Musk's SolarCity To Pay $29.5 Million To Settle Federal Probe

The settlement is not an admission of guilt

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September 22, 2017

SolarCity, a company acquired by Tesla last fall, has agreed to pay the U.S. Treasury $29.5 million to resolve allegations that it lied to the federal government and overinflated its costs to receive higher stimulus funds than it deserved, the Justice Department announced Friday.

The settlement, which is not an admission of guilt, resolves a longstanding dispute with the solar energy company, owned by billionaire Elon Musk.

Congress and the Treasury Department's Office of Inspector General have spent five years investigating SolarCity, the largest provider of residential solar panels in the nation, and other renewable-energy companies.

The probes were trying to determine whether the companies inflated their costs for providing their products in order to cash in on the stimulus funds the federal government provided to help the country recover from the economic crisis in the early years of the Obama administration.

"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," Acting Assistant Attorney General Chad Readler said in a statement.

The federal investigations focused on the Section 1603 program, which was created by the Obama administration to boost the solar-energy industry by subsidizing installation costs. The program provided solar companies like SolarCity federal grant money to compensate them for roughly 30 percent of the cost to install or acquire solar systems.

SolarCity has denied the charges that it over-inflated its costs and countersued the U.S. government, claiming it was still owed money. The company has now dropped that countersuit as part of the settlement.

A SolarCity spokesperson said its projects were always valued correctly in its claims to the federal government and the "methods used to value its projects were sound."

"It's telling that after a 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" in exchange for the company replaying approximately 5 percent of the cash stimulus grants provided, the spokesperson said in a statement.

The company said it took its responsibilities seriously under the program to accurately value its costs and submit accurate claims, using independent appraisers, accountants with industry expertise, and investors.

Around 2012, the company said, the Treasury Department began to reconsider some of its own valuations and revisited the amounts it had previously approved and paid. An academic that Treasury hired to provide accurate appraisals of the costs, the spokesperson said, had been discredited in a similar lawsuit last year.

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

Tesla, Musk's electric vehicle automaker, acquired SolarCity last fall. Musk personally owned 22 percent of SolarCity, whose shares were plummeting last year and faced a billion dollars in leasing-and-installing debt payments before the merger.

The Los Angeles Times in 2015 estimated that Musk's companies have benefited from nearly $4.9 billion in state and federal "green" tax subsidies.

Musk in early June resigned from the presidential business advisory councils he sat on after President Trump pulled out of the Paris climate agreement.