Read Online You Can't Cheat an Honest Man by James Walsh - Free Book Online

promised tax benefits proved to be grossly exaggerated. Still, UEC sold 5,323 aluminum and silicon solar energy devices to 4,500 investors for $30,000 to $40,000 each. That was a total take of more than $200 million—though only about $83 million was collected. “Ernie was a consummate salesman,” says Patrick Jordan, a lawyer who bought a solar module from Lampert.
    UEC recruited life insurance agents and financial planners to sell modules on a commission basis. The contracts for the modules usually provided for down payments ranging from 36 percent to 43 percent of the purchase price, with the remainder financed by long-term, generally nonrecourse, promissory notes which were payable in semiannual or annual installments and secured by the modules themselves. In a typical United Energy sales agreement, a person bought a $40,000 module with a $14,500 down payment and signed a 30-year promissory note for $25,500 in monthly payments. There was some truth to the tax-advantage claims. Federal and state tax credits created in 1982 to spur investment in renewable-energy programs allowed a UEC investor in the 50 percent tax bracket who put down only $14,500 on a module to reap tax benefits of $23,235 in the first year.
    So, for UEC’s investors, many of them lawyers, accountants or engineers, the company’s sales pitch offered a chance to invest in a socially beneficial program and a lucrative tax shelter at the same time.
    Early investors were paid for power their modules never produced. In typical Ponzi scheme fashion, UEC made it appear that the business venture was a success. It fabricated kilowatt hours of production for each module and paid owners more than $4 million for this phony productivity.
    The truth: UEC solar farms produced a negligible amount of power. The farms actually sold a total of less than $3,500 of electricity, in part because about 1,200 of the modules bought by investors were either not built or not installed.
    Almost half of those that were installed didn’t have a critical element, the solar cells that chemically convert sunlight to electricity. Lampert said that problems with solar-cell suppliers forced him to install many of the modules without cells in order to meet IRS requirements that the devices be “placed in service” to qualify for tax benefits. Because the modules were capable of producing thermal energy—that is, heating the water—they technically functioned.
    This kind of slippery logic was typical of Lampert’s business ethic. He was also a virtuoso of self-dealing. Among his transactions:
    • Renewable Power Corp., owned by Lampert’s wife Delphine, actually owned the hardware and real estate at the three solar farms. It rented the integrated life systems to UEC.
• United Financial Corp., owned by Lampert himself, and operated as a financing unit whose sole income was a 1 percent interest markup on investors’ money as it flowed from UEC to Renewable Power.
    • Lampert executed an agreement with himself, as “exclusive designer” of various renewable-energy equipment, to receive a 4 percent commission on UEC’s gross sales. Besides his $75,000 annual salary, the arrangement brought him about $2.7 million.
    By early 1984, word was circulating among UEC investors that the company was being investigated by the IRS and California state regulators. In April 1984, eleven southern California investors who put a total of almost $400,000 in UEC filed a lawsuit claiming fraud.
    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