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United States v. Rapower-3 LLC

United States District Court, D. Utah

May 3, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
RAPOWER-3, LLC; INTERNATIONAL AUTOMATED SYSTEMS, INC.; LT B1, LLC; R. GREGORY SHEPARD; and NELDON JOHNSON, Defendants.

          MEMORANDUM DECISION AND ORDER ON RECEIVER'S MOTION TO INCLUDE AFFILIATES AND SUBSIDIARIES IN RECEIVERSHIP

          David Nuffer United States District Judge.

         R. Wayne Klein, the court-appointed receiver (“Receiver”), [1] filed a motion (the “Motion”)[2] to extend the receivership to thirteen entities affiliated with Defendants RaPower-3 LLC (“RaPower”), International Automated Systems Inc. (“IAS”), L T B 1 LLC (“LT B 1 ”), Neldon Johnson, and R. Gregory Shepard (collectively, the “Receivership Defendants”). Specifically, the Motion seeks to extend the receivership to the following (collectively, the “Affiliated Entities”):

1. Solco I, LLC (“Solco”);
2. XSun Energy, LLC (“XSun”);
3. Cobblestone Centre, LC (“Cobblestone”);
4. LT B O & M, LLC;
5. U-Check, Inc.;
6. D C L 1 6 B LT, Inc.;
7. DCL-16A, Inc.;
8. N.P. Johnson Family Limited Partnership (“NPJFLP”);
9. Solstice Enterprises, Inc. (“Solstice”);
10. Black Night Enterprises, Inc. (“Black Night”);
11. Starlight Holdings, Inc. (“Starlight”);
12. Shepard Energy; and
13. Shepard Global, Inc.

         The Motion is based, in large measure, on the Receiver's Report and Recommendation on Inclusion of Affiliates and Subsidiaries in Receivership Estate (the “R&R”).[3] The R&R was required by Paragraph 5 of the Corrected Receivership Order. The assets of these entities were frozen by that same paragraph “for the purpose of permitting the Receiver to investigate the assets, property, property rights, and interests of the” Affiliated Entities “to determine whether the assets, property, property rights, or interests of the [Affiliated Entities] derive from the abusive solar energy scheme at issue in this case or from an unrelated business activity.”[4] In the R&R, “[t]he Receiver recommends that the 12 affiliated entities identified in the [Corrected Receivership] Order, as well as one additional entity, U-Check, Inc., be included in the Receivership Estate as Entity Receivership Defendants.”[5]

         Each of the Affiliated Entities has received timely and sufficient notice of the Motion and been afforded an adequate opportunity to be heard with respect to it.[6] Although Neldon Johnson and nonparties Glenda Johnson, XSun Energy, Solco, and Solstice filed responses opposing the Motion, they have not raised a genuine dispute as to any material fact set forth in support of the Motion.[7] No. other response has been filed in opposition to the Motion.

         It is generally recognized that district courts have broad powers and wide discretion to determine relief in a receivership.[8] “When a district court creates a receivership, its focus is to safeguard the assets, administer the property as suitable, and to assist the district court in achieving a final, equitable distribution of the assets if necessary.”[9] To accomplish the purpose of the receivership, courts frequently include all subsidiaries and affiliates of receivership defendants in the receivership, regardless of where they may be located.[10]

         FACTUAL BASIS

         The following facts are based on the evidence presented and existing record, including proof presented in hearings held April 26 and May 3, 2019.

         1. For more than ten years, the Receivership Defendants promoted an abusive tax scheme centered on purported solar energy technology featuring “solar lenses” to customers across the United States. But the solar lenses were only the cover story for what the Receivership Defendants were really selling: unlawful tax deductions and credits. Their conduct, which is subject to penalty under the Internal Revenue Code, caused serious harm to the United States Tr e as u r y.[11] As a result, they have been enjoined from promoting their abusive ...


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