United States District Court, D. Utah, Central Division
MEMORANDUM DECISION AND ORDER FREEZING ASSETS AND TO
APPOINT A RECEIVER
NUFFER UNITED STATES DISTRICT JUDGE
order GRANTS the United States' second motion to freeze
Defendants' assets and appoint a receiver, ECF Doc. No.
414, filed June 22, 2018.
November 23, 2015, the United States filed its complaint
against Defendants, seeking to enjoin Defendants from
organizing, promoting, and selling the “solar energy
scheme” that they have been promoting since on or
before 2010. The United States also seeks disgorgement
of Defendants' ill-gotten gains from the promotion of
their abusive tax scheme.
United States previously moved for an order freezing the
assets of Defendants Neldon Johnson, RaPower-3, and IAS's
assets and for an order appointing a receiver on November 17,
2017. On March 2, 2018, the United States'
motion was denied without prejudice in part because the
United States relied upon the facts set forth in its motion
for partial summary judgment including the “disputed
material facts as to Defendants' knowledge at the time
they made certain statements.” The Motion for Partial
Summary Judgement was also denied in that same
order. Trial is now completed. The Court made
extensive findings on the record at the end of
trial; intends to enter detailed Findings of Fact
and Conclusions of Law including a disgorgement order; and
has already entered an interim injunction based on summary
findingsand a preservation order. On the basis of
the evidence adduced at trial, as laid out below, the United
States' motion is granted.
Statement of Facts
injunctive relief requested by the United States - in the
form of an asset freeze and appointment of a receiver - is
necessary or appropriate to enforce the Internal Revenue
Laws. . 13
A. The United States has succeeded on the merits. .
B. The United States will suffer irreparable injury if an
order granting the asset freeze and appointing a receiver is
not issued. .
C. The balance of harm to the United States in not issuing
the injunctive relief outweighs the harm to be caused to
Defendants by issuing the requested relief. . .............
D. An injunction will benefit, not disserve, the public
interest. . ............................... 19
E. A receiver is necessary or appropriate to effect the asset
freeze. . ........................ 20
Statement of Facts
Neldon Johnson is and has been the manager, and a direct and
indirect owner of, RaPower-3, LLC, International Automated
Systems, Inc. and LTB1, LLC (among other entities). He is the
sole decision-maker for each entity.
Johnson claims to have invented certain solar energy
technology that involves solar thermal lenses placed in
arrays on towers.
or around 2006 through 2008, Johnson directed IAS to erect,
at most, 19 towers on “the R&D Site” near
Delta, Utah, in Millard County.
Johnson also directed that IAS install solar lenses in those
make money from this purported solar energy technology,
Johnson decided to sell a component of the purported
technology: the solar lenses.
Johnson recognized that his strength was not in sales, so he
directed that IAS use independent sales representatives to
Johnson drafted some promotional materials to describe the
arrangement, “IAUS Solar Unit Purchase Overview”
and IAS “Solar Equipment Purchase.”
Johnson showed IAS salespeople these descriptive materials
about the structure of the transaction, the purported
technology, and the federal tax benefits that Johnson said a
customer could lawfully claim when he bought a lens from
told IAS's initial salespeople what he understood the tax
laws to mean.
Gregory Shepard has been an IAS shareholder since the
mid-1990s. He became one of IAS's initial
salespeople in or around September 2005, and began selling
Shepard's information about Johnson's purported solar
energy technology came from Johnson or members of
Johnson's family, and Shepard's own observations on
his site visits over the years.
Johnson told Shepard that a depreciation deduction and the
solar energy tax credit are related to the sale of
Johnson created, owns, and controls at least three entities
that sell or have sold solar lenses: SOLCO I,  XSun Energy,
and RaPower-3, LLC. SOLCO I and XSun Energy are not
defendants in this action.
Johnson created RaPower-3 in 2010. He is it manager and the
sole decision-maker for the company.
Once formed, RaPower-3, rather than IAS, sold solar lenses to
RaPower-3's only business activity is selling solar
lenses through a multi-level marketing (otherwise known as
“network marketing”) approach to increase
Selling lenses through RaPower-3 gave Johnson “much
needed revenue” to continue his
Johnson directed RaPower-3 to create a site online
(https://rapower3.net) where a customer can access and sign a
contract to buy lenses and sign other transaction documents
that Johnson provides (described below).
Among other things, Shepard created the website
www.rapower3.com and moderates an online discussion board
called “IAUS & RaPower[-]3
Shepard gets paid for his work with RaPower-3 through his
company, Shepard Global.
the RaPower-3 website, Shepard describes the solar energy
technology (including the solar lenses) and the transactions
underpinning the solar energy scheme, promotes sales, and
provides links to the website with the transaction
documents. Shepard also uses the IAUS and RaPower-3
Forum and emails to communicate with RaPower-3 members and
Shepard also organizes groups of people to visit the R&D
Site, the site where component parts of the purported solar
technology system are manufactured (the “Manufacturing
Facility”), and the site on a large field with a few
semi-constructed component parts (the “Construction
Shepard directs customers to use tax return preparers who are
part of the solar energy scheme, like John Howell in Wichita
Falls, Texas; Kenneth Alexander in Florida; and Richard
Jameson in St. George, Utah.
From 2009 through 2016, RaPower-3 had received at least $25,
874, 066 from its role in the solar energy
From 2008 through 2016, IAS has received at least $5, 438,
089 from its role in the solar energy scheme.
From 2011 through 2016, XSun Energy has received at least $1,
126, 888 from its role in the solar energy
From 2010 through 2016, SOLCO I has received at least $3,
434, 992 from its role in the solar energy
From 2005 through February 28, 2018, all lens-selling
entities have received at least $32, 796, 196.
Testimony at trial showed that the total sales price of
lenses which appears to have been paid is at least $50, 025,
From 2008 through 2016, Shepard received $702, 001 from his
role in the solar energy scheme.
While selling the solar lenses, Defendants told customers
they could buy “lenses” and claim tax
While they sold solar lenses and organized efforts to sell
solar lenses, Defendants told their customers that if they
bought a solar lens and signed the transaction documents
Defendants provide, their customers were in the “trade
or business” of “leasing” solar
According to Defendants, because their customers are in the
trade or business of leasing solar lenses, their customers
are allowed to claim on their federal income tax returns a
business tax deduction for depreciation on the solar lenses
and a solar energy tax credit.
Defendants told customers that IAS, RaPower-3, or LTB
“placed in service” or “put into
service” their solar lenses in the year that the
customers purchased the lenses.
Starting in 2010, RaPower-3 sold lenses for a price of $3,
500 per lens. Johnson determined the price that
RaPower-3 would charge for the lenses.
Customers started purchasing lenses via the internet at
rapower.net. On that site, a potential customer enters the
number of lenses he wishes to purchase, and the website
“figures” the amount the customer owes and the
amount of the customer's down payment.
site also provides all transaction documents for customers to
sign electronically: an Equipment Purchase Agreement, an
Operations & Maintenance Agreement
(“O&M”), and, at times in the past, a bonus
Customers do not negotiate the price of a lens, or other
terms of the transactions Defendants promote.
Over the years, Defendants told customers about Johnson's
purported solar energy technology and the progress being made
by Defendants. Defendants emphasized progress being
made despite their knowledge that the system was not up and
From the start, Defendants have told their customers that
they can “zero out” their federal income tax
liability by buying enough solar lenses and claiming both a
depreciation deduction and solar energy tax credit for the
Defendants knew that when they made statements to customers
and prospective customers about the tax benefits and their
purported solar lens leasing “trade or business,
” that the only way a customer has ever “made
money” from buying a lens is from the tax benefits; no
customer has earned money from rental income or income from a
LTB, which by contract was to operate and maintain the solar
energy project and specifically the lenses, has never done
anything; it has never had a bank account, any employees, or
Defendants told customers to expect income from the
“lease” of their lenses, but Defendants know that
no customer has been paid for the use of his or her
Defendants' customers have been audited by the IRS for
claiming the tax benefits Defendants promote.
Based on the advice and information provided by attorneys or
accountants they spoke with about the solar energy scheme,
Defendants knew or had reason to know that the purported tax
benefits were not permissible under the Internal Revenue
Defendants also knew or had reason to know that the purported
tax benefits from their solar energy scheme were not
permissible under the Internal Revenue Code because others
also disagreed with their assertions about tax benefits
available from the solar lenses, including: customers' or
prospective customers' tax preparers/CPAs, the Internal
Revenue Service, the Oregon Department of Revenue, the Oregon
Tax Court Magistrate Division, and the Department of
When a customer notifies Shepard that they are under audit,
Shepard typically directs the customer to Enrolled Agents
John Howell or Richard Jameson to represent the customer
before the IRS. Howell and Jameson represent RaPower-3
customers using the same arguments that Defendants
Shepard has also advocated for customers under audit before
the IRS. He has given customers the arguments to
make before the IRS and documents to submit while under
Johnson is paying the attorneys' fees for all customers
whose tax benefits have been disallowed on appeal by the IRS
and who have filed petitions in Tax Court.
Defendants have caused serious harm to the United States
Treasury as a result of their solar energy
scheme. Defendants' customers claimed at
least $14, 207, 517 of improper tax refunds as a result of
Defendants' scheme for tax years 2013 through
date, Johnson, Shepard, IAS and RaPower-3 continue to
organize sales of solar lenses, and participate (directly and
indirectly) in the sale of solar lenses.
They are not deterred from promoting the scheme, not by the
IRS' disallowance of their audited customers'
depreciation deductions and solar energy tax credits or by
the complaint filed in this case or by the announced result
in the case.
The injunctive relief requested by the United States - in the
form of an asset freeze and appointment of a receiver - is
necessary or ...