Last Defendant in Lottery Scam Involving Palisades Man Is Sentenced

The last defendant in an international fraud scheme that swindled nearly $26.5 million from thousands of people in the U.S. and Canada was sentenced to 10 years in federal prison Monday.

James Ray Houston, 65, of Kansas City, was the last of five defendants to face sentencing. Palisades resident Henry Walther, 66, was among his co-conspirators.

A U.S. Attorney's office spokesman said Walther, a former Santa Monica attorney, pleaded guilty to mail fraud in connection with the scheme in March 2007. Walther was sentenced to two years in federal prison, three years of supervised release and a $10,000 fine in April 2010.

Walther's son, Scott Henry Walther, was indicted in the scam in 2007. Scott Henry Walther lived in Goleta, Calif., at the time of his initial court appearance. The charges were dismissed in March 2008.

According to the U.S. Attorney's office, during the 16-year scheme, the defendants collected money from the victims by offering to buy international lottery tickets on their behalf. However, the defendants never purchased the tickets. Instead, the money was transferred to various overseas accounts and a small portion of the money was sent back to the victims as "winnings." The rest was used to fund operation costs and then divided between the defendants.

During Monday's sentencing, prosecutors read a document seized from Scott Henry Walther's home that stated, "This is fraud that has been going on for many years. Millions of dollars have been stolen from people that cannot afford it."

Court documents also showed that many of the victims of the scheme were elderly.

Henry Walther began serving his federal prison sentence at the Federal Correctional Institution-La Tuna in Anthony, Texas, in June 2010.

Editor's note: This story was updated to include information that, in March 2008, Scott Henry Walther was cleared of all charges related to the international lottery scam.