SEC v. JOSEPH BAYLISS; and RONALD ROACH, No. 2:19-cv-02140-MCE, Eastern District of California (Oct. 22, 2019) — Complaint

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THOMAS BEDNAR
DEAN M. CONWAY
(counsel for service)
SARRA CHO
CHRISTOPHER NEE
Email:  [email protected]

Attorneys for Plaintiff
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549
Telephone: (202) 551-4412
Facsimile: (202) 772-9245
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

vs.
JOSEPH BAYLISS and RONALD
ROACH,
Defendants.

 Case No.

COMPLAINT

Plaintiff Securities and Exchange Commission (“SEC”) alleges:
JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to Sections 20(b),
20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§
77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),
78u(d)(3)(A), 78u(e) & 78aa(a).
2. Defendants have, directly or indirectly, made use of the means or
instrumentalities of interstate commerce, of the mails, or of the facilities of a national
securities exchange in connection with the transactions, acts, practices and courses of

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business alleged in this complaint.
3. Venue is proper in this district pursuant to Section 22(a) of the Securities
Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a)
because certain of the transactions, acts, practices and courses of conduct constituting
violations of the federal securities laws occurred within this district.  Both Defendants
committed many of the acts set forth in this Complaint in this district.  For example,
Bayliss sent commissioning certificates via email to Company S, which is located in
this district, for distribution to investors.  Likewise, Roach sent Accountant’s
Compilation Reports via email to Company S.
SUMMARY
4. This case involves fraudulent securities offerings and a massive Ponzi
scheme that raked in over $910 million in investor funds.  This Ponzi scheme was
orchestrated by Individual 1 and Individual 2 through companies they controlled, and
which they used to enrich themselves at investors’ expense.  The Defendants in this
action, Joseph Bayliss and Ronald Roach, each played an important role in this
scheme to sell investment opportunities offered by certain solar energy companies in
the business of making, leasing, and operating mobile solar generators (“Generators”)
--    investments that were touted as presenting gains in the form of tax benefits,
guaranteed lease payments, and the resulting profits from the operation of the
Generators.  In reality, thousands of the purportedly profitable Generators were never
even manufactured, let alone put into use, and the vast majority of revenue to
investors came from investor money, not from actual lease payments.  Bayliss
advanced the scheme by providing bogus technical certificates of inspection for
Generators he had never inspected -- and in many cases, for Generators that never
existed.  Roach compiled financial statements, prepared by management, falsely
reporting that the business had real and significant revenue from real leases, lent the
imprimatur of his accounting firm to the bogus financials, and in some cases
disseminated them directly to investors.  While investors were fleeced, Bayliss and

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Roach each made millions off the scheme.
5. In 2011, Individual 1 and Individual 2 began selling investment contracts
through their privately-held alternative energy companies Company S and Company
D (collectively with Individuals 1 and 2 “the Company”).  Through December 2018,
the Company raised around $910 million from purchasers of the investment contracts.
The Company designed the investments to take advantage of tax credits that were
available to certain alternative energy related projects.  To that end, investors
purchased Generators from Company S and then immediately leased them to
Company D.  Company D was then supposed to sub-lease the Generators to end-
users.  The Company touted itself as a major player in its industry, with thousands of
Generators in the field, lucrative contracts with big customers yielding a track record
of major revenue, and extensive experience in making and maintaining the
Generators and finding customers for them.
6. That was all a sham.  The Company had manufactured and put into
service far fewer Generators than it claimed, and made hardly any of its revenue from
leasing Generators.  In fact, Company S did not actually manufacture about two-
thirds of the Generators that it purportedly sold to investors.  Recent intensive efforts
by investors to locate the Generators have identified just 5,858 of the approximately
17,600 Generators for which the Company entered into investor contracts.  Investors
paid hundreds of millions of dollars for Generators that never existed.  And,
legitimate lease income from actual end-users of the Generators represented a tiny
fraction --    less than 5% --    of Company D’s revenue.  The vast majority of Company
D’s revenue was comprised of investor funds transferred from Company S.  In
reality, the vast majority of investor funds was not being used to manufacture, place
into service, and maintain the thousands of Generators that the Company was using as
the basis for investment contracts, but was instead being pilfered by Individuals 1 and
2 for their personal benefit, such as the purchase of luxury vehicles and real estate,
and used to make lease payments and distributions to earlier investors.

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7. Defendant Bayliss played a key role in the scheme by falsely certifying
the existence of non-existent Generators.  Bayliss claimed to be an independent
engineer and signed a commissioning certificate for each Generator purportedly sold
by Company S beginning in 2014, indicating that he had inspected the Generator and
that it was in working order.  Investors relied on these certificates and were required
to release payments to Company S upon receiving them.  In truth, Bayliss never laid
eyes on the majority of the Generators for which he signed certificates.
8. Defendant Roach likewise played an integral role in the scheme by
concealing the lack of legitimate lease revenue from investors.  Roach is a certified
public accountant who provided tax and accounting services to the Company.  Roach
knowingly issued “Accountant’s Compilation Reports,” that accompanied unaudited
financial statements for Company D that falsely stated that Company D generated
hundreds of millions of dollars in “Rental Income.”  In reality, the overwhelming
majority of that “Revenue” consisted of transfers from Company S rather than lease
payments from end-users of the Generators.  The reports Roach knowingly issued
also accompanied financial statements for Company S which hid the significant cash
transfers it made to Company D.
9. As a result of the conduct alleged herein, Defendants have violated the
antifraud provisions of the Securities Act and the Exchange Act.  The SEC brings this
action and seeks entry of permanent injunctions against Defendants as well as
disgorgement of ill-gotten gains and prejudgment interest thereon and civil penalties.
THE DEFENDANTS
10. Joseph W. Bayliss is a resident of Martinez, California.  Bayliss is the
owner of Bayliss Innovative Services, Inc. through which he is licensed as an
electrical and general building contractor.
11. Ronald J. Roach is a resident of Walnut Creek, California.  Roach is a
certified public accountant and the owner of Ronald J. Roach Accountancy
Corporation.  He also hold Series 6, 7, 63 and 65 securities licenses and is a

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registered investment adviser and a registered representative.
RELATED INDIVIDUALS AND ENTITIES
12. Company S is a California corporation headquartered in Benicia, CA.  It
was owned by Individual 1.  Company S is not registered with the SEC in any
capacity.  It filed for bankruptcy protection in early 2019 and is currently in Chapter 7
proceedings.
13. Company D is a California corporation headquartered in Benicia, CA.  It
was owned by Individual 2.  Company D is not registered with the SEC in any
capacity.  It filed for bankruptcy protection in early 2019 and is currently in Chapter 7
proceedings.
14. Individual 1 was a resident of Martinez, CA during the relevant time
period.  In addition to owning Company S, Individual 1was the President and a
Director of Company S and the Vice President and a Director of Company D.
15. Individual 2 was a resident of Martinez, CA during the relevant time
period.  In addition to owning Company D, Individual 2 was the President, Secretary,
Treasurer, and a Director of Company D and the Secretary, Treasurer and a Director
of Company S.
FACTUAL ALLEGATIONS
A. Background on the Company
16. Individuals 1 and 2 are the owners and principals of Company S and
Company D.  To investors, the Company claimed that it “design[ed], manufacture[d]
and lease[d] renewable energy products to serve the off-grid needs of a broad and
diverse marketplace – while providing investors with access to the renewable energy
asset class.”
B. The Company Offerings
(1) The Solicitation of Investors
17. Since at least 2011 and continuing to December 2018, the Company
offered securities to investors.  The securities took the form of two types of

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investment contracts: (1) Investment Fund Contracts and (2) Sale-Leaseback
Contracts.  Under both arrangements, the investors paid to purchase Generators from
Company S, while simultaneously leasing them to Company D.  Company D would
then arrange to sub-lease the Generators to end-users.  The investors expected to
profit from the investments due to tax credits, depreciation on the Generators, and
lease payments.  Investors thus played an entirely passive role:  the success of the
venture, and thus the profits to investors and the Company, turned entirely on the
efforts of the Company to make, maintain, market, and lease the Generators.
18. Over the course of the offerings, the Company raised approximately
$910 million in investor money.  These deals had face values of more than $2.7
billion because investors in the Investment Fund Contracts financed approximately 70
percent of the amount of their investments through promissory notes.
19. The Company, directly and indirectly, solicited investors through
brokers and salespeople using various methods, including email, conference calls and
in-person meetings.  The Company offered and sold Investment Fund Contracts and
Sale-Leaseback Investments through interstate commerce to investors across the
United States.
20. The Company marketed itself as having extensive experience and
capabilities in the renewable energy field and in executing successful transactions for
investors.  For example, pitch-books for investors, which were prepared by a broker
working on behalf of the Company using information provided by the Company,
emphasized that the Company had thousands of Generators deployed and
manufacturing capabilities of 900 Generators per month.  They also highlighted that
the Company had closed many prior investment funds with “headline” or “notable”
investors, including funds with fair market values near or over $100 million, and that
the “performance of each of the funds remains in good standing.”  In addition, the
materials claimed the Company had “customer relationships with leading companies
in the telecommunications, entertainment and construction industries” and provided

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case studies of the established leasing arrangements with many of those customers.
Finally, certain of the pitch-books provided a “Summary of Investor Returns” with
estimated internal rates of return ranging from 40 to as high as 50 percent.
(2) The Terms of the Investment Fund Contract Offerings
21. Investment Fund Contract investors executed a standard package of
agreements, including:  (i) a Limited Liability Company Agreement (“LLC
Agreement”); (ii) a Solar Equipment Purchase Agreement (“Purchase Agreement”);
(iii) a Secured Promissory Note (“Promissory Note”); and (iv) a Mobile Solar
Equipment Lease (“Equipment Lease”) (together the “Investment Fund Contracts”).
The documents were executed at or around the same time, with Individual 1 signing
the Purchase Agreements on behalf of Company S and Individual 2 typically signing
the Equipment Leases on behalf of Company D.  While the Investment Fund
Contracts for certain deals had minor variations in wording, they largely had the same
substantive terms.
22. Under the terms of the LLC Agreement, an investor became the
“Investor Member” of the Investment Fund Limited Liability Company (“Investment
Fund”), an entity created specifically for the purpose of the investment.  This
Investment Fund then purchased Generators from Company S at a price of $150,000
per Generator under the Solar Equipment Purchase Agreement.  The Purchase
Agreement specified the total number of Generators being purchased as well as the
total purchase price.  An Exhibit to the Purchase Agreement contained a blank space
for the Vehicle Identification Numbers (“VINs”) for the Generators or stated that
“VIN for each Generator to be Supplied at Delivery.”  In exchange for the payment,
Company S agreed to deliver the Generators by a certain date or dates and warranted
“to Buyer that all Equipment shall be in good working order in conformity with the
Specifications for a period” of five or ten years.
23. The delivery dates for tranches of Generators specified in the Purchase
Agreements were often scheduled in stages.  Likewise, the Purchase Agreements

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dictated that payments would be due to Company S in stages according to a schedule
in part dictated by capital contributions being made by the investor under the terms of
the LLC Agreement.  Those capital contributions were contingent on the investor
receiving confirmation that the Generators were “Placed in Service” as evidenced by
an “IE [Independent Engineer] Certificate.”
24. Investors generally contributed about thirty percent of the purchase price
in cash and financed the balance pursuant to a Promissory Note or Notes executed by
the Investment Fund in favor of Company S.  The Promissory Note was an exhibit to
the Purchase Agreement.  The Company told investors, and arranged for a tax
opinion letter from a law firm confirming, that the Generators qualified for the
Energy Credit under Internal Revenue Code § 48.  That provision allows for a thirty
percent tax credit for certain energy-related investments.  Thus, investors expected to
be able to take a tax credit for roughly the same amount as their cash contribution to
the investment.
25. Under the Investment Fund Contracts, the Generator business was left
entirely to the Company.  At the time the Investment Funds executed the Purchase
Agreement with Company S, the Investment Funds also executed the Mobile Solar
Equipment Lease with Company D for at least the first batch of Generators being
purchased.  Depending on the size of the transaction, as additional tranches of
Generators were manufactured, additional Equipment Leases were executed.  Under
the Equipment Leases, the Investment Funds leased their Generators to Company D
for terms ranging up to 120 months.  The Equipment Leases provided that Company
D shall use “the Solar Equipment in a careful and proper manner”   and “shall comply
with all laws, regulations and ordinances.”  Moreover, the Equipment Leases stated
that Company D shall be “solely responsible for the maintenance and repair of the
Solar Equipment” and “shall ensure the Solar Equipment is operational and capable
of producing solar energy at all times.”  The Equipment Leases required Company D
to “obtain, maintain and keep” insurance coverage on the Generators in the amount of

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the replacement cost as well as “liability insurance.”  In addition, the Equipment
Leases required Company D to “promptly pay when due, all license fees, registration
fees, sales taxes, use and property taxes, assessments, charges and other taxes”
imposed upon the Generators.
26. The Equipment Leases further provided for a set amount of “Base Rent”
to be paid to  the Investment Fund in advance in monthly installments for the term of
the lease as well as payment to the Investment Fund of “Additional Rent” or
“Variable Rent” to the extent Company D received revenue from subleasing the
Generators in excess of a certain amount.  The amount of additional or variable rent
due to the Investment Fund varied depending on the deal and the calculation was
specified in the Equipment Lease.
27. The Investment Fund Contracts were structured such that there was a
flow of money between the Investment Funds and the Company, all of which was
contingent on the Generators generating significant sub-lease revenue from legitimate
end-users.  Company D owed monthly lease payments to the Investment Funds
purportedly to be paid with the sub-lease revenue it received from third-party
customers.  The Investment Funds would then use the lease payments they received
from Company D under the terms of the Equipment Leases to make monthly
payments due to Company S under the terms of the Promissory Notes.  Investors
expected several benefits under the arrangement, including the thirty percent energy
tax credit and the ability to claim significant depreciation on the Generators.  In
addition, investors expected to receive yearly cash distributions from the Investment
Funds.  In general, the LLC Agreements stated that “Distributable Cash,” defined as
the amount of cash from lease revenue remaining after loan payments and operating
expenses, would be paid out to investors on an annual basis.  Based on financial
projections for the Investment Funds that were provided to investors, investors
expected to receive these cash distributions.
28. From December 2011 through December 2018, the Company closed 34

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Investment Fund Contracts, involving 13 investors, totaling about $2.57 billion in
face value.  The investors made roughly $759 million in cash contributions to their
Investment Fund Contracts.
(3) The Terms of the Sale-Leaseback Contract Offerings
29. The Company began offering the second type of security, the Sale-
Leaseback Contracts, since at least 2017.  Investors in the Sale-Leaseback Contracts
typically executed several agreements including: (i) a Sale Agreement; (ii) an
Equipment Lease Agreement; and (iii) a Schedule (collectively the “Sale-Leaseback
Contracts”).  Individual 1 typically signed the Sale Agreement on behalf of Company
S, or in one instance on behalf of another affiliate of the Company, and Individual 2
typically signed the Lease Agreement and the Schedule on behalf of Company D.
While the Sale-Leaseback Contracts for certain deals had minor variations in
wording, they largely had the same substantive terms.
30. The Sale-Leaseback Contracts differed from the Investment Fund
Contracts in that investors purchased the Generators outright from Company S, or in
one instance another affiliate of the Company, without executing a Promissory Note.
Under the Sale Agreement, investors paid $150,000 for each Generator they
purchased.  The Generators were identified by VIN in an exhibit attached to that
Agreement.  In exchange for the purchase price, Company S agreed to convey to the
investors “all right, title and interest in” the Generators.
31. One Sale-Leaseback Contract transaction differed from the others in that
the investor purchased used Generators and paid $82,500 for each.  As the Generators
were used, they did not qualify for the tax credit.  However, the investment worked
the same as the other Sale-Leaseback Contracts with the investor immediately leasing
the Generators to Company D and being entirely reliant on Company D to maintain
and sub-lease the Generators.
32. Just as was done in the Investment Fund Contracts, under the Sale-
Leaseback Contracts the investors immediately leased the Generators back to

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Company D (or another affiliate of the Company) in return for monthly payments
purportedly to be made from sub-lease payments.  Under the Lease Agreement,
Company D committed to keeping the Generators “in good repair” and operating
condition and to “maintain” insurance coverage on the Generators as well as “liability
insurance.”  The Lease Agreement also required Company D to pay, or reimburse the
investor for, all taxes, fees, and assessments imposed on the Generators.
33. Like the Investment Funds, most investors in the Sale-Leaseback
Contracts received an “IE Certificate,” or “IE Commissioning Report,” for each new
Generator that they purchased.
34. The Schedule to the Lease Agreement set forth the term of the lease and
a set lease payment due to the investors from Company D each month.  An
attachment to the Schedule again identified the Generators by VIN.  In addition to the
monthly lease payments, most Sale-Leaseback Contract investors expected to be able
to take the 30 percent energy tax credit as well as depreciation on the Generators they
purchased.  In fact, the Schedules in certain of the Sale-Leaseback Contracts
specifically referenced the energy tax credit and depreciation and required Company
D to use the Generators so as to remain eligible for those tax benefits.  Based on the
combination of tax benefits and lease revenue, the Sale-Leaseback Contract investors
expected to earn a positive return and profit from these transactions.
35. From 2017 through 2018, the Company completed seven Sale-
Leaseback Contracts, involving 4 investors, in transactions worth nearly $151
million.
(4) The Company’s Offerings Are Securities
36. The Company offered and sold the Investment Fund Contracts and Sale-
Leaseback Contracts through interstate commerce to investors located in multiple
states.
37. The Company’s    Investment Fund Contracts and Sale-Leaseback
Contracts are securities in the form of investment contracts.  They represented an

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investment of money, in a common enterprise, with the expectation of profits to be
derived from the efforts of a third party.  Investors provided money to the Company
for investment purposes.  Because the terms of the Investment Fund Contracts and
Sale-Leaseback Contracts tied the fortunes of the investors to those of the Company
and its ability to manufacture the Generators and then sub-lease them at optimal rates,
investors were investing in a common enterprise.  And, because the terms of the
Investment Fund Contracts and Sale-Leaseback Contracts made investors entirely
dependent on the Company to manufacture, operate and maintain their purported
Generators, the Company’s efforts were essential to the failure or success of the
common enterprise.  Investors also had an expectation of profits from the tax benefits
and payment stream to be generated from the enterprise.
C. Defendants Committed Deceptive Acts in Furtherance of the Fraud
38. Unbeknownst to investors, the Company never manufactured the
majority of the Generators that it sold them.  And, most of the lease revenue paid to
investors consisted of investor funds, rather than lease income from legitimate end-
users of the Generators.  Bayliss and Roach each played a role in hiding these facts
from investors and perpetuating the Company’s fraud.
(1) Bayliss Certified Generators that Did Not Exist    and Altered
VINs
39. By design, investors never physically took possession of the Generators
that they purchased because the Generators were leased to Company D upon
purportedly being placed in service.  Pursuant to the terms of the Purchase
Agreements and LLC Agreements, investors in the Investment Funds made payments
to Company S for the Generators in installments after receiving proof that the
Generators had been placed in service as evidenced by the delivery of the “IE
Certificate.”  The LLC Agreements defined “IE Certificate” as “a certificate to be
issued by the Independent Engineer” with respect to the Generators “upon
achievement of Placement in Service.”  Beginning in 2014, the LLC Agreements

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further stated that “‘Independent Engineer’ means Joseph Bayliss of Bayliss
Innovative Services.”  Most Sale-Leaseback Contract investors also received these IE
Certificates from Bayliss for the new Generators they purchased.
40. Individual 1 arranged for Bayliss and his firm to serve as the
“Independent Engineer.”  This arrangement deceived investors as Bayliss was neither
independent nor an engineer.  Bayliss holds general contractor and electrical licenses
from the State of California, but he was never a licensed engineer.  And, Bayliss has
known Individuals 1 and 2 since high school.  In fact, the Company and Individual 1
hired Bayliss to perform various projects for the Company and other businesses
owned by Individual 1.
41. The Company purported to sell more than 17,600 Generators to investors
from its inception.  Bayliss executed IE Certificates, titled “IE Commissioning
Reports,” for nearly all of the Investment Funds and Sale-Leaseback Contract
investors that purchased Generators from 2014 through 2018.  Those Investment
Funds and Sale-Leaseback Contract investors contracted to purchase more than
16,400 Generators.  In thousands of instances, Bayliss signed IE Commissioning
Reports for Generators without inspecting them, and without any basis for making the
representations in the IE Certificates.  This is because Company S only manufactured
a fraction of the Generators it purported to sell to the investors.  Indeed, recent
intensive efforts by investors to locate those Generators turned up only 5,013
Generators of the more than 16,400 Generators for which Bayliss provided IE
Commissioning Reports.
42. The IE Commissioning Reports described Bayliss as the “Independent
Engineer and Commissioner” and his signature line contained the title “Technical
Engineering Consultant,” along with a license number, which was actually the
number, or a slight variation of the number, of Bayliss’s state license as a contractor.
Each IE Commissioning Report identified a Generator by VIN and contained a
checklist of tests that Bayliss allegedly completed in assessing the Generator with an

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“x” under the “yes” box for each test identified.
43. Bayliss also falsely attested that “I have taken the steps described during
the commissioning of the above system and confirm that the system was installed in
accordance with professional engineering practices and safety requirements; and that
the system is ready and able to be used for the production of electricity.”
44. Of the over 16,400 Generators that Bayliss prepared IE Commissioning
Reports for, more than 11,400 could not be located.  Given that Bayliss signed the IE
Commissioning Reports for these non-existent Generators without having inspected
them, all of his statements in those reports were false and deceptive, and made by
Bayliss in furtherance of the fraud.
45. Bayliss knew, or was reckless in not knowing, that Company S   had not
manufactured thousands of Generators for which he signed IE Commissioning
Reports.  Bayliss also knew, or was reckless in not knowing, that the IE
Commissioning Reports he signed were being sent to investors and were important to
them.
46. Bayliss also profited from his work for the Company, earning over $2.4
million between January 2013 and December 2018.  Over $1,020,000 of these
payments were made to Bayliss directly by the Investment Funds or the Sale-
Leaseback Contract investors, mostly for his work in issuing the IE Commissioning
Reports.
47. At times, Company S sold the same Generator to different Investment
Funds or Sale-Leaseback Contract investors.  Investors were unaware that their
supposed Generators were being resold, or that they were purchasing used Generators
to which someone else had an ownership claim.  As part of these efforts, the
Company had to remove the VIN stickers from the Generators because each one had
a unique VIN.  After removing the old VIN sticker from a Generator, the Company
would replace it with a new VIN sticker in an effort to make it appear that the
Generator was new.  Bayliss helped the Company remove and replace VIN stickers.

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Bayliss knew this was being done in an attempt to dupe investors into believing that
the Generators were new.
(2) Roach Issued Deceptive Compilation Reports
48. Lease revenue from end-users of the Generators was critical to the
success of the investments because it was supposed to provide the funds that
Company D needed to make lease payments to the Investment Funds and Sale-
Leaseback Contract investors.  Although Company D purported to be earning
millions each month in lease revenue from end-users of the Generators, bank records
demonstrate that Company D generated minimal lease revenue from sub-leases to
end-users.  In fact, the vast majority of funds flowing into Company D’s bank
accounts consisted of transfers of investor funds from Company S.
49. For example, during the period of January 2013 through December
2018, a total of about $409,930,000 was deposited to Company D’s bank accounts.
Of that amount, approximately $383,347,000 --    or 93.5% --    consisted of transfers
from Company S’s bank accounts.  And, another $8,268,000 --    or 2.0% --    consisted
of transfers from the bank accounts of different Investment Funds.  At most,
$18,316,000 --    or 4.5% --    of the deposits to Company D’s bank accounts during the
time period represented sub-lease payments from end-users of the Generators.
50. But, during this period, Company D paid about $347,800,000 to various
Investment Funds and Sale-Leaseback Contract investors, most of which took the
form of “lease payments” owed under the operative Equipment Lease Agreements.
Accordingly, Company D’s payments were not funded by legitimate sub-lease
revenue, but instead by investor funds cycled through Company S.
51. Roach played a key role in misleading investors about the actual amount
of lease revenue generated from end-users of the Generators and the true source of
the funds coming into Company D.  Prospective investors routinely requested
financial statements from Company D and Company S before investing.  In response,
the Company often provided investors with financial statements.  Roach issued

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“Accountants’ Compilation Reports” for Company D and Company S covering
various periods between 2011 through July 2018.  Roach signed these reports on the
letterhead of his firm, Ronald J. Roach Accountancy Corporation.  The financial
statements accompanying Roach’s compilation reports included a statement of
income in each, which Roach knew contained false and misleading information.  The
accountant who issues the compilation report accompanying the financial statement
must make himself familiar with the company’s business and processes, and must not
issue a compilation report on financial statements that he knows to contain false
information.
52. At the time Roach was issuing these reports, he knew that Company D
was generating minimal lease revenue from end-users of Generators.  Roach also
knew that Company S infused Company D with cash each month in order to support
the lease payments due to the Investment Funds and Sale-Leaseback Contract
investors, with the cash coming mostly from investor funds.  In addition, he was
aware that investors were led to believe that Company D generated sufficient lease
revenue from end-users of the Generators to pay its own lease payment obligations to
the Investment Funds and Sale-Leaseback Contract investors each month.
53. In total, the financial income statements for Company D accompanying
the compilation reports issued by Roach falsely stated that Company D generated
hundreds of millions of dollars of revenues in “Rental Income.”  In reality, the
overwhelming majority of purported “Rental Income” consisted of intercompany
transfers from Company S.  Company D needed the cash transfers from Company S
in order to cover its lease payment obligations to the Investment Funds and Sale-
Leaseback Contract investors because it was not generating sufficient “Rental
Income” from end-users of the Generators in order to cover those obligations.  The
income statements were intended to mislead investors and potential investors into
believing that Company D made hundreds of millions of dollars in “Rental Income”
from end-users of the Generators from 2011 through 2018.

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54. Similarly, the various compilation reports for Company S that Roach
issued also accompanied financial statements that contained false information.  The
cash infusions of hundreds of millions of dollars from Company S to Company D
were hidden in the “Direct Costs” category of Company S’s income statements.  In
reality, these payments had nothing to do with the costs of manufacturing the
Generators.  Roach knew this categorization was wrong and he knew that Company S
categorized the payments in this manner to conceal from investors the fact that
Company S funded Company D’s “Rental Income.”
55. Roach knew that the false financial statements and the compilation
reports that he issued thereon were being provided to investors, often at the investors’
request.  In fact, Roach at times sent the financial statements and his accompanying
reports directly to investors via email.  He never told investors that information
contained in the financial statements was false or inaccurate.
56. Roach profited from his work for the Company over the years, receiving
about $2.9 million between January 2013 and December 2018.
FIRST CLAIM FOR RELIEF
Fraud in Connection With the Sale of Securities
Violations of Section 10(b) of the Exchange Act
and Rule 10b-5 (b) Thereunder
(against Defendant Bayliss)
57. The SEC realleges and incorporates by reference paragraphs 1 through
56 above.
58. Defendant Bayliss, by engaging in the conduct described above, directly
or indirectly, in connection with the purchase or sale of a security, by the use of
means or instrumentalities of interstate commerce, of the mails, or of the facilities of
a national securities exchange, with scienter, made untrue statements of a material
fact or omitted to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not misleading.
59. By engaging in the conduct described above, Defendant Bayliss,

COMPLAINT
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violated, and unless restrained and enjoined will continue to violate, Section 10(b) of
the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5(b) thereunder, 17 C.F.R. §
240.10b-5(b).
SECOND CLAIM FOR RELIEF
Fraud in the Offer and Sale of Securities
Violations of Section 17(a)(2) of the Securities Act
(against Defendants Bayliss and Roach)
60. The SEC realleges and incorporates by reference paragraphs 1 through
56 above.
61. Defendants Bayliss and Roach, by engaging in the conduct described
above, in the offer or sale of securities by the use of means or instruments of
transportation or communication in interstate commerce or by use of the mails,
directly or indirectly, with scienter, obtained money or property by means of untrue
statements of a material fact or by omitting to state a material fact necessary in order
to make the statements made, in light of the circumstances under which they were
made, not misleading.
62. By engaging in the conduct described above, Defendants Bayliss and
Roach, violated, and unless restrained and enjoined will continue to violate, Section
17(a)(2) of the Securities Act, 15 U.S.C. § 77q(a)(2).
THIRD CLAIM FOR RELIEF
Fraud in Connection With the Sale of Securities
Violations of Section 10(b) of the Exchange Act
and Rules 10b-5(a) and (c) Thereunder
(against Defendants Bayliss and Roach)
63. The SEC realleges and incorporates by reference paragraphs 1 through
56 above.
64. Defendants Bayliss and Roach, by engaging in the conduct described
above, directly or indirectly, in connection with the purchase or sale of a security, by
the use of means or instrumentalities of interstate commerce, of the mails, or of the

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facilities of a national securities exchange, with scienter:
a.   employed devices, schemes, or artifices to defraud; or
b. engaged in acts, practices, or courses of business which operated
or would operate as a fraud or deceit upon other persons.
65. By engaging in the conduct described above, Defendants Bayliss and
Roach violated, and unless restrained and enjoined will continue to violate, Section
10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-5 (a) and (c)
thereunder, 17 C.F.R. §§ 240.10b-5(a) & 240.10b-5(c).
FOURTH CLAIM FOR RELIEF
Fraud in the Offer and Sale of Securities
Violations of Sections 17(a)(1) and (3) of the Securities Act
(against Defendants Bayliss and Roach)
66. The SEC realleges and incorporates by reference paragraphs 1 through
56 above.
67. Defendants Bayliss and Roach, by engaging in the conduct described
above, in the offer or sale of securities by the use of means or instruments of
transportation or communication in interstate commerce or by use of the mails,
directly or indirectly:
a. with scienter, employed devices, schemes, or artifices to defraud;
or
b. engaged in transactions, practices, or courses of business which
operated or would operate as a fraud or deceit upon the purchaser.
68. By engaging in the conduct described above, Defendants Bayliss and
Roach violated, and unless restrained and enjoined will continue to violate, Sections
17(a)(1) and (3) of the Securities Act, 15 U.S.C. § 77q(a)(1) and (3).
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:

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I.
Issue judgments, in forms consistent with Fed. R. Civ. P. 65(d), permanently
enjoining Defendants, and their agents, servants, employees, and attorneys, and those
persons in active concert or participation with any of them, who receive actual notice
of the judgment by personal service or otherwise, and each of them, from violating
Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the
Exchange Act, 15 U.S.C. §§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-
5.
II.
Upon motion of the Commission, order Defendants to disgorge all ill-gotten
gains they received, together with prejudgment interest thereon.
III.
Upon motion of the Commission, order Defendants to pay civil penalties under
Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the
Exchange Act, 15 U.S.C. § 78u(d)(3).
IV.
Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or
motion for additional relief within the jurisdiction of this Court.

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V.
Grant such other and further relief as this Court may determine to be just and
necessary.

Dated:  October 22, 2019

/s/ Tom Bednar
Thomas Bednar
Dean M. Conway
Sarra Cho
Christopher Nee
Attorneys for Plaintiff
Securities and Exchange Commission

COMPLAINT 1  
 

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THOMAS BEDNAR 
DEAN M. CONWAY 
(counsel for service) 
SARRA CHO 
CHRISTOPHER NEE 
Email:  [email protected] 
 
 
Attorneys for Plaintiff 
Securities and Exchange Commission 
100 F Street NE 
Washington, DC 20549 
Telephone: (202) 551-4412 
Facsimile: (202) 772-9245 

UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF CALIFORNIA 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 
 

vs. 

JOSEPH BAYLISS and RONALD 
ROACH, 

Defendants. 
 

 Case No. 
 
COMPLAINT 
 

 
 
Plaintiff Securities and Exchange Commission (“SEC”) alleges: 

JURISDICTION AND VENUE 

1. The Court has jurisdiction over this action pursuant to Sections 20(b), 

20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 

77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the 

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1), 

78u(d)(3)(A), 78u(e) & 78aa(a). 

2. Defendants have, directly or indirectly, made use of the means or 

instrumentalities of interstate commerce, of the mails, or of the facilities of a national 

securities exchange in connection with the transactions, acts, practices and courses of 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 1 of 21

mailto:[email protected]


 

COMPLAINT 2  
 

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business alleged in this complaint. 

3. Venue is proper in this district pursuant to Section 22(a) of the Securities 

Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a) 

because certain of the transactions, acts, practices and courses of conduct constituting 

violations of the federal securities laws occurred within this district.  Both Defendants 

committed many of the acts set forth in this Complaint in this district.  For example, 

Bayliss sent commissioning certificates via email to Company S, which is located in 

this district, for distribution to investors.  Likewise, Roach sent Accountant’s 

Compilation Reports via email to Company S.   

SUMMARY 

4. This case involves fraudulent securities offerings and a massive Ponzi 

scheme that raked in over $910 million in investor funds.  This Ponzi scheme was 

orchestrated by Individual 1 and Individual 2 through companies they controlled, and 

which they used to enrich themselves at investors’ expense.  The Defendants in this 

action, Joseph Bayliss and Ronald Roach, each played an important role in this 

scheme to sell investment opportunities offered by certain solar energy companies in 

the business of making, leasing, and operating mobile solar generators (“Generators”) 

-- investments that were touted as presenting gains in the form of tax benefits, 

guaranteed lease payments, and the resulting profits from the operation of the 

Generators.  In reality, thousands of the purportedly profitable Generators were never 

even manufactured, let alone put into use, and the vast majority of revenue to 

investors came from investor money, not from actual lease payments.  Bayliss 

advanced the scheme by providing bogus technical certificates of inspection for 

Generators he had never inspected -- and in many cases, for Generators that never 

existed.  Roach compiled financial statements, prepared by management, falsely 

reporting that the business had real and significant revenue from real leases, lent the 

imprimatur of his accounting firm to the bogus financials, and in some cases 

disseminated them directly to investors.  While investors were fleeced, Bayliss and 

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COMPLAINT 3  
 

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Roach each made millions off the scheme. 

5. In 2011, Individual 1 and Individual 2 began selling investment contracts 

through their privately-held alternative energy companies Company S and Company 

D (collectively with Individuals 1 and 2 “the Company”).  Through December 2018, 

the Company raised around $910 million from purchasers of the investment contracts.  

The Company designed the investments to take advantage of tax credits that were 

available to certain alternative energy related projects.  To that end, investors 

purchased Generators from Company S and then immediately leased them to 

Company D.  Company D was then supposed to sub-lease the Generators to end-

users.  The Company touted itself as a major player in its industry, with thousands of 

Generators in the field, lucrative contracts with big customers yielding a track record 

of major revenue, and extensive experience in making and maintaining the 

Generators and finding customers for them.   

6. That was all a sham.  The Company had manufactured and put into 

service far fewer Generators than it claimed, and made hardly any of its revenue from 

leasing Generators.  In fact, Company S did not actually manufacture about two-

thirds of the Generators that it purportedly sold to investors.  Recent intensive efforts 

by investors to locate the Generators have identified just 5,858 of the approximately 

17,600 Generators for which the Company entered into investor contracts.  Investors 

paid hundreds of millions of dollars for Generators that never existed.  And, 

legitimate lease income from actual end-users of the Generators represented a tiny 

fraction -- less than 5% -- of Company D’s revenue.  The vast majority of Company 

D’s revenue was comprised of investor funds transferred from Company S.  In 

reality, the vast majority of investor funds was not being used to manufacture, place 

into service, and maintain the thousands of Generators that the Company was using as 

the basis for investment contracts, but was instead being pilfered by Individuals 1 and 

2 for their personal benefit, such as the purchase of luxury vehicles and real estate, 

and used to make lease payments and distributions to earlier investors.   

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COMPLAINT 4  
 

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7. Defendant Bayliss played a key role in the scheme by falsely certifying 

the existence of non-existent Generators.  Bayliss claimed to be an independent 

engineer and signed a commissioning certificate for each Generator purportedly sold 

by Company S beginning in 2014, indicating that he had inspected the Generator and 

that it was in working order.  Investors relied on these certificates and were required 

to release payments to Company S upon receiving them.  In truth, Bayliss never laid 

eyes on the majority of the Generators for which he signed certificates. 

8. Defendant Roach likewise played an integral role in the scheme by 

concealing the lack of legitimate lease revenue from investors.  Roach is a certified 

public accountant who provided tax and accounting services to the Company.  Roach 

knowingly issued “Accountant’s Compilation Reports,” that accompanied unaudited 

financial statements for Company D that falsely stated that Company D generated 

hundreds of millions of dollars in “Rental Income.”  In reality, the overwhelming 

majority of that “Revenue” consisted of transfers from Company S rather than lease 

payments from end-users of the Generators.  The reports Roach knowingly issued 

also accompanied financial statements for Company S which hid the significant cash 

transfers it made to Company D.         

9. As a result of the conduct alleged herein, Defendants have violated the 

antifraud provisions of the Securities Act and the Exchange Act.  The SEC brings this 

action and seeks entry of permanent injunctions against Defendants as well as 

disgorgement of ill-gotten gains and prejudgment interest thereon and civil penalties.   

THE DEFENDANTS 

10. Joseph W. Bayliss is a resident of Martinez, California.  Bayliss is the 

owner of Bayliss Innovative Services, Inc. through which he is licensed as an 

electrical and general building contractor. 

11. Ronald J. Roach is a resident of Walnut Creek, California.  Roach is a 

certified public accountant and the owner of Ronald J. Roach Accountancy 

Corporation.  He also hold Series 6, 7, 63 and 65 securities licenses and is a 

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COMPLAINT 5  
 

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registered investment adviser and a registered representative.  

RELATED INDIVIDUALS AND ENTITIES 

12. Company S is a California corporation headquartered in Benicia, CA.  It 

was owned by Individual 1.  Company S is not registered with the SEC in any 

capacity.  It filed for bankruptcy protection in early 2019 and is currently in Chapter 7 

proceedings. 

13. Company D is a California corporation headquartered in Benicia, CA.  It 

was owned by Individual 2.  Company D is not registered with the SEC in any 

capacity.  It filed for bankruptcy protection in early 2019 and is currently in Chapter 7 

proceedings. 

14. Individual 1 was a resident of Martinez, CA during the relevant time 

period.  In addition to owning Company S, Individual 1was the President and a 

Director of Company S and the Vice President and a Director of Company D. 

15. Individual 2 was a resident of Martinez, CA during the relevant time 

period.  In addition to owning Company D, Individual 2 was the President, Secretary, 

Treasurer, and a Director of Company D and the Secretary, Treasurer and a Director 

of Company S. 

FACTUAL ALLEGATIONS 

A. Background on the Company 

16. Individuals 1 and 2 are the owners and principals of Company S and 

Company D.  To investors, the Company claimed that it “design[ed], manufacture[d] 

and lease[d] renewable energy products to serve the off-grid needs of a broad and 

diverse marketplace – while providing investors with access to the renewable energy 

asset class.”     

B. The Company Offerings 

(1) The Solicitation of Investors 

17. Since at least 2011 and continuing to December 2018, the Company 

offered securities to investors.  The securities took the form of two types of 

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COMPLAINT 6  
 

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investment contracts: (1) Investment Fund Contracts and (2) Sale-Leaseback 

Contracts.  Under both arrangements, the investors paid to purchase Generators from 

Company S, while simultaneously leasing them to Company D.  Company D would 

then arrange to sub-lease the Generators to end-users.  The investors expected to 

profit from the investments due to tax credits, depreciation on the Generators, and 

lease payments.  Investors thus played an entirely passive role:  the success of the 

venture, and thus the profits to investors and the Company, turned entirely on the 

efforts of the Company to make, maintain, market, and lease the Generators.    

18. Over the course of the offerings, the Company raised approximately 

$910 million in investor money.  These deals had face values of more than $2.7 

billion because investors in the Investment Fund Contracts financed approximately 70 

percent of the amount of their investments through promissory notes.   

19. The Company, directly and indirectly, solicited investors through 

brokers and salespeople using various methods, including email, conference calls and 

in-person meetings.  The Company offered and sold Investment Fund Contracts and 

Sale-Leaseback Investments through interstate commerce to investors across the 

United States.   

20. The Company marketed itself as having extensive experience and 

capabilities in the renewable energy field and in executing successful transactions for 

investors.  For example, pitch-books for investors, which were prepared by a broker 

working on behalf of the Company using information provided by the Company, 

emphasized that the Company had thousands of Generators deployed and 

manufacturing capabilities of 900 Generators per month.  They also highlighted that 

the Company had closed many prior investment funds with “headline” or “notable” 

investors, including funds with fair market values near or over $100 million, and that 

the “performance of each of the funds remains in good standing.”  In addition, the 

materials claimed the Company had “customer relationships with leading companies 

in the telecommunications, entertainment and construction industries” and provided 

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COMPLAINT 7  
 

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case studies of the established leasing arrangements with many of those customers.  

Finally, certain of the pitch-books provided a “Summary of Investor Returns” with 

estimated internal rates of return ranging from 40 to as high as 50 percent.   

(2) The Terms of the Investment Fund Contract Offerings 

21. Investment Fund Contract investors executed a standard package of 

agreements, including:  (i) a Limited Liability Company Agreement (“LLC 

Agreement”); (ii) a Solar Equipment Purchase Agreement (“Purchase Agreement”); 

(iii) a Secured Promissory Note (“Promissory Note”); and (iv) a Mobile Solar 

Equipment Lease (“Equipment Lease”) (together the “Investment Fund Contracts”).  

The documents were executed at or around the same time, with Individual 1 signing 

the Purchase Agreements on behalf of Company S and Individual 2 typically signing 

the Equipment Leases on behalf of Company D.  While the Investment Fund 

Contracts for certain deals had minor variations in wording, they largely had the same 

substantive terms. 

22. Under the terms of the LLC Agreement, an investor became the 

“Investor Member” of the Investment Fund Limited Liability Company (“Investment 

Fund”), an entity created specifically for the purpose of the investment.  This 

Investment Fund then purchased Generators from Company S at a price of $150,000 

per Generator under the Solar Equipment Purchase Agreement.  The Purchase 

Agreement specified the total number of Generators being purchased as well as the 

total purchase price.  An Exhibit to the Purchase Agreement contained a blank space 

for the Vehicle Identification Numbers (“VINs”) for the Generators or stated that 

“VIN for each Generator to be Supplied at Delivery.”  In exchange for the payment, 

Company S agreed to deliver the Generators by a certain date or dates and warranted 

“to Buyer that all Equipment shall be in good working order in conformity with the 

Specifications for a period” of five or ten years.   

23. The delivery dates for tranches of Generators specified in the Purchase 

Agreements were often scheduled in stages.  Likewise, the Purchase Agreements 

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dictated that payments would be due to Company S in stages according to a schedule 

in part dictated by capital contributions being made by the investor under the terms of 

the LLC Agreement.  Those capital contributions were contingent on the investor 

receiving confirmation that the Generators were “Placed in Service” as evidenced by 

an “IE [Independent Engineer] Certificate.” 

24. Investors generally contributed about thirty percent of the purchase price 

in cash and financed the balance pursuant to a Promissory Note or Notes executed by 

the Investment Fund in favor of Company S.  The Promissory Note was an exhibit to 

the Purchase Agreement.  The Company told investors, and arranged for a tax 

opinion letter from a law firm confirming, that the Generators qualified for the 

Energy Credit under Internal Revenue Code § 48.  That provision allows for a thirty 

percent tax credit for certain energy-related investments.  Thus, investors expected to 

be able to take a tax credit for roughly the same amount as their cash contribution to 

the investment. 

25. Under the Investment Fund Contracts, the Generator business was left 

entirely to the Company.  At the time the Investment Funds executed the Purchase 

Agreement with Company S, the Investment Funds also executed the Mobile Solar 

Equipment Lease with Company D for at least the first batch of Generators being 

purchased.  Depending on the size of the transaction, as additional tranches of 

Generators were manufactured, additional Equipment Leases were executed.  Under 

the Equipment Leases, the Investment Funds leased their Generators to Company D 

for terms ranging up to 120 months.  The Equipment Leases provided that Company 

D shall use “the Solar Equipment in a careful and proper manner” and “shall comply 

with all laws, regulations and ordinances.”  Moreover, the Equipment Leases stated 

that Company D shall be “solely responsible for the maintenance and repair of the 

Solar Equipment” and “shall ensure the Solar Equipment is operational and capable 

of producing solar energy at all times.”  The Equipment Leases required Company D 

to “obtain, maintain and keep” insurance coverage on the Generators in the amount of 

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the replacement cost as well as “liability insurance.”  In addition, the Equipment 

Leases required Company D to “promptly pay when due, all license fees, registration 

fees, sales taxes, use and property taxes, assessments, charges and other taxes” 

imposed upon the Generators.   

26. The Equipment Leases further provided for a set amount of “Base Rent” 

to be paid to the Investment Fund in advance in monthly installments for the term of 

the lease as well as payment to the Investment Fund of “Additional Rent” or 

“Variable Rent” to the extent Company D received revenue from subleasing the 

Generators in excess of a certain amount.  The amount of additional or variable rent 

due to the Investment Fund varied depending on the deal and the calculation was 

specified in the Equipment Lease. 

27. The Investment Fund Contracts were structured such that there was a 

flow of money between the Investment Funds and the Company, all of which was 

contingent on the Generators generating significant sub-lease revenue from legitimate 

end-users.  Company D owed monthly lease payments to the Investment Funds 

purportedly to be paid with the sub-lease revenue it received from third-party 

customers.  The Investment Funds would then use the lease payments they received 

from Company D under the terms of the Equipment Leases to make monthly 

payments due to Company S under the terms of the Promissory Notes.  Investors 

expected several benefits under the arrangement, including the thirty percent energy 

tax credit and the ability to claim significant depreciation on the Generators.  In 

addition, investors expected to receive yearly cash distributions from the Investment 

Funds.  In general, the LLC Agreements stated that “Distributable Cash,” defined as 

the amount of cash from lease revenue remaining after loan payments and operating 

expenses, would be paid out to investors on an annual basis.  Based on financial 

projections for the Investment Funds that were provided to investors, investors 

expected to receive these cash distributions.   

28. From December 2011 through December 2018, the Company closed 34 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 9 of 21



 

COMPLAINT 10  
 

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Investment Fund Contracts, involving 13 investors, totaling about $2.57 billion in 

face value.  The investors made roughly $759 million in cash contributions to their 

Investment Fund Contracts. 

(3) The Terms of the Sale-Leaseback Contract Offerings 

29. The Company began offering the second type of security, the Sale-

Leaseback Contracts, since at least 2017.  Investors in the Sale-Leaseback Contracts 

typically executed several agreements including: (i) a Sale Agreement; (ii) an 

Equipment Lease Agreement; and (iii) a Schedule (collectively the “Sale-Leaseback 

Contracts”).  Individual 1 typically signed the Sale Agreement on behalf of Company 

S, or in one instance on behalf of another affiliate of the Company, and Individual 2 

typically signed the Lease Agreement and the Schedule on behalf of Company D.  

While the Sale-Leaseback Contracts for certain deals had minor variations in 

wording, they largely had the same substantive terms. 

30. The Sale-Leaseback Contracts differed from the Investment Fund 

Contracts in that investors purchased the Generators outright from Company S, or in 

one instance another affiliate of the Company, without executing a Promissory Note.  

Under the Sale Agreement, investors paid $150,000 for each Generator they 

purchased.  The Generators were identified by VIN in an exhibit attached to that 

Agreement.  In exchange for the purchase price, Company S agreed to convey to the 

investors “all right, title and interest in” the Generators. 

31. One Sale-Leaseback Contract transaction differed from the others in that 

the investor purchased used Generators and paid $82,500 for each.  As the Generators 

were used, they did not qualify for the tax credit.  However, the investment worked 

the same as the other Sale-Leaseback Contracts with the investor immediately leasing 

the Generators to Company D and being entirely reliant on Company D to maintain 

and sub-lease the Generators. 

32. Just as was done in the Investment Fund Contracts, under the Sale-

Leaseback Contracts the investors immediately leased the Generators back to 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 10 of 21



 

COMPLAINT 11  
 

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Company D (or another affiliate of the Company) in return for monthly payments 

purportedly to be made from sub-lease payments.  Under the Lease Agreement, 

Company D committed to keeping the Generators “in good repair” and operating 

condition and to “maintain” insurance coverage on the Generators as well as “liability 

insurance.”  The Lease Agreement also required Company D to pay, or reimburse the 

investor for, all taxes, fees, and assessments imposed on the Generators.   

33. Like the Investment Funds, most investors in the Sale-Leaseback 

Contracts received an “IE Certificate,” or “IE Commissioning Report,” for each new 

Generator that they purchased. 

34. The Schedule to the Lease Agreement set forth the term of the lease and 

a set lease payment due to the investors from Company D each month.  An 

attachment to the Schedule again identified the Generators by VIN.  In addition to the 

monthly lease payments, most Sale-Leaseback Contract investors expected to be able 

to take the 30 percent energy tax credit as well as depreciation on the Generators they 

purchased.  In fact, the Schedules in certain of the Sale-Leaseback Contracts 

specifically referenced the energy tax credit and depreciation and required Company 

D to use the Generators so as to remain eligible for those tax benefits.  Based on the 

combination of tax benefits and lease revenue, the Sale-Leaseback Contract investors 

expected to earn a positive return and profit from these transactions.   

35. From 2017 through 2018, the Company completed seven Sale-

Leaseback Contracts, involving 4 investors, in transactions worth nearly $151 

million. 

(4) The Company’s Offerings Are Securities 

36. The Company offered and sold the Investment Fund Contracts and Sale-

Leaseback Contracts through interstate commerce to investors located in multiple 

states. 

37. The Company’s Investment Fund Contracts and Sale-Leaseback 

Contracts are securities in the form of investment contracts.  They represented an 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 11 of 21



 

COMPLAINT 12  
 

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investment of money, in a common enterprise, with the expectation of profits to be 

derived from the efforts of a third party.  Investors provided money to the Company 

for investment purposes.  Because the terms of the Investment Fund Contracts and 

Sale-Leaseback Contracts tied the fortunes of the investors to those of the Company 

and its ability to manufacture the Generators and then sub-lease them at optimal rates, 

investors were investing in a common enterprise.  And, because the terms of the 

Investment Fund Contracts and Sale-Leaseback Contracts made investors entirely 

dependent on the Company to manufacture, operate and maintain their purported 

Generators, the Company’s efforts were essential to the failure or success of the 

common enterprise.  Investors also had an expectation of profits from the tax benefits 

and payment stream to be generated from the enterprise.   

C. Defendants Committed Deceptive Acts in Furtherance of the Fraud 

38. Unbeknownst to investors, the Company never manufactured the 

majority of the Generators that it sold them.  And, most of the lease revenue paid to 

investors consisted of investor funds, rather than lease income from legitimate end-

users of the Generators.  Bayliss and Roach each played a role in hiding these facts 

from investors and perpetuating the Company’s fraud. 

(1) Bayliss Certified Generators that Did Not Exist and Altered 

VINs 

39. By design, investors never physically took possession of the Generators 

that they purchased because the Generators were leased to Company D upon 

purportedly being placed in service.  Pursuant to the terms of the Purchase 

Agreements and LLC Agreements, investors in the Investment Funds made payments 

to Company S for the Generators in installments after receiving proof that the 

Generators had been placed in service as evidenced by the delivery of the “IE 

Certificate.”  The LLC Agreements defined “IE Certificate” as “a certificate to be 

issued by the Independent Engineer” with respect to the Generators “upon 

achievement of Placement in Service.”  Beginning in 2014, the LLC Agreements 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 12 of 21



 

COMPLAINT 13  
 

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further stated that “‘Independent Engineer’ means Joseph Bayliss of Bayliss 

Innovative Services.”  Most Sale-Leaseback Contract investors also received these IE 

Certificates from Bayliss for the new Generators they purchased. 

40. Individual 1 arranged for Bayliss and his firm to serve as the 

“Independent Engineer.”  This arrangement deceived investors as Bayliss was neither 

independent nor an engineer.  Bayliss holds general contractor and electrical licenses 

from the State of California, but he was never a licensed engineer.  And, Bayliss has 

known Individuals 1 and 2 since high school.  In fact, the Company and Individual 1 

hired Bayliss to perform various projects for the Company and other businesses 

owned by Individual 1. 

41. The Company purported to sell more than 17,600 Generators to investors 

from its inception.  Bayliss executed IE Certificates, titled “IE Commissioning 

Reports,” for nearly all of the Investment Funds and Sale-Leaseback Contract 

investors that purchased Generators from 2014 through 2018.  Those Investment 

Funds and Sale-Leaseback Contract investors contracted to purchase more than 

16,400 Generators.  In thousands of instances, Bayliss signed IE Commissioning 

Reports for Generators without inspecting them, and without any basis for making the 

representations in the IE Certificates.  This is because Company S only manufactured 

a fraction of the Generators it purported to sell to the investors.  Indeed, recent 

intensive efforts by investors to locate those Generators turned up only 5,013 

Generators of the more than 16,400 Generators for which Bayliss provided IE 

Commissioning Reports. 

42. The IE Commissioning Reports described Bayliss as the “Independent 

Engineer and Commissioner” and his signature line contained the title “Technical 

Engineering Consultant,” along with a license number, which was actually the 

number, or a slight variation of the number, of Bayliss’s state license as a contractor.  

Each IE Commissioning Report identified a Generator by VIN and contained a 

checklist of tests that Bayliss allegedly completed in assessing the Generator with an 

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COMPLAINT 14  
 

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“x” under the “yes” box for each test identified.   

43. Bayliss also falsely attested that “I have taken the steps described during 

the commissioning of the above system and confirm that the system was installed in 

accordance with professional engineering practices and safety requirements; and that 

the system is ready and able to be used for the production of electricity.”   

44. Of the over 16,400 Generators that Bayliss prepared IE Commissioning 

Reports for, more than 11,400 could not be located.  Given that Bayliss signed the IE 

Commissioning Reports for these non-existent Generators without having inspected 

them, all of his statements in those reports were false and deceptive, and made by 

Bayliss in furtherance of the fraud. 

45. Bayliss knew, or was reckless in not knowing, that Company S had not 

manufactured thousands of Generators for which he signed IE Commissioning 

Reports.  Bayliss also knew, or was reckless in not knowing, that the IE 

Commissioning Reports he signed were being sent to investors and were important to 

them.   

46. Bayliss also profited from his work for the Company, earning over $2.4 

million between January 2013 and December 2018.  Over $1,020,000 of these 

payments were made to Bayliss directly by the Investment Funds or the Sale-

Leaseback Contract investors, mostly for his work in issuing the IE Commissioning 

Reports.        

47. At times, Company S sold the same Generator to different Investment 

Funds or Sale-Leaseback Contract investors.  Investors were unaware that their 

supposed Generators were being resold, or that they were purchasing used Generators 

to which someone else had an ownership claim.  As part of these efforts, the 

Company had to remove the VIN stickers from the Generators because each one had 

a unique VIN.  After removing the old VIN sticker from a Generator, the Company 

would replace it with a new VIN sticker in an effort to make it appear that the 

Generator was new.  Bayliss helped the Company remove and replace VIN stickers.  

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 14 of 21



 

COMPLAINT 15  
 

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Bayliss knew this was being done in an attempt to dupe investors into believing that 

the Generators were new.   

(2) Roach Issued Deceptive Compilation Reports  

48. Lease revenue from end-users of the Generators was critical to the 

success of the investments because it was supposed to provide the funds that 

Company D needed to make lease payments to the Investment Funds and Sale-

Leaseback Contract investors.  Although Company D purported to be earning 

millions each month in lease revenue from end-users of the Generators, bank records 

demonstrate that Company D generated minimal lease revenue from sub-leases to 

end-users.  In fact, the vast majority of funds flowing into Company D’s bank 

accounts consisted of transfers of investor funds from Company S.   

49. For example, during the period of January 2013 through December 

2018, a total of about $409,930,000 was deposited to Company D’s bank accounts.  

Of that amount, approximately $383,347,000 -- or 93.5% -- consisted of transfers 

from Company S’s bank accounts.  And, another $8,268,000 -- or 2.0% -- consisted 

of transfers from the bank accounts of different Investment Funds.  At most, 

$18,316,000 -- or 4.5% -- of the deposits to Company D’s bank accounts during the 

time period represented sub-lease payments from end-users of the Generators. 

50. But, during this period, Company D paid about $347,800,000 to various 

Investment Funds and Sale-Leaseback Contract investors, most of which took the 

form of “lease payments” owed under the operative Equipment Lease Agreements.  

Accordingly, Company D’s payments were not funded by legitimate sub-lease 

revenue, but instead by investor funds cycled through Company S. 

51. Roach played a key role in misleading investors about the actual amount 

of lease revenue generated from end-users of the Generators and the true source of 

the funds coming into Company D.  Prospective investors routinely requested 

financial statements from Company D and Company S before investing.  In response, 

the Company often provided investors with financial statements.  Roach issued 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 15 of 21



 

COMPLAINT 16  
 

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“Accountants’ Compilation Reports” for Company D and Company S covering 

various periods between 2011 through July 2018.  Roach signed these reports on the 

letterhead of his firm, Ronald J. Roach Accountancy Corporation.  The financial 

statements accompanying Roach’s compilation reports included a statement of 

income in each, which Roach knew contained false and misleading information.  The 

accountant who issues the compilation report accompanying the financial statement 

must make himself familiar with the company’s business and processes, and must not 

issue a compilation report on financial statements that he knows to contain false 

information. 

52. At the time Roach was issuing these reports, he knew that Company D 

was generating minimal lease revenue from end-users of Generators.  Roach also 

knew that Company S infused Company D with cash each month in order to support 

the lease payments due to the Investment Funds and Sale-Leaseback Contract 

investors, with the cash coming mostly from investor funds.  In addition, he was 

aware that investors were led to believe that Company D generated sufficient lease 

revenue from end-users of the Generators to pay its own lease payment obligations to 

the Investment Funds and Sale-Leaseback Contract investors each month. 

53. In total, the financial income statements for Company D accompanying 

the compilation reports issued by Roach falsely stated that Company D generated 

hundreds of millions of dollars of revenues in “Rental Income.”  In reality, the 

overwhelming majority of purported “Rental Income” consisted of intercompany 

transfers from Company S.  Company D needed the cash transfers from Company S 

in order to cover its lease payment obligations to the Investment Funds and Sale-

Leaseback Contract investors because it was not generating sufficient “Rental 

Income” from end-users of the Generators in order to cover those obligations.  The 

income statements were intended to mislead investors and potential investors into 

believing that Company D made hundreds of millions of dollars in “Rental Income” 

from end-users of the Generators from 2011 through 2018.   

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 16 of 21



 

COMPLAINT 17  
 

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54. Similarly, the various compilation reports for Company S that Roach 

issued also accompanied financial statements that contained false information.  The 

cash infusions of hundreds of millions of dollars from Company S to Company D 

were hidden in the “Direct Costs” category of Company S’s income statements.  In 

reality, these payments had nothing to do with the costs of manufacturing the 

Generators.  Roach knew this categorization was wrong and he knew that Company S 

categorized the payments in this manner to conceal from investors the fact that 

Company S funded Company D’s “Rental Income.” 

55. Roach knew that the false financial statements and the compilation 

reports that he issued thereon were being provided to investors, often at the investors’ 

request.  In fact, Roach at times sent the financial statements and his accompanying 

reports directly to investors via email.  He never told investors that information 

contained in the financial statements was false or inaccurate. 

56. Roach profited from his work for the Company over the years, receiving 

about $2.9 million between January 2013 and December 2018.   

FIRST CLAIM FOR RELIEF 

Fraud in Connection With the Sale of Securities 
Violations of Section 10(b) of the Exchange Act 

and Rule 10b-5(b) Thereunder 
(against Defendant Bayliss) 

57. The SEC realleges and incorporates by reference paragraphs 1 through 

56 above. 

58. Defendant Bayliss, by engaging in the conduct described above, directly 

or indirectly, in connection with the purchase or sale of a security, by the use of 

means or instrumentalities of interstate commerce, of the mails, or of the facilities of 

a national securities exchange, with scienter, made untrue statements of a material 

fact or omitted to state a material fact necessary in order to make the statements 

made, in the light of the circumstances under which they were made, not misleading. 

59. By engaging in the conduct described above, Defendant Bayliss, 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 17 of 21



 

COMPLAINT 18  
 

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violated, and unless restrained and enjoined will continue to violate, Section 10(b) of 

the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5(b) thereunder, 17 C.F.R. § 

240.10b-5(b). 

SECOND CLAIM FOR RELIEF 

Fraud in the Offer and Sale of Securities 
Violations of Section 17(a)(2) of the Securities Act 

(against Defendants Bayliss and Roach) 

60. The SEC realleges and incorporates by reference paragraphs 1 through 

56 above. 

61. Defendants Bayliss and Roach, by engaging in the conduct described 

above, in the offer or sale of securities by the use of means or instruments of 

transportation or communication in interstate commerce or by use of the mails, 

directly or indirectly, with scienter, obtained money or property by means of untrue 

statements of a material fact or by omitting to state a material fact necessary in order 

to make the statements made, in light of the circumstances under which they were 

made, not misleading. 

62. By engaging in the conduct described above, Defendants Bayliss and 

Roach, violated, and unless restrained and enjoined will continue to violate, Section 

17(a)(2) of the Securities Act, 15 U.S.C. § 77q(a)(2). 

THIRD CLAIM FOR RELIEF 

Fraud in Connection With the Sale of Securities  
Violations of Section 10(b) of the Exchange Act  

and Rules 10b-5(a) and (c) Thereunder 
(against Defendants Bayliss and Roach) 

63. The SEC realleges and incorporates by reference paragraphs 1 through 

56 above. 

64. Defendants Bayliss and Roach, by engaging in the conduct described 

above, directly or indirectly, in connection with the purchase or sale of a security, by 

the use of means or instrumentalities of interstate commerce, of the mails, or of the 

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COMPLAINT 19  
 

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facilities of a national securities exchange, with scienter: 

a. employed devices, schemes, or artifices to defraud; or 

b. engaged in acts, practices, or courses of business which operated 

or would operate as a fraud or deceit upon other persons. 

65. By engaging in the conduct described above, Defendants Bayliss and 

Roach violated, and unless restrained and enjoined will continue to violate, Section 

10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rules 10b-5(a) and (c) 

thereunder, 17 C.F.R. §§ 240.10b-5(a) & 240.10b-5(c). 

FOURTH CLAIM FOR RELIEF 

Fraud in the Offer and Sale of Securities 
Violations of Sections 17(a)(1) and (3) of the Securities Act 

(against Defendants Bayliss and Roach) 

66. The SEC realleges and incorporates by reference paragraphs 1 through 

56 above. 

67. Defendants Bayliss and Roach, by engaging in the conduct described 

above, in the offer or sale of securities by the use of means or instruments of 

transportation or communication in interstate commerce or by use of the mails, 

directly or indirectly: 

a. with scienter, employed devices, schemes, or artifices to defraud; 

or 

b. engaged in transactions, practices, or courses of business which 

operated or would operate as a fraud or deceit upon the purchaser. 

68. By engaging in the conduct described above, Defendants Bayliss and 

Roach violated, and unless restrained and enjoined will continue to violate, Sections 

17(a)(1) and (3) of the Securities Act, 15 U.S.C. § 77q(a)(1) and (3). 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that the Court: 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 19 of 21



 

COMPLAINT 20  
 

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I. 

Issue judgments, in forms consistent with Fed. R. Civ. P. 65(d), permanently 

enjoining Defendants, and their agents, servants, employees, and attorneys, and those 

persons in active concert or participation with any of them, who receive actual notice 

of the judgment by personal service or otherwise, and each of them, from violating 

Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the 

Exchange Act, 15 U.S.C. §§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-

5.  

II. 

Upon motion of the Commission, order Defendants to disgorge all ill-gotten 

gains they received, together with prejudgment interest thereon. 

III. 

Upon motion of the Commission, order Defendants to pay civil penalties under 

Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d), and Section 21(d)(3) of the 

Exchange Act, 15 U.S.C. § 78u(d)(3). 

IV. 

Retain jurisdiction of this action in accordance with the principles of equity and 

the Federal Rules of Civil Procedure in order to implement and carry out the terms of 

all orders and decrees that may be entered, or to entertain any suitable application or 

motion for additional relief within the jurisdiction of this Court.  

  

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V. 

Grant such other and further relief as this Court may determine to be just and 

necessary. 

 

Dated:  October 22, 2019  
 /s/ Tom Bednar 

Thomas Bednar 
Dean M. Conway 
Sarra Cho 
Christopher Nee 
Attorneys for Plaintiff 
Securities and Exchange Commission 

 

Case 2:19-cv-02140-MCE-AC   Document 1   Filed 10/22/19   Page 21 of 21