Source: US State of California
Defendant Agrees to Pay Restitution and to Assist Prosecutors with Locating and Transferring Assets
SAN FRANCISCO – Lewis Wallach pleaded guilty today in federal court to fraud charges for his role in a large-scale fraud involving the Marin County real estate company Professional Financial Investors, or PFI, announced United States Attorney David L. Anderson and Federal Bureau Investigation Special Agent in Charge Craig D. Fair. The plea was accepted by the Hon. Maxine M. Chesney, U.S. District Judge.
Wallach, 64, of Los Angeles, is the former CEO of PFI. He was charged in a criminal information filed on September 29, 2020, alleging that he and PFI’s now-deceased founder ran the company as a Ponzi scheme. The information charged Wallach with one count of wire fraud and one count of conspiracy to commit wire fraud, in a scheme to defraud and conspiracy that went back to at least 2015.
According to his plea agreement, Wallach admitted that he was hired by the founder of PFI and related entity Professional Investors Security Fund, or PISF, in 1990, and that he was later named president and CEO of PFI. Both companies were based in Novato, California. Wallach admitted that PFI and PISF investors were told that the investors’ regular interest and distribution payments would be paid from income on the residential and commercial properties owned and managed by PFI. In fact, as Wallach admitted, he knew that PFI was not profitable and that income from the properties was not sufficient to pay both interest and distributions. In fact, both Wallach and the company founder knew that PFI and PISF had to raise new investments to pay existing investors.
Wallach admitted that he lied to investors, including falsely telling investors that PFI had significant reserves to allow it to survive and expand during the economic downturn caused by the COVID 19 pandemic. He admitted that he conspired with the PFI founder to mislead investors and solicit investor funds using false statements.
Wallach also admitted that he engaged in a years-long scheme to embezzle funds from PFI and PISF in which he took more than $26 million from 2015 until June 2020, including money he used for large investments, the purchase of real estate, and payment of personal expenses.
Under a plea agreement entered by Wallach and the United States Attorney’s Office, Wallach agrees to the entry of an order by the court requiring him to pay restitution of no less than $26.7 million. Pursuant to the agreement, Wallach also agrees to continue to cooperate in the criminal investigation and to assist prosecutors with identifying, securing, and transferring any assets derived from or related to the charged offense.
Wallach was charged by information on September 29, 2020, with one count of wire fraud, in violation of 18 U.S.C. § 1343, and one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349. Wallach pleaded guilty to both counts.
The maximum statutory penalties for each of the two counts, wire fraud under 18 U.S.C. § 1343 and conspiracy to commit wire fraud under 18 U.S.C. § 1349, are 20 years in prison, a fine of $250,000, and restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Wallach is currently on pretrial release after posting a $500,000 bond. The case was set for a status hearing on March 24, 2020, at 2:15 p.m., before the Honorable Maxine M. Chesney, U.S. District Judge; no sentencing hearing has been scheduled.
The case is being prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office. The prosecution is the result of an investigation by the Federal Bureau of Investigation. The United States Attorney’s Office and the Federal Bureau of Investigation also thank the San Francisco Regional Office of the Securities and Exchange Commission.