Bloomberg Businessweek - USA (2019-06-10)

29

FROM

LEFT:

SEAN

GARDNER/GETTY

IMAGES;

JOHANNES

EISELE/AFP/GETTY

IMAGES

○ Blindsidedbypopulism,investorsaretryingtounderstandhowpoliticswillaffecttheirportfolios

A Bull Market for

THEBOTTOMLINE InvestorsincludingBerkshireHathawayand

banksweredrawntoDCSolarin partbyfederaltaxincentives.

Nowmanyofthoseinvestorsarehavingtoreversethosecredits.

○ Buffett

Better Markets, a left-leaning Washington think

tank, describes itself as a watchdog over Wall

Street. Nowadays, many of the people seeking its

advice are Wall Streeters themselves.

There’s been a “very big uptick” in fund man-

agers reaching out to talk, says Dennis Kelleher,

co-founder and chief executive officer of the group,

which advocates for financial-services reforms. He

says his unanticipated visitors tend to have one

thing in common. They’re alarmed—very belatedly,

in Kelleher’s view—by the populist turn in U.S. pol-

itics, and they’re struggling to figure out where

things are headed next. Talking to groups with

alternative views is one way to get a sense of that.

“You have this ongoing economic insecurity that is

eroding confidence in Wall Street and the American

economy,” he says.

For decades, there was broad agreement in

Washington that prosperity is built on unfettered

global commerce, restrained federal budgets, and

central bank independence. Those certainties

were shaken by the financial crisis—and they’ve

been largely abandoned under President Trump,

who appears to disagree with them all. At the same

time, more Democrats are embracing policies, such

as universal, single-payer health care and wealth

taxes, that were once regarded as radical.

Trumponomics has delivered decent returns

for financial assets, so far. While trade war, an

expanding national debt, and repeated snip-

ing at the Federal Reserve have unnerved plenty

of investors, stocks have soared under the new

regime, contrary to predictions by some econo-

mists. Populist policies cut both ways, say analysts

at Oxford Economics in London. Looser bud-

gets boost growth and could help lift inflation,

folks in the private sector.” To boost the brand, the

couple relied heavily on auto racing. They’d agreed

to sponsor Chip Ganassi Racing in the Nascar Xfinity

Series and drivers including Ross Chastain.

Overall, DC Solar attracted at least a dozen inves-

tors in complex transactions that raised money

through special funds, according to government alle-

gations. In a typical DC Solar deal, filings showed,

investors bought each mobile unit for $150,000, pay-

ing only $45,000 in cash—the maximum amount

of the tax credit they could claim. They were told

that the company would then lease the equip-

ment to end-users such as telecom companies. The

lease money would pay down the remainder of the

$150,000 cost plus provide any profit to the investor.

DC Solar, it turns out, didn’t usually lease the gen-

erators to third parties as described by the company,

the filings said. Instead, about 90% of the money

one of its affiliated companies claimed as lease rev-

enue was actually new investors’ money. In 2016, for

example, that sum amounted to $50 million of the

claimed $55 million in revenue, a former employee

told authorities. As for the generators themselves,

DC Solar allegedly made it appear it had leased more

than it did. Employees placed GPS transponders

meant to confirm the presence of generators in spots

where, “in truth, they were not located,” according

to the government filings. Investigators later said

they did find many generators, though not where

the company claimed. Some were stored at locations

including the Las Vegas Motor Speedway. Others

were sitting, unused, outside DC Solar’s offices.

Berkshire said it was “more likely than not” that

the tax benefits it received from certain investments

from 2015 to 2018 were invalid, according to a May

filing that didn’t name the sponsor. It later identi-

fied that sponsor as DC Solar. The company took a

$377 million charge in the first quarter to reverse the

tax benefit. Progressive spokesman Jeff Sibel says the

company believes it was defrauded after investing

in three funds with DC Solar. The goal was to earn

“attractive investment returns” and to support the

environment, he says.

The DC Solar building is now shuttered. In the

darkened reception area, just one item is still visi-

ble: a lone silver Christmas tree. —Brian Eckhouse,

Katherine Chiglinsky, and Mark Chediak

“It’s a new

uncertainty,

it’s very

uncomfortable,

and it’s

everywhere”

 FINANCE Bloomberg Businessweek June 10, 2019