$100 Million Asked in Suit Against Solar Contractors

More than 130 California homeowners who said they were promised big tax rebates if they bought solar heating systems filed a $100-million class-action lawsuit Monday, alleging that they received faulty equipment at inflated prices and were threatened with foreclosure on their homes if they didn’t pay.

The suit, filed in Orange County Superior Court against 35 solar contractors and 16 lending institutions, claims that as many as 5,000 California homeowners were defrauded in the 1970s and early 1980s when the gas crisis and an array of energy-saving tax credits sent the solar energy industry booming. Homeowners, the suit alleges, were told that their heating bills would be cut $5 to $15 a month; that they would be fined by the state if they failed to install solar systems; that the value of their homes would increase if they installed a solar system; that they would receive free vacations and gifts for listening to sales presentations.

But none of the promises proved to be true, said Joe Morgan, executive director of the Public Interest Homeowners Assn., which filed the suit. In some cases, he said, homeowners were sold defective equipment or even used equipment at prices far in excess of the $3,500 to $5,000 it normally costs to install a system.

Many families were unaware that they were signing a second trust deed as collateral for the financing of the equipment, and then they faced foreclosure when they could not make the payments, he said.

Some were misled into thinking that the available state and federal tax credits would rebate as much as 50% of the cost of the new system, when a credit of that size was probably only available to an upper-income family that owed sufficient taxes to qualify for the credit.

“I stay awake at nights worrying about the problem,” said Alejandro Saucedo, 72, of Montebello, who finally paid $11,400 for a solar water-heating system he was told would cost $7,000--and which does not work. His payments, originally estimated at $70 a month, wound up at $190 a month.

Premature Installation

Gary Spicher of Lancaster said his solar water-heating system was installed before he had even signed the final papers. When he returned from vacation a week or so later, he found that the system had leaked water inside his house and he could not get the company to fix it, he said. The company later went out of business.

Mark Frauman, spokesman for the California Solar Energy Industries Assn., said that less than half of 1% of the estimated 500,000 solar systems installed in California have resulted in complaints.

“That’s still too many,” he said, attributing the problem to a few “get-rich-quick” companies that went out of business as soon as federal tax credits for solar systems expired last year.

The 300-member trade association has established a program under which member companies will repair, free of charge, any system installed by a solar company that is no longer in business. Hundreds of systems have already been repaired since 1984, Frauman said.

But a spokesman for the attorney general’s office, which has two consumer protection suits pending against solar companies, estimated that Californians may have been defrauded out of as much as $300 million.

Stories Coming True

“All the nightmares that you’ve heard about plumbers and used car salespeople and suede-shoe operators--they all apply here,” said Richard Rivera, senior special investigator for the Contractors State Licensing Board.

The board last year filed charges that led to the arrest of a Mission Viejo solar company salesman on nine felony counts of using a contractor’s license with intent to defraud and 11 felony counts of grand theft. That case is still pending.

The suit, which alleges fraud and violations of the state’s truth-in-lending laws, seeks to prevent any foreclosures on homeowners’ properties, to nullify many pending contracts, and to win unspecified general damages and punitive damages of at least $100 million.

Times staff writers Claudia Puig and Marcos Breton contributed to this story.