International Automated Systems (fka IAUS)

[scion]

Defendants’ abusive solar energy scheme.

14. Since at least 2010, and continuing to the present, Defendants have promoted an abusive tax scheme that results in their customers claiming federal income tax deductions and credits to which the customers are not entitled, and which enriches Defendants at the expense of the United States Treasury.

15. Defendants use their own websites (e.g., www.rapower3.com and www.iaus.com) and social media sites to promote their abusive scheme. Defendants give teleconferences and inperson presentations to potential customers about the scheme. They also use a multi-level marketing model to attract new customers.

16. Defendants claim that IAS owns certain technology that offers a “disruptive” and “revolutionary” approach to capturing and using solar energy to help make “America energy independent.”

17. This technology purportedly involves “solar thermal lenses” on IAS “solar towers.”

18. IAS owns a parcel of land in Millard County, Utah (“Installation”), on which Defendants have placed fewer than 25 “solar towers.”

19. Each “solar tower” has, at most, approximately 68 “lenses” mounted at the top.

20. According to Defendants, the lenses use solar energy and, with the other infrastructure at the Installation, generate “process heat temperatures of over 1,000 degrees F” and electricity.

21. Defendants feature photos and videos purporting to show the “technology” in testing and/or in operation on their websites and on social media sites like Tumblr and YouTube.

22. Johnson allegedly invented the “technology” that IAS claims to possess and that Defendants promote.

23. IAS gives “RaPower[-]3 the right to sell [its] lenses.”

24. RaPower-3 solicits customers to purportedly buy the solar lenses from RaPower-3.

25. When the customer signs a purchase agreement with RaPower-3, purportedly to buy solar lenses, the customer also signs an “operation and maintenance agreement” with LTB and may also sign a “bonus referral contract” with RaPower-3.

26. RaPower-3 provides all three agreements to potential customers.

27. Under the purported lens purchase agreement, the price for each lens is $3,500.

28. Johnson, as “Director” of RaPower-3, signs the operation and maintenance agreements that purportedly bind LTB.

29. At no cost, according to RaPower-3, LTB “installs, operates and maintains [the customer’s] lenses” at the Installation or elsewhere, ostensibly to generate energy using solar power.

30. Therefore, according to RaPower-3, a customer need not worry about the “hassle” of operating and maintaining the lenses.

31. According to the operation and maintenance agreement, once the customer’s lenses are installed and purportedly producing revenue (ostensibly by generating energy using solar power),LTB will make quarterly or annual “rental payments” to the customer for using the lenses in the amount of $150 total per year.

32. The so-called “bonus referral contract” purportedly entitles the customer to an infinitesimal percentage of IAS’s “gross revenue” in exchange for the customer’s agreement to make the lenses “available to IAS as a reference for marketing and sales purposes” to entice new customers to buy in to the scheme.

33. According to Defendants, the combination of the three agreements – the purchase agreement, the operation and maintenance agreement, and the bonus referral contract – gives a customer the right to claim the tax benefits Defendants promote: depreciation and other business related expenses and the § 48 solar energy credit.

34. According to Defendants, the lenses need not actually be in use as solar-energy producing equipment for the customer to claim the tax benefits Defendants promote. Instead, the customer purportedly “leases out” the lenses through the operation and maintenance agreement. By holding the lenses out for lease, according to Defendants, the customer may claim the promoted tax benefits.

35. Defendants’ customers typically “buy” multiple lenses per year; some even purportedly purchase more than one hundred lenses in a particular tax year.

36. Defendants also encourage their customers to “sponsor” more taxpayers to buy lenses through a multi-level marketing model. In fact, some of Defendants’ customers have recruited others to buy into the scheme, in exchange for a commission. For example:

a. Person A, a Utah resident, claimed to have sold 400 to 500 lenses as of January 2013. He earned commission of 10 percent of the $1,050 down payment for each lens he sold.

b. Defendants’ customer Person B is the “sponsor” for Defendants’ customers Person C, Person D, and Person E. All are Florida residents. According to the “success stories” on RaPower-3’s website in 2013, Person B has “signed many, many new RaPower[-]3 Team Members.”

c. Defendants’ customer Person F is the “sponsor” for Defendants’ customer Person G. Person F is a resident of Washington and Person G is a resident of Alaska.

37. Shepard “sponsors” customers into this abusive scheme. He claims to have earned more than $170,000 from 2010 through 2013 due to activities related to promoting the scheme.

38. From his activities related to promoting this abusive tax scheme, Johnson claims to have earned nearly $500,000 in tax years 2012 and 2013 alone.

39. Freeborn “sponsors” customers into this abusive scheme. For his activities related to promoting this abusive tax scheme, RaPower-3 paid him more than $100,000 from 2011 through 2013.

40. In March 2015, RaPower-3 and Shepard stated “RaPower[-]3 should expand its member base by thousands of new members. So expect them to also be claiming tax benefits.”


Extract -
Doc 2 PDF file
https://www.scribd.com/doc/291081416/USA-v-RaPower-3-Et-Al-Doc-2-Filed-23-Nov-15