Northampton County man charged in Ponzi scheme
A 73-year-old Northampton County man has been charged by the U.S. Justice Department 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.
The charges against Walter P. Lambert of Pen Argyl, who also is known as Buddy, were announced Wednesday by United States Attorney Zane David Memeger.
Lambert, who was the CEO of Blue Mountain Consumer Discount Company, a consumer loan company based in Wind Gap, is charged with defrauding individual lenders into loaning over $5 million to his company by promising them a high rate of return (typically 9 or 10 percent), which Lambert usually paid to the investors in cash and failed to document with the IRS.
Lambert allegedly caused more than 20 individual lenders to sustain losses of about $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.
Lambert told individual lenders that Blue Mountain Consumer Discount would use their funds to issue high-interest loans to consumers, at an interest rate of about 23 to 26 percent, allowing the company to make a profit of about 1 to 16 percent after paying the individual lenders their 10 percent return.
But rather than using the lenders’ loan principal payments to issue new consumer loans, the government alleges that Lambert used the funds for his own benefit, including:
* to pay company 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 company's owner:
*and to issue loans to himself, his children, and other “preferred” consumers at a rate of 6 percent interest per year or less, rather than the annual interest rate of 23 to 26 percent that the individual lenders were quoted.
The government alleges that prior to borrowing the principal from individual lenders, Lambert failed to disclose how their loan principal really would be used.
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 company salary and overhead expenses.
It is further alleged that to hide his fraud, Lambert doctored the books, submitted false annual reports to the Pennsylvania Department of Banking, and falsified tax returns.
Lambert withdrew hundreds of thousands of dollars from the company for the benefit of himself, which he recorded as “loans” to himself and his family members.
In falsely issuing these “loans,” ,Lambert forged the signatures of his family members on the loan paperwork and the checks issued, and deposited the checks into his personal bank accounts.
Lambert allegedly documented fictitious payments to deceive the Pennsylvania Department of Banking into believing that Blue Mountain was financially sound and operating appropriately.
In carrying out this scheme, Lambert interfered with the due administration of the Internal Revenue Service by, among other things, overstating corporate income, understating company salaries and wages by failing to record cash salary payments to employees, understating Blue Mountain's interest expenses by failing to record interest payments to individual lenders that were made in cash, and submitting false tax returns for the company.
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 percent interest by check and provided them and the IRS with accurate annual IRS Forms 1099, Lambert paid Sabatine his promised 1 percent kickback in the form of cash that neither Lambert nor Sabatine declared to the IRS.
The case was investigated by the Internal Revenue Service Criminal Investigations and the FBI. It is being prosecuted by Assistant U.S. Attorney Michael S. Lowe.
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