Warren Buffett’s Berkshire Hathaway duped by ‘Ponzi-type’ scheme

Warren Buffett’s Berkshire Hathaway duped by ‘Ponzi-type’ scheme

May 10, 2019

Warren Buffett’s Berkshire Hathaway admitted it got bilked out of $340 million by a solar power company that the feds had said looked like a “Ponzi-type” scheme.

The Oracle of Omaha’s giant investment fund revealed Wednesday that it recently took a $377 million charge that was tied to DC Solar, a solar power generation company that US authorities have linked to fraud.

Berkshire said in its first-quarter report Saturday it had invested $340 million in various tax equity investment funds from 2015 to 2018, before learning that federal authorities had alleged “fraudulent income conduct” by the funds’ sponsor.

“We now believe that it is more likely than not that the income tax benefits that we recognized are not valid,” and took the charge for “uncertain tax positions” related to its investments, Berkshire said.

Buffett’s assistant Debbie Bosanek confirmed the charge related to DC Solar. Bloomberg News earlier reported its identity.

Berkshire’s report had not identified the sponsor by name, and Buffett’s Omaha, Nebraska-based conglomerate has not been accused of wrongdoing.

Lawyers for DC Solar did not immediately respond to requests for comment.

DC Solar, whose products include solar generators as well as light towers that can be used at sports events, filed for Chapter 11 bankruptcy protection in February in Reno, Nevada.

In a Feb. 8 affidavit related to those proceedings, an FBI agent said the manner in which the Benecia, California-based company appeared to have operated reflected “evidence of a Ponzi-type investment fraud scheme.”

The US Securities and Exchange Commission accused DC Solar’s owners by name of engaging in a Ponzi scheme, according to a separate court filing.

Berkshire’s charge reduced first-quarter operating profit to $5.56 billion, up 5 percent from a year earlier.

This year’s results excluded the impact of Berkshire’s 26.7 percent stake in Kraft Heinz Co., which has yet to report audited quarterly results.

Berkshire’s $340 million investment is small relative to its $738.7 billion asset base, which includes $191.8 billion of equity investments and $114.2 billion of cash. The company also has its own renewable energy projects.

With Reuters

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