You Can't Cheat an Honest Man - James Walsh [22]
John Bisnar, an attorney for the group, said that his clients intended to use the investments as a means of lessening tax liabilities. Instead, they learned that the devices were “never purchased and never installed,” Bisnar said. “In the beginning, everything seemed to be all right. Perhaps [UEC] got too successful and got more investors than they could handle.”
Bisnar said the investors would be pleased if they could recover their investments and attorney’s fees. “If Lampert called tomorrow and said ‘I’ll give them their money back,’ I’d be willing to drop the whole thing,” Bisnar said. The call never came. But more trouble did.
In October 1984, UEC and Renewable Power were named in a civil lawsuit filed by the California Corporations Commission, which alleged violations of state securities laws. The state tried to get an injunction to put the companies out of business—but the court refused, insisting the case go to trial.
By early 1985, well before any of the 30-year benefits were seen, UEC filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code. By the bankruptcy trustee’s accounting, more than $40 million of the $83 million received by UEC went to manufacturing and construction of solar modules, the ponds and manufacturing equipment. About $7.3 million was spent on research and development, $12 million for operating and marketing costs, $12 million for sales commissions and $4.7 million in payments to module owners for “purported but fictional power sales” to public utilities. The payments made UEC a Ponzi scheme.
The trustee alleged that $20 million in UEC assets, including three condominiums valued at more than $600,000, four airplanes, two cars and nearly $2.7 million in “royalties” were “fraudulently or otherwise improperly transferred” to Lampert and Lampert-controlled entities.
In March 1987, a federal court ruled that the Lamperts had operated an abusive tax shelter that “perpetrated a massive fraud upon the public and the government.” The ruling, by Magistrate Claudia Wilken, enjoined the Lamperts from selling tax-shelter-related investments without prior Internal Revenue Service approval. Wilken concluded that Lampert had “diverted money from UEC for the purpose of hindering the Internal Revenue Service. He has engaged in extensive deceptive and fraudulent practices and made it clear that he intends to continue these practices.”
Wilken also ruled that Lampert had diverted $4.5 million from UEC into his own bank account. Finally, she wrote:
No buyer with reasonable knowledge of the relevant facts would buy a UEC module at any price....Such a buyer would have realized that UEC’s modules had no chance of producing any significant income and that tax credits would never become available because the modules would never be placed in service and because the...operation was a sham.... The best evidence of the modules’ value is the Trustee’s sale of them for scrap, which will bring at most several hundred dollars.
One of Lamperts attorneys said the findings “[weren]’t supported by the evidence” and he intended to appeal the ruling. He said that Lampert already had been assessed more than $9.5 million in abusivetax-shelter fines by the IRS even though the judge who had presided over the state actions had “found absolutely no evidence of any type of Ponzi scheme.”
Lampert blamed investigations by the IRS and the California Department of Corporations for the company’s demise. “If I wanted to do an ment of Corporations for the company’s demise. “If I wanted to do an square-foot office on Wilshire Boulevard. We did not have a garage operation.” He also accused the government of purposely delaying trial in its case against him, aware that bankruptcy and tax assessments would leave him hard-pressed to mount a defense.
By the late 1980s, Lampert had gone back into business, selling rooftop solar-power modules through a southern California company called Lampert Energy Co. He even solicited