638 for which it originally applied on the 18 systems. Treasury valued the 18 systems at $5.70 a watt for purposes of paying grants. The company wanted roughly $10.50 a watt.
The government found the legal arrangements around the 18 systems were a mess when digging more carefully into the facts after the company filed suit.
Two individuals set up a solar installer called RCIAC in February 2010. RCIAC sold the 18 systems to customers in 2010. An affiliated company, LCM, that the same two individuals formed in October 2010 then applied for rebates from ONCOR, the local utility, and for section 1603 payments from the US Treasury for almost half the purported sales prices of the systems to the customers. Each customer paid RCIAC only $1,500 for its system in fact, according to the government. RCIAC excused the rest of the purchase price.
LCM said on its Treasury cash grant applications that it purchased the systems from RCIAC using the ONCOR rebates and expected section 1603 payments and was leasing the systems to the customers under leases with terms of five years and rent of $25 a month.
The rebate applications filed with ONCOR said that each customer was the system owner and that the systems would remain in place for their entire useful lives.
The Treasury asked LCM for documents demonstrating that the customer leases were true leases before it paid the original grants. LCM produced a legal opinion that said LCM purchased the systems for the amount of the rebates, and RCAIC’s cost to install was $4.79 a watt. When the Treasury paid the original grants, it took the $4.79 cost to install and added 20% to arrive at $5.70.
LCM sued for more. During depositions, one of the two owners of LCM said the company arrived at the purchase price it used to calculate grants by assuming a set number of hours to install each system at $75 an hour, regardless of actual installation costs, according to the government.