Federal authorities unveiled charges against a Pennsylvania man and accused him of orchestrating a $5 million Ponzi scheme.. Walter "Buddy" Lambert, 73, was charged with sixteen counts of mail fraud, five counts of wire fraud, and one count of interfering with the due administration of the Internal Revenue Service. The criminal charges come over three years after the Federal Bureau of Investigation raided Lambert's offices, and nearly four years after almost a dozen lawsuits were filed against Lambert by victims.
Lambert was the chief executive officer of Blue Mountain Consumer Discount Company ("Blue Mountain"), a consumer loan company owned by the prominent Cinelli family. The company solicited potential investors with the promise that their investment would be used to make high-interest loans to consumers at an annual rate ranging from 23% - 26%. In return, investors were promised steady annual returns of 10% that were paid in cash and usually not disclosed to the Internal Revenue Service. In total, more than twenty investors entrusted more than $5 million with Blue Mountain.
However, authorities alleged that Lambert failed to use investor funds as promised. Instead of making high-interest consumer loans, Lambert diverted investor funds for his own personal use, including the payment of Blue Mountain overhead and expenses, the purchase of a life insurance policy on himself, buying personal items and collectibles for himself and family members, and making 6% loans to himself, his children, and other "preferred" consumers. To hide his fraud, Lambert is also accused of doctoring Blue Mountain's books and filing falsified income tax returns with the IRS. In addition to paying the majority of interest payments to investors in cash, Lambert also paid a 1% kickback to a local attorney, Nicholas R. Sabatine, III, in exchange for Sabatine's referral of clients to Blue Mountain. Sabatine was charged in October 2013 with filing a false tax return in 2009.
Francis Cinelli and his family are currently named in multiple lawsuits seeking more than $5 million on claims that they failed to supervise Lambert. Both Cinelli and Blue Mountain have filed bankruptcy, with Cinelli listing the majority of his creditors as Blue Mountain victims.