Lawsuits and investigations

Buffalo Billionedit

Buffalo Billion is a billion-dollar program from the administration of New York Governor Andrew Cuomo to revitalize Buffalo, New York. One of the main features of the program is a 1.2 million square foot solar panel factory called SolarCity RiverBend. It will be owned by SolarCity. The factory "is expected to become the largest manufacturing facility in the Western Hemisphere when it opens". Hiring for the factory is expected in spring of 2017 and the factory is expected to begin producing solar cells by the summer of 2017.

The factory will be located in an "innovation hub" called the High-Tech Manufacturing Innovation Hub at RiverBend. The state appropriated $750 million in funding for the hub. According to Daily Energy Insider, "The facility will have one gigawatt of annual solar capacity when it reaches full production and is expected to produce about 10,000 solar panels per day." SolarCity is required to spend $5 billion over the next decade on the facility and create more than 1,460 direct manufacturing jobs.

As of May 2016, federal investigators were investigating how money and contracts within the Buffalo Billion program were distributed. SolarCity was a partner in the program. The company intended to open a large solar panel factory on the Buffalo River. In May 2016, New York State officials postponed the approval of almost $500 million for the SolarCity project. According to The New York Times, Buffalo Billion will benefit "a tangle of well-connected players – including developers and frequent donors to the governor – who have feasted on Buffalo Billion money".

On April 29, 2016, then-U.S. Attorney Preet Bharara (of the Southern District of New York) began an investigation into state construction projects and contracts. Buffalo Billion was a part of that investigation. Many companies have been subpoenaed, and have provided information, including SolarCity and the office of New York Governor Andrew Cuomo. SolarCity is not the subject or focus of the investigation, and not involved in the vendor selection or contracting.

The United States attorney's office for the Southern District of New York is leading a federal inquiry into Buffalo Billion. Prosecutors subpoenaed several state institutions who were responsible for SolarCity and other components of the Buffalo Billion project. The subpoenas sought information about how government-funded programs were awarded and what the role was of state officials who selected the winners. Cuomo has strongly defended the project noting that there has been a decrease in unemployment and an increase in spending around the Buffalo area.

In February, three executives who worked for LPCiminelli Development who were arrested in 2016 in a federal bid-rigging investigation motioned to have the case against them either dismissed or moved from Manhattan to Buffalo. The three men face a 14-count indictment for wire fraud and bribery and alleged bid rigging of the SolarCity RiverBend construction contract. Additionally, five other people have been charged with related crimes. The trials will begin in late spring of 2017.

An Albany firm called Whitman Osterman and Hannah represented both LPCiminelli and Fort Schuyler Management Corporation, which was a subsidiary of SUNY Polytechnic that was awarded the contract to develop the site where SolarCity is being built. The governor's office said that the formal awarding of the SolarCity contract was made by Fort Schuyler on behalf of the state. On May 18, 2016, the Public Authorities Control Board delayed a meeting at which it was set to approve $485 million in new funds for SolarCity. As late as May 2016 SolarCity said that it was cooperating with federal agents who had been in contact with the company.

The New York state legislature plans to approve a budget by April 1, 2017 that would give $500 million more into the Buffalo Billion program. In return, the legislature wants the Cuomo administration to put more transparency into how the money is spent.

Oregon Attorney General investigationedit

On March 30, 2017, The Oregonian said that Campaign for Accountability, a D.C.-based consumer advocacy group, and other groups have asked Oregon Attorney General Ellen Rosenblum to investigate solar panel sales practices that "are designed to trick homeowners into buying or leasing solar panels" in violation of Oregon's Unlawful Trade Practices Act. According to The Oregonian, the request to Rosenblum "singled out one company: California-based SolarCity. It outlined several complaints filed against the solar giant by Oregonians who claimed they'd been misled about costs, tax credits and energy savings by the company."

The Campaign for Accountability reviewed 58 complaints that consumers filed with the Oregon Department of Justice and said that the complaints indicated "a widespread pattern of apparent fraud and abuse by solar companies". The Oregon Solar Energy Industry Association, however, said that it examined the complaints and "found the numbers to be relatively low – lower than those being cited by the Campaign for Accountability".

Investigators determined that SolarCity attempted to "cheat the system" by inflating the cost of 14 commercial solar projects by more than 100% to qualify for higher state tax credits. SolarCity and its accountant were required to pay back $13 million to the state of Oregon. The investigation also found that "phony and misleading documents" were submitted for some projects, and there was a bribery scheme involving the projects' energy consultant and a state Energy Department manager. One of SolarCity's solar panel suppliers employed prisoners at the Federal Correctional Institution in Sheridan, Oregon to keep costs down.

"Solar by Degree" projectedit

The company is involved in a case concerning Martin Shain, the lead energy consultant in a solar power project at two Oregon universities. Shain was indicted for forgery in Marion County in August 2016. He is a consultant for BacGen Technologies in Seattle, a key player in the controversial $24 million "Solar by Degree" project and is accused of "creating a phony invoice from a fictional subcontractor that was pivotal in getting nearly $12 million in tax credits from the Oregon Department of Energy". The project began in 2013 and was sponsored by the Oregon University System; thousands of solar panels, generating millions of kilowatt hours of energy per year, were constructed on 21 acres on the campuses of Oregon State University and the Oregon Institute of Technology in Klamath Falls.

The state's case revolves around two documents, which include an invoice from Solar Foundations Systems dated February 25, 2011, and a December 2011 letter signed by Ryan Davies, the former head of RedCo, a Utah-based company, which was the second developer on the project. According to KOIN-TV, "The Davies letter reported $210,000 had been spent toward the project and that construction was progressing." The Solar Foundations invoice contains details of the construction of solar arrays. The invoice was necessary to provide proof of work on the project to get tax credits from the state. The "Solar by Degree" project received the tax credits, but it was later shown that the company named on the invoice, Solar Foundations, does not exist. In addition, Davies claims he did not write nor has ever seen the RedCo letter in question and that his name was forged. Relying on this evidence, the state claims Shain forged both documents. Shain denies forging the invoice and claims it was given to him by someone else involved in the project. The tax credits involved were given to SolarCity, the third developer in the project, along with its financial backers. According to The Oregonian, "Those backers provide upfront financing for the projects in exchange for a share of the project revenues and the federal and state tax credits, which they can use to offset their own taxes." SolarCity stated, "We financed and constructed the projects in accord with the requirements of the Oregon Department of Energy." The company argues that the state hired Shain, and it had no knowledge of the phony documents in question, otherwise it would have not pursued the endeavor.

Treasury Department inquiriesedit

In 2012, the Treasury Department began investigative interviews of solar firms regarding their fair market value calculations for constructed solar energy systems. The IRS has yet to determine whether or not these values have been inflated. In a 2016 federal filing, SolarCity wrote, "If the Internal Revenue Service or the U.S. Treasury Department were to object to amounts we have claimed as too high of a fair market value on such systems, it could have a material adverse effect on our business, financial condition and prospects." The firm stated, however, that its values were correct and complied with the Treasury Department guidelines. If the Treasury Department or IRS disagrees, SolarCity and other firms could be forced to reimburse institutions that purchase their tax credits as investments.

SolarCity received roughly $501.2 million in credits up until December 31, 2015. In SolarCity's 2015 annual report, a note was made stating that if the government determines misrepresentations were made, "the Department of Justice could bring a civil action to recover amounts it believes were improperly paid to us".

Customer litigationedit

Since 2006, SolarCity has lowered the minimum FICO score required for customers to get the leasing deals. It uses the score of 650 (a "fair" credit rating) as the cutoff. However, between 2014 and 2017, SolarCity signed long-term lease agreements with at least 14 homeowner customers right before the customers defaulted on their mortgages. The company has been named in 139 lawsuits where it is the defendant in legal proceedings based on "residential foreclosure action".

In its response, SolarCity said in a statement to the New York Times, "Out of more than 305,000 installed customers, SolarCity is currently involved in 139 such proceedings. The litigation is not adversarial – being named in the foreclosure proceeding provides us with advance notice that we need to reassign a contract, and many are immediately resolved with the relevant bank."

Customer cancellation investigationedit

The Securities and Exchange Commission (SEC) began investigating Sunrun and SolarCity in May 2017, and were looking into whether they adequately disclosed canceled contracts. "Some customers say they canceled contracts after being strong-armed into solar-energy deals" and there have been hundreds of complaints to state attorneys general.

The federal government is investigating whether solar companies are "masking how many customers they are losing". The SEC is involved because "investors use that cancellation metric as one way to gauge the companies' health". According to the Wall Street Journal, "To generate business, solar companies have long relied on thousands of salespeople who knock on doors, make hundreds of cold calls and even trail people as they shop at retailers like Home Depot Inc., according to salespeople, executives and homeowners."

Some customers say they were strong-armed into buying solar-energy systems by sales representatives who threatened to sue them if they didn't proceed with a project or to place a so-called mechanic's lien on their homes—a measure used to force a homeowner to pay for a home-improvement project. Others say they didn't realize they had actually signed contracts."

FCC receiving radio interference complaintsedit

SolarCity installed SolarEdge inverter systems with a type of DC-DC converter called an optimizer. These systems cause radio interference as documented in April 2016 QST magazine a publication of the ARRL.

Federal settlement for allegations of False Claims Act violationsedit

In September 2017, as part of a legal settlement with the federal government, SolarCity agreed to pay a $29.5 million penalty regarding allegations that the company overstated the cost of facilities it developed and submitted claims for under the American Recovery and Reinvestment Act of 2009, which would be a violation of the False Claims Act. SolarCity dropped its lawsuit, Sequoia Pacific Solar I, LLC v. United States—in which the company alleged the federal government owed it more money—as part of the settlement.

As part of the settlement, the company agreed to “release all pending and future claims against the U.S. for additional payments from the grant program". The move ended a five-year investigation.

Vermont projects without approvaledit

In June 2017 the Vermont Public Service Board found that SolarCity was implementing solar projects in Vermont without approval required by law. According to Vermont Public Radio, Public Service Board Chair Anthony Roisman sent a letter to SolarCity warning the company that it needed to get regulatory approval before installing solar generation equipment and attaching it to the state's electrical grid. Roisman wrote, "Over the past few months, my office has observed a pattern of procedural issues with net-metering applications being pursued by your company." Officials at the company worked quickly to respond to the issue.

Faked sales numbersedit

In July 2018, three former employees filed a lawsuit against SolarCity, alleging that the corporation had approved the creation of "fake sales accounts", which resulted in an "unreasonably high valuation of SolarCity" for investors. After allegedly informing management, including CEO Elon Musk, of these incidents, the employees were allegedly fired, which they argue contravenes California's whistleblower protection laws. A Tesla spokesman denied these allegations. On June 5, 2020, the case was dismissed with prejudice.

Walmart lawsuit and Project Titanedit

SolarCity installed and manages solar panels on the roofs of more than 240 Walmart stores. On August 21, 2019, Walmart filed a lawsuit against Tesla, seeking reimbursement for millions of dollars in damages and release from contracts, claiming that fires on the roofs of seven of those stores since 2012 were caused by SolarCity's "negligent installation and maintenance".

On 5 November 2019 it was announced that Walmart Inc has agreed to settle its legal dispute accusing Tesla Inc of negligence in the installation of solar panels atop hundreds of its stores, resulting in at least seven fires. A joint statement provided by Tesla stated the companies said they were "pleased to have resolved the issues raised by Walmart" concerning the installations, and looked forward to "a safe re-energization of our sustainable energy systems." Walmart had sued Tesla for breach of contract on Aug. 20 in a New York state court in Manhattan, seeking to have its solar panels removed from more than 240 stores. Walmart had accused Tesla of “widespread, systematic negligence” and ignoring prudent industry practices by relying on untrained and unsupervised personnel to install and maintain its panels, and prioritizing speed and profit over safety. Tesla's solar panel market share has been falling, prompting the Palo Alto, California-based company to cut its sales force. Revenue from Tesla's energy generation and storage operations from January to September fell 7% from a year earlier to $1.1 billion. Terms of the settlement were not disclosed. Walmart had no immediate additional comment. Tesla and its respective lawyers did not immediately respond to requests for comment.

At around the start of the lawsuit, it was revealed that Tesla had initiated a secretive program, called Project Titan, to "replace solar-panel parts that could cause fires" as early as the previous summer. From a resource-perspective, Project Titan involved "ordering supplies including ladders and tool belts and sent crews out around the United States" to approximately 50 cities as well as replacements for the specific parts believed to be causing fires: Amphenol H4 connectors and SolarEdge optimizers.