Pasadena’s East West Bancorp Writes Off $7 Million Sting by Apparent Solar Ponzi Scheme

Published : Friday, May 10, 2019 | 4:54 AM

Pasadena-based East West Bancorp said it has written off $7 million in tax credit investments related to exposure from a potential solar energy Ponzi scheme identified by the Federal Bureau of Investigation in February.

The publicly owned company revealed the write offs in a May 8 regulatory filing, according to a report in the L.A. Business Journal.

East West Bancorp has assets in excess of $41 billion. It is parent company the East West Bank, the largest independent bank headquartered in California. It is headquartered on North Los Robles Avenue.

In a 10-Q filing with the SEC for its first quarter financial results, the bank said it had recorded a pre-tax $7 million impairment charge related to the alleged fraud.

With an impairment charge, if the fair value of exposure is less than the carrying value, the goodwill is deemed “impaired” and must be charged off.

In February, East West Bank said it had a $53.9 million exposure related to investments in mobile solar generators sold and managed by DC Solar, based in Benicia, Calif., between 2014 and 2018.

The bank did not say whether future impairment charges could be required to deal with the exposure, according to the report.

DC Solar filed for federal bankruptcy protection in February, following an FBI raid at the company’s headquarters in December.

The raid revealed details of an alleged scheme where new investments were used to pay off old ones – a Ponzi-like configuration that could potentially involve hundreds of millions of dollars, according to the FBI.

“The company continues to closely monitor the progress of the allegations set forth in the FBI declaration, and it is reasonably possible that an uncertain tax position will be required for at least part, if not potentially all, of the tax credit benefits the company has claimed,” part of Wednesday’s filing by East West Bancorp read.

The company added the amount of the uncertain tax position liability may have an adverse impact on their income tax liabilities, results of operations and financial condition, according to report.

East West Bank is focused on the United States and Greater China markets and operates over 130 locations worldwide. Branches in the U.S. are in California, Georgia, Massachusetts, Nevada, New York, Texas and Washington.

In Greater China, full service branches are located in Hong Kong, Shanghai, Shantou and Shenzhen, and representative offices in Beijing, Chongqing, Guangzhou, Taipei and Xiamen.

For more information, visit www.eastwestbank.com.

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