RECEIVERSHIPS: RaPower-3

WAYNE KLEIN, RECEIVER FOR
RaPower-3

PO Box 1836
Salt Lake City, UT 84110
Telephone: (801) 824-9616
E-mail: wklein@kleinutah.com

Welcome to the Klein & Associates website! This page contains information regarding the Receivership: RaPower-3. On this page, you will find:

    1. Copies of the Court Order Appointing a Receiver and other Court filings about the Receivership;
    1. Copies of Status Reports and other notices the Receiver will file with the Court;
    1. General information about the Receivership.
Information for Customers who Purchased Solar Lenses from Rapower-3 or International Automated Systems.

Background of the Litigation: On November 23, 2015, the United States filed a civil lawsuit against RaPower-3, International Automated Systems (“IAS”), LTB1, Greg Shepard, Neldon Johnson, and Roger Freeborn in federal court in Utah. A copy of the civil lawsuit can be found on this website or by contacting the Receiver. Trial on the lawsuit was completed in June 2018. At the conclusion of the trial, the judge issued partial findings of fact which concluded that defendants engaged in a massive fraud. On October 4, 2018, the judge issued 144 pages of factual findings and legal conclusions. A copy of those “Findings of Fact and Conclusions of Law” can be found on this website. On October 31, 2018, the Court appointed Wayne Klein as Receiver over RaPower-3, International Automated Systems, LTB1 and the assets of Johnson and Shepard. The Court also temporarily froze the assets of twelve other companies that were affiliated with RaPower, IAS, Johnson or Shepard. On November 13, 2018, the Court imposed a judgment on the defendants. The judgment amounts are: $50 million against Johnson, $5.4 million against IAS, $25 million against RaPower, and $700,000 against Shepard.

Receiver Appointed: The role of the Receiver is to take control of the companies (RaPower-3, IAS, and LTB1) and all of the assets of Johnson and Shepard. A copy of the order appointing the Receiver and describing his duties can be found on this website. The Receiver has taken control of all of the bank accounts of the defendants and as of November 30, 2018 was holding approximately $1.7 million. The Receiver will review the business and financial records of the companies and determine whether assets have been improperly transferred from the companies or the individuals to other persons and, if so, seek to recover those assets. In the process, the Receiver will evaluate the actions of the twelve affiliated companies and recommend to the Court whether those entities should be included in the Receivership Estate. The Receiver will sell the assets, and distribute the funds to the intended recipients.

Intended Recipients of Funds: The Receivership Order identifies the persons and entities who are to receive funds recovered by the Receiver and the order of priority for distributing those funds. Under the Receivership Order, the first priority for payment of funds are amounts owed to the U.S. Department of Justice for the costs it incurred in suing the defendants. The second priority is paying $14,207,517 to the United States Treasury. The third priority is to lens purchasers. (See paragraph 89 in the attached order appointing receiver.) This priority ranking means that no lens purchasers will be entitled to any payments from Receivership assets until $14.2 million is paid to the United States Treasury. Based on what the Receiver has learned to date, it is unlikely there will be enough assets to pay the first and second priority in full. That means it is unlikely there will be any funds available for distribution to customers who purchased lenses. However, if the Receiver does recover enough that it appears there would be sufficient funds to make distributions to lens purchasers, he will ask the Court to approve creation of a claims process. Under the claims process, purchasers would complete and submit a claim form (that would be created by the Receiver and approved by the Court). The Receiver would evaluate the claims and make a recommendation to the Court on how the funds should be distributed.

Send Contact Information to the Receiver: Because it is possible that sufficient funds will be recovered to conduct a claims process, the Receiver invites purchasers to send him their contact information. Please send an email to wklein@kleinutah.com with: 1) your name, address, phone number, and email address, and 2) the amount you paid to RaPower or IAS to purchase solar lenses. If you sent your payment to a company other than RaPower or IAS, identify the company to which you sent your payments and indicate how much you paid. If a claims process is created, the Receiver will post information on this website about the claims process and send you an email with a copy of the proof of claim form and a summary of the claims process. If no claims process is created, the Receiver will not notify you that there will not be a claims process.

Payments on Lens Purchases: The Receiver will not accept any funds from lens purchasers for amounts owed on purchase contracts with RaPower or IAS. Paragraph 37 of the Receivership Order directs the Receiver to refuse to accept any further payments from lens purchasers.

Tax Issues: The Receiver was appointed by the Court. He does not work for the IRS or represent the IRS. Nevertheless, the Receiver provides the information below regarding potential tax liabilities. Purchasers are encouraged to contact competent tax advisers to determine the best course of action in their particular circumstances. The Receiver strongly urges lens purchasers to contact tax advisers different from tax advisers that might have been recommended by RaPower or IAS.

The Receiver understands that the IRS and a number of state taxing agencies have audited tax returns of lens purchasers who claimed deductions or tax credits based on the purchase of solar lenses. It is the Receiver’s understanding that the taxing authorities take the position that tax deductions and tax credits taken for the purchase of solar lenses were impermissible. The Receiver understands that the IRS has filed a number of lawsuits against purchasers who claimed deductions or credits, which lawsuits are pending in U.S. Tax Court. In light of the ruling by the federal court in the RaPower-3 case—that the entire scheme was a tax fraud—it may be more likely that the IRS will prevail in its efforts to claim the deductions or tax credits were improper. You should discuss with your tax adviser the likelihood that your tax returns will be audited by the IRS or state tax authorities and that the taxing authorities might demand payment of the taxes that were improperly avoided. In addition, the taxing authorities might impose financial penalties and interest.

You also may want to discuss with your tax advisors whether you will be allowed to claim a loss for the purchase of solar lenses in light of the Court’s ruling that RaPower was a massive fraud.

 

Court Documents

 

Statement by the Receiver: The Receiver was appointed by the U.S. District Court of Utah to take control of three companies: RaPower-3, LLC, International Automated Systems, Inc., and LTB1, LLC as well as the assets of Neldon Johnson and R. Gregory Shepard. The federal court has frozen all the assets of these defendants. The Receiver is to determine whether other affiliates and subsidiaries of defendants should also be included in the Receivership Estate. The Receiver intends to recover all properties that should be in the Receivership Estate and sell those assets.