SALT LAKE CITY — A Utah solar energy company that promises substantial tax breaks to customers who buy its thermal lenses doesn't generate any electricity and never will, a solar power expert testified Monday in federal court.
Neldon Johnson and R. Gregory Shepard are accused of using RaPower-3 LLC and International Automated System Inc. to sell solar technology to customers under a false premise that the equipment is groundbreaking.
A 2015 Department of Justice complaint alleges the businesses made false promises to customers and that the "so-called technology is a sham." A scheduled 10-day bench trial before Judge David Nuffer started Monday in U.S. District Court.
The Deseret News was the first to report in December of 2013 the questionable business practices of International Automated System's decadelong practice of promising solar energy in arrangements that never came to fruition.
In a monthslong investigation, the newspaper uncovered projects in multiple states that never produced significant energy, despite claims by company officials that the technology was revolutionary.
Federal authorities say the company has cost the U.S. Treasury Department more than $4 million in a bevy of tax cases in courts in Utah, Oregon, California, Washington and other states. The DOJ has identified at least 90 customers who claimed bogus tax credits.
Government witness Tom Mancini, who owns a solar consulting firm in Albuquerque, New Mexico, said his analysis showed International Automated Systems' solar dish technology never produced electrical power or any other usable energy from the sun. He also said it would never become a commercialized system.
On two visits to the company's site in Millard County, Mancini said he never saw any engineering drawings, computer models of components, system tests, lists of materials or cost estimates. He said Johnson repeatedly told him he doesn't keep that kind of information.
Mancini also testified the company doesn't have the 20-plus engineers and 75 to 100 technicians needed to work on making a technology viable. He described the operation as a series of components that don't fit together in a system that would work efficiently or effectively.
Johnson's attorney, Denver Snuffer Jr., objected to Mancini taking the witness stand, arguing his testimony is not relevant because the case is about tax issues. He also asked the judge to strike his testimony because he contends Mancini's analysis didn't meet court-established criteria. Nuffer denied the motion.
Under cross-examination, Mancini conceded that he didn't test any of the components in the system. Snuffer tried to discredit Mancini's analysis, saying he did not work with data but used his imagination to assemble the system in his head to determine whether it would work.
The government claims the thermal lenses are nothing more than thin sheets of plastic that have been exposed to desert conditions and either have fallen to the ground or hang dangling or broken from installed towers. RaPower-3 and International Automated System products don't qualify customers for tax breaks as the companies claim, according to the government.4 comments on this story
The defendants deny the allegations and assert they have been involved in a legitimate business. Any representations they made regarding tax implications are grounded in "fact and law," according to court documents.
"The fact that the government incentivizes alternative energy transactions by means of tax credits and deductions does not make the defendant's business a 'scheme,'" they argued.
Correction: In an earlier version of this story, a statement made under cross-examination by government witness Tom Mancini that he didn't test any of the components in the system was wrongly attributed to the defendant, Neldon Johnson.