B.O.G.

The Fourth Ring of Dante's Inferno is filled with the greedy. In this wonderful illustration by Gustave Doré we see these bums in sisyphean toil with their money bags. According to Dante, you actually can take it with you.

It is one thing to be greedy - it is quite another to steal. Thieves are kept deeper... Down below the ANGRY, passed the HERETICS and beyond the VIOLENT you come to the Cliffs of Treachery. A quick hop on the back of Geryon (human head, serpent body, furry paws) will take you past the cliffs and down to the Eighth Ring. Once in the Eighth Ring you go east on MLK until you get to the 7th borough - there you'll find the special place in Hell where thieves are kept. I've treated scrambled eggs better than Dante treats thieves.





Scams, Frauds and Screws

Charity Scam

A charity scam works like so: Bob gives Acme Aid Association a $100 donation. Acme Aid then gives Bob a receipt for $500. When tax time rolls around Bob uses his inflated receipt to take a tax credit that's greater than the original donation.

Mortgage Fraud

Step 1. Bob buys a property for $50,000.
Step 2. Bob gets an exaggerated appraisal on the property from Neil, his co-conspirator, for $100,000.
Step 3. Bob creates a fictional buyer (poof) and uses the fake appraisal to obtain an 80% loan to buy/sell the property to/from himself.
Step 4. Bob and Neil split $30,000 and head down to the Castro District for some fun. The fictional buyer defaults and the bank is left holding an $80,000 loan on a $50,000 property.

What are the red flags?

"An official with the Texas Department of Savings and Mortgage Lending notes that inflated appraisals and the constant use of the same appraiser are two of the most common signs of mortgage fraud. Agents acting in dual roles such as real estate agent and mortgage broker are another indicator."

The Solar Screw

The Solar Screw shares many things in common with charity and mortgage frauds. The screw starts off when Bob signs up for a PPA deal with a 3rd party financing company such as Solar Credit R' Us. Bob gets a photoelectric system and a lower monthly electricity bill. The photoelectric system costs $20,000 but SCRU uses a collection of smoke, mirrors and incantations to raise the Fair Market Value of the system up to $40,000. The $40,000 bill is then submitted to the US Government who subsequently gives SCRU a 30% tax credit on the inflated price. Jigar Shah talks about the practice here.

Who is doing this you ask? Who isn't is a more appropriate question. Johnathan Bass provides some delicious food for thought with this quote.

"SolarCity is unique in that it is both the developer/financing company and installer of its projects, while the vast majority of the other installers offering leases and PPAs use a 3rd party for financing."

Sound familiar? Remember the Red Flags?

"An official with the Texas Department of Savings and Mortgage Lending notes that inflated appraisals and the constant use of the same appraiser are two of the most common signs of mortgage fraud. Agents acting in dual roles such as real estate agent and mortgage broker are another indicator."

Rhone Resch recently made some interesting comments regarding this issue. The comments are especially interesting because he's talking about business practices back in the mid-eighties.

"Solar marketing firms that were using solar financing arrangements for systems were suspected of inflating the prices of solar equipment way above the fair market value and abusing the basis on which the tax credit was calculated."

He had this to say regarding the collapse of the solar industry in the mid-eighties.

"So we had a confluence of events: tax reform and companies getting greedy. Sound familiar? This cannot be allowed to happen again."

Too late Resch... As things stand its appears that tax reform is only a few moons away. At the end of the day that's not a bad thing if you believe, as I do, that tax reform will end up promoting competition. I'm personally a fan of phasing out the Investment Tax Credit (ITC) entirely but an effective preliminary measure would be capping the credit. Strangely enough there's already a precedent here as the ITC for small wind projects has a cap at $1000 per KW. Why not just carbon copy the wind legislation, CTRL+F, replace wind with photoelectric and get it stamped? Badda Bing...

If fixing the ITC isn't possible a warning to the theiverous scumdrels must suffice.