Northampton County Man Charged with Orchestrating a Ponzi Scheme and Tax Offense
PHILADELPHIA—Walter P. Lambert, a/k/a “Buddy,” 73, of Pen Argyl, PA, was charged by information, filed yesterday, with 16 counts of mail fraud, five counts of wire fraud, and one count of interfering with the due administration of the Internal Revenue Service, announced United States Attorney Zane David Memeger.
The information alleges that Lambert, who at the time was the CEO of Blue Mountain Consumer Discount Company (“BMCDC”), a consumer loan company based in Wind Gap, Pennsylvania, defrauded individual lenders into loaning over $5 million to BMCDC by promising them a high rate of return (typically nine percent or 10 percent), which Lambert usually paid to the investors in cash and failed to document with the IRS. Lambert told the individual lenders that BMCDC would use the lenders’ funds to issue high-interest loans to consumers (at an interest rate of approximately 23 percent to 26 percent), thereby allowing BMCDC to make a profit of approximately 13 percent to 16 percent after paying the individual lenders their 10% return. However, rather than using the individual lenders’ loan principal payments to issue new consumer loans, it is alleged that Lambert used the funds for his own benefit, including: to pay BMCDC’s overhead (including his own salary); to purchase a life insurance policy for himself; to purchase personal items and collectibles for himself and his family members; to pay for gasoline and repairs to personal cars owned and used by himself, his family members, and the owner of BMCDC; and to issue loans to himself, his children, and other “preferred” consumers at a rate of six percent interest per year or less, rather than the annual interest rate of 23 percent to 26 percent that the individual lenders were quoted. The information alleges that prior to borrowing the principal from the individual lenders, Lambert failed to disclose that their loan principal would be used as set forth above. The information alleges that in order to keep the scheme afloat, Lambert continued to borrow money from new individual lenders, lied to them about what he would do with the money, and used the new loans to pay the old lenders their interest, and to pay BMCDC’s salary and overhead expenses.
It is further alleged that to hide his fraud, Lambert doctored the books of BMCDC, submitted false annual reports to the Pennsylvania Department of Banking, and falsified BMCDC’s tax returns. According to the information, Lambert withdrew hundreds of thousands of dollars from BMCDC for the benefit of himself that he caused to be recorded as “loans” to himself and his family members. In falsely issuing these “loans” to his family members, Lambert forged the signatures of his family members on the loan paperwork and the checks issued by BMCDC, and deposited the checks into his personal bank accounts. Lambert allegedly documented fictitious payments to deceive the Pennsylvania Department of Banking into believing that BMCDC was financially sound and operating appropriately.
The information further alleges that in carrying out this scheme, Lambert interfered with the due administration of the Internal Revenue Service by, among other things, overstating corporate income, understating BMCDC’s salaries and wages by failing to record cash salary payments to BMCDC employees, understating BMCDC’s interest expenses by failing to record interest payments to individual lenders that were made in cash, and submitting false tax returns for BMCDC. Lambert is also alleged to have paid a 1 percent “kickback” to one of the individual lenders, Nicholas R. Sabatine, III, charged separately, a local area attorney who referred clients to Lambert. While Lambert paid Sabatine’s clients 9% interest by check and provided them and the IRS with accurate annual IRS Forms 1099, Lambert paid Sabatine his promised one percent kickback in the form of cash that neither Lambert nor Sabatine timely declared to the IRS.
Lambert allegedly caused over 20 individual lenders to sustain losses of approximately $2,269,503, and caused the IRS to sustain a tax loss of at least approximately $252,621 for tax years 2007 through 2009.
If convicted, Walter Lambert faces a maximum sentence of 423 years in prison, a three-year period of supervised release, a $5.5 million fine, and a $2,200 special assessment.
The case was investigated by the Internal Revenue Service Criminal Investigations and the FBI. It is being prosecuted by Assistant United States Attorney Michael S. Lowe.
An Indictment or Information is an accusation. A defendant is presumed innocent unless and until proven guilty.