SolarCity Settles Grant Fraud Allegations

In another reminder that doing business with the federal government presents unique risks, on September 22, 2017, the U.S. Justice Department announced that SolarCity Corporation had agreed to pay $29.5 million to resolve the government’s allegations that SolarCity and related entities had violated the Civil False Claims Act. (31 U.S.C. § 3729.)  The allegations and settlement stem from federal grants for renewable energy projects under Section 1603 of the American Recovery and Reinvestment Act of 2009. (Public Law 111-5.)

Accordingly to DOJ’s press release, beginning in 2009, SolarCity submitted thousands of Section 1603 claims on behalf of itself and affiliated investment funds.  The government alleged that SolarCity falsely overstated the cost bases of its solar energy properties in its certified Section 1603 claims to the Treasury Department, resulting in inflated grant payments from the Treasury. 

Notably, in 2013, SolarCity affiliates, Sequoia Pacific Solar I, LLC and Eiger Lease Company, filed one of approximately 25 lawsuits in the U.S. Court of Federal Claims asserting that the government had underpaid the firms for their 1603 claims.  (The action is captioned Sequoia Pacific Solar I, LLC v. United States, No. 13-139C (Fed. Cl.)) In relevant part, Sequoia Pacific’s complaint alleged that the Treasury department improperly reduced the cash grant awards for its projects by approximately $14 million.    

Under the Civil False Claims Act, a party that submits a false claim to the government is liable to the United States Government for a civil penalty of between $10,781 and $21,563 per false claim, plus three times the amount of damages which the Government sustains because of the act of that person.  DOJ’s press release noted that as part of the settlement, SolarCity not only was required to pay the settlement amount but also was required to voluntarily dismiss its claim for damages in its Court of Federal Claims litigation.

Click here for a copy of DOJ’s Press Release.