DENVER (Lawfuel) – Troy A. Eid, United States Attorney for the District of Colorado, James H. Davis, Special Agent in Charge of the Federal Bureau of Investigation’s Denver Division, and Terry L. Stuart, Special Agent In Charge of the IRS-Criminal Investigation, Denver Field Office, announced that NORMAN SCHMIDT, age 72, of Denver, Colorado, was sentenced this afternoon by U.S. District Court Judge Robert E. Blackburn to serve 330 years in federal prison for his role in a fraudulent “high yield investment scheme.” Judge Blackburn deferred entry of a final order of restitution. The judge did enter an order of forfeiture totaling $38,414,988.49. SCHMIDT was remanded and ordered to start serving his sentence immediately.
SCHMIDT was found guilty on May 29, 2007, following an eight week jury trial, of conspiracy to commit mail fraud, wire fraud and securities fraud, as well as substantive counts of mail fraud, wire fraud and securities fraud, and separately the crime of money laundering. SCHMIDT, his wife, JANNICE SCHMIDT, and 5 others were indicted by a federal grand jury in Denver on March 10, 2004. JANNICE SCHMIDT was previously sentenced by Judge Blackburn to serve 108 months (9 years) in federal prison. Other co-defendants George Alan Weed, Charles Lewis, and Michael Smith await sentencing. George Beros was previously sentenced by Judge Blackburn to serve 1 year and 1 day in federal prison, and ordered to pay restitution to victims totaling $286,739. Peter A.W. Moss remains a fugitive.
According to the evidence presented during the trial, SCHMIDT obtained tens of millions of dollars from hundreds of investors, and used the money for the defendants’ own personal gain. From April 1999 through April 2003, SCHMIDT and others engaged in a conspiracy to commit mail, wire and securities fraud by executing a scheme to defraud investors by implementing a “high-yield investment program.” SCHMIDT, with assistance from others, falsely stated that they would invest the victims’ money, promising rates of return from 2 percent to 400 percent per month. To perpetuate the scheme, the defendants sent investors fraudulent monthly statements which falsely reflected the growth of and earnings on their invested funds. The defendants would encourage victim investors to make additional investments, defer disbursements, and refer new investors to the program.
To lure and reassure investors, the defendants made false representations that the investments were safe because invested funds could not be moved, and that the investments were insured from loss by various high profile insurance companies. Defendants also misled investors by using false legal opinion letters concerning the status of insurance on investor funds. To further their scheme, the defendants created corporate alter egos through which the investment program was offered. Entities involved in the scheme include the Reserve Foundation Trust, Smitty’s Investments, Capital Holdings, Monarch Capital Holdings, and Fast Track.
The defendants then used investor funds for purposes other than those represented to investors, including for loans or payments to the defendants, personal expenses, acquisition of unrelated businesses and assets, payments to other investors, and the payments of monthly commissions or “overrides” to members of a network of individuals, acquaintances, and insurance agents recruited by the defendants to obtain new investors in the fraudulent program. Some of the investors’ money was used to purchase the Redstone Castle Properties.
“If someone promises to double your money overnight, don’t believe it,” said U.S. Attorney Troy Eid.
“The FBI continues to work closely with our law enforcement partners to protect investors from fraudulent schemes,” said FBI Special Agent in Charge James Davis. “In this case, some people ‘invested’ their life savings, only to later learn those they trusted spent their money on frivolous things.”
“If you can’t afford to lose it, don’t invest it! That’s the safest way to avoid being a victim of an investment scam,” said Terry L. Stuart, Special Agent in Charge of the IRS Criminal Investigation, Denver Field Office.
Some of the investors’ money was used to purchase the Redstone Castle, which was seized by federal agents. Also seized during the course of the investigation, was money in approximately 60 bank accounts, and 8 NASCAR race cars, 1 race truck, as well as other race related vehicles and items. Federal agents seized assets, including cash and property, worth approximately $24,000,000. These assets have been distributed to the victims of this fraudulent scheme through a separate court process. To date over $18,000,000 in forfeited funds have been returned to the victims of the crime.
The case was investigated by the Federal Bureau of Investigation (FBI), the Internal Revenue Service (IRS) Criminal Investigations, and the State of Colorado Department of Regulatory Agencies Division of Securities.
The case is being prosecuted by Assistant United States Attorneys Wyatt Angelo and Matthew Kirsch. The civil asset forfeiture case is being handled by Assistant United States Attorney James Russell.