Captives used in major fraud case, prosecutors allege
A South Carolina lawyer has admitted fraudulently paying millions of dollars as premiums into his clients’ captive insurance companies.
The transfers came after the clients had had their solar power businesses and homes raided by US law enforcement agencies who suspected them of fraud and money laundering.
According to the US Attorney’s Office in South Carolina, Peter J. Strauss has pleaded guilty to removal of property to prevent seizure.
Strauss was the founder and managing partner of the Strauss Law Firm, located in Hilton Head in South Carolina. The firm specialised in estate and tax planning, asset protection and the implementation of captive insurance solutions for clients. Strauss also served as principal of Hamilton Captive Management (HCM), a captive insurance management company that provided management services to his clients’ captive insurance funds.
According to the US Attorney’s Office, evidence obtained in the investigation revealed that Strauss knowingly transferred millions of dollars for Jeff and Paulette Carpoff, two individuals who have since been convicted and sentenced for their roles in the largest criminal fraud scheme in the Eastern District of California.
The Carpoffs owned and operated DC Solar Solutions and DC Solar Distribution, California corporations that said they designed, manufactured and leased renewable energy products, specialising predominantly in the production of mobile solar generators.
On December 18, 2018, the FBI and other federal law enforcement agencies executed numerous search warrants on the businesses associated with DC Solar, as well as the personal residences of Jeff and Paulette Carpoff. Several seizure warrants were also executed on bank accounts and assets associated with DC Solar and its principals.
The search warrants were conducted in conjunction with a large-scale investigation regarding an investment fraud and money laundering scheme being operated by the principals of DC Solar. At the time, federal authorities alleged that the Carpoffs committed wire fraud and tax fraud and diverted investors’ money for personal use. Federal authorities further alleged that DC Solar manufactured only a small percentage of the mobile solar generators and created fictitious lease agreements to show to their investors in order to obtain investments.
Following the execution of search and seizure warrants related to an investigation into the Carpoffs’ company, Strauss received $11 million from the Carpoffs. On December 19, 2018, the first $5 million was transferred into Strauss’ Interest on Lawyer’s Trust Account (IOLTA) account and thereafter distributed to various criminal defence attorneys and bankruptcy counsel and to Carpoffs’ captive insurance funds, managed by HCM. Thereafter, on December 28, 2018, Strauss received an additional $3 million which was used to pay for the Carpoffs’ captive insurance fund premiums.
Finally, on January 15, 2019, the Carpoffs wired Strauss $3 million into Strauss’ IOLTA account. Thereafter, the funds were comingled in Strauss’ IOLTA account and completely spent over the next few months. By pleading guilty, Strauss admitted that by the time of the $3 million transfer on January 15, 2019, he knowingly transferred and aided and abetted the transfer of funds from Carpoff to prevent and impair the government’s lawful authority to take such property into its custody and control. The defendant has agreed to pay $2,700,000 in restitution to the Federal Clerk of Court at or before the sentencing.
On January 24, 2020, Jeff Carpoff pleaded guilty in California to money laundering and wire fraud and was thereafter sentenced to 30 years in prison. On November 9, 2021, Paulette Carpoff pleaded guilty to conspiracy to commit an offense against the United States and money laundering. She was sentenced to 11 years and three months on June 28, 2022.
Strauss faces a maximum penalty of five years in federal prison. He also faces a fine of up to $250,000, restitution, and three of supervision to follow the term of imprisonment. United States District Judge Richard M. Gergel accepted the guilty plea and will sentence Strauss after receiving and reviewing a sentencing report prepared by the US Probation Office.
This case was investigated by the Federal Bureau of Investigation.