The Securities and Exchange Commission today announced charges against two California individuals for their roles in a multi-year alternative energy tax credit Ponzi scheme run by two California-based companies. Defendants have agreed to settle the SEC's charges, with monetary relief to be determined by the court at a later date.

According to the SEC's complaint, filed in federal court in Sacramento, Joseph Bayliss, a licensed electrical and general building contractor, and Ronald Roach, a certified public accountant and investment adviser, were integral to a massive Ponzi scheme that raised approximately $909 million from 17 investors between 2011 and 2018. The complaint alleges that investors were induced by others to invest in tax credit investment contracts and sale leaseback investments through promises of gains in the form of tax credits, guaranteed lease payments, and profits from the operation of mobile service generators. In reality, the complaint alleges, thousands of the purportedly profitable generators were never even manufactured, let alone put into use, and the vast majority of revenue to investors came from Ponzi-like payments, where funds from new investors were used to pay off old investors, not from actual lease payments.

Bayliss allegedly provided false technical certificates of inspection for generators that he, in fact, never inspected, and, in many cases, for generators that did not exist. Bayliss allegedly knew, or was reckless in not knowing, that the certificates that he signed were being sent to and relied upon by investors. Roach allegedly issued compilation reports and accompanying financial statements that falsely reported significant revenue from purportedly real leases. Roach allegedly knew that these misleading reports and financial statements were being provided to investors. According to the complaint, defendants each made millions of dollars from the scheme, while investors lost their money.

The SEC's complaint charges defendants with violating the antifraud provisions of the federal securities laws and seeks injunctive relief, disgorgement, and civil penalties. Defendants have consented to permanent injunctions, with monetary relief to be determined by the court on motion by the SEC at a later date.

In a parallel criminal case, the U.S. Attorney's Office for the Eastern District of California today announced criminal charges against both defendants.

The SEC's continuing investigation is being conducted by Sarra Cho and Christopher Nee and supervised by Andrew Sporkin and Daniel Michael, all of the SEC's Complex Financial Instruments Unit, with the assistance of Kam Lee. The litigation is being led by Dean Conway and supervised by Thomas Bednar. The SEC appreciates the assistance of the U.S. Attorney's Office for the Eastern District of California, the Federal Bureau of Investigation, and the Internal Revenue Service.