Heritage Commerce agrees to settle DC Solar claims
Heritage Bank of Commerce in San Jose, California has agreed to pay $ 4 million to settle claims arising from an alleged Ponzi scheme.
According to a statement on Wednesday, the deal was reached with Christine Lovato, trustee of four bankrupt companies linked to DC Solar, a failing manufacturer of mobile solar generators. The Heritage Commerce payment settles Lovato’s claims arising from the bank’s handling of deposit accounts maintained by failed companies as well as several related investment funds.
Heritage Commerce has denied any responsibility.
DC Solar owners Jeff and Paulette Carpoff pleaded guilty to conspiracy and money laundering charges in January 2020.
DC Solar investors bought mobile solar generators, allegedly manufactured by the company. Instead of operating the generators themselves, investors leased them to DC Solar, which would in turn lease them to end users. In addition to benefiting from rental income, investors have received hundreds of millions of dollars in solar energy tax credits.
According to the government, at least half of the approximately 17,000 mobile solar generators that DC Solar claims to have manufactured never existed, so the rental income associated with them – as well as the tax credits – were fraudulent.
The list of defrauded investors includes several banks, while Heritage Commerce also made two commercial real estate loans to entities related to DC Solar.
Heritage, which reported net income of $ 11.2 million for the quarter ending March 31, said it would record the settlement payment as non-interest income in its second quarter financial results . Heritage Commerce also plans to continue reimbursing its insurer.
In a research note Thursday, Tim Coffey, who covers Heritage Commerce for Janney Montgomery Scott, lowered his estimate of second quarter earnings from five cents to $ 0.15 per share. Coffey, however, reiterated his buy rating and his estimate of the fair value of $ 13.50 on the stock.
“While the settlement is a setback… we don’t see it as a long-term barrier to better assessment,” Coffey wrote.