DENVER – Troy A. Eid, United States Attorney for the District of Colorado, Joe Campbell, Acting Special Agent in Charge of the Denver Division of the FBI, and Terry L. Stuart, Special Agent In Charge of the IRS-Criminal Investigation, Denver Field Office, announced that NORMAN SCHMIDT, of Denver, Colorado, was found guilty of committing crimes, including conspiracy to commit mail fraud, wire fraud and securities fraud, and separately the crime of money laundering, following a six week jury trial before U.S. District Court Judge Robert E. Blackburn. The jury verdict relates to the defendant and others committing crimes in connection with a fraudulent “high yield investment scheme.” The jury deliberated for approximately 6 days before handing down their verdicts. The defendant was found guilty of 37 of 42 counts.
In addition to SCHMIDT, the jury found CHARLES LEWIS, Littleton, Colorado, guilty of conspiracy along with various counts of mail fraud, wire fraud, and securities fraud as well as money laundering. LEWIS was also found not guilty of some of the charges. The jury convicted GEORGE ALAN WEED, of Benton, Illinois, on one count mail fraud, one count of wire fraud and one count of securities fraud, but found him not guilty of other charges. The jury found MICHAEL DUANE SMITH, of Colbert, Washington, guilty of three counts of securities fraud, and not guilty of other charges.
Two other people indicted as part of the scheme have previously pled guilty. JANICE McLAIN SCHMIDT, of Denver, pled guilty to being involved in the fraudulent scheme, and was sentenced by Judge Blackburn to serve 9 years in federal prison. GEORGE BEROS, of Shaker Heights, Ohio, also pled guilty to being involved in the scheme, and awaits sentencing. The final person indicted, PETER A.W. MOSS, is believed to be in Great Britain. The U.S. Attorney’s Office will seek to extradite MOSS.
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 LEWIS 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.” The two, with assistance from others, including, WEED AND SMITH, 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.
“Investment schemes, such as the one the defendants were found guilty of operating today, involve empty promises, and no real financial returns,” said U.S. Attorney Troy Eid. “The only people who prosper from these ‘high yield’ schemes are the fraudsters,” US Attorney Eid said.
“The verdict received today reflects the extensive efforts, in a four year investigation, of the agents of the FBI as well as our law enforcement partners,” said Joe Campbell, Acting Special Agent in Charge of the FBI in Denver. “Protecting hard working and honest citizens from fraud schemes which rob them of their life savings is extremely important. It is one of the priorities of the FBI to preserve the integrity of the securities industry and legitimate investments.”
“Fraudulent High Yield Investments or Prime Bank schemes continue to ensnare thousands of victims each year,” said Terry L. Stuart, Special Agent in Charge, IRS-Criminal Investigation, Denver Field Office. “The best protection for potential investors is to understand that high yields and low risk are not typically found in the same investment. Also, potential investors should remember the fundamental rule of investing, ‘there is no such thing as a risk free investment’” Stuart said.
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.
“I want to thank the many people that have worked so hard on this complex criminal investigation,” said Colorado Securities Commissioner Fred Joseph.
Conspiracy carries a penalty of not more than 5 years in federal prison and/or a $250,000 fine per count. Mail fraud and wire fraud carry penalties of up to a $1,000,000 fine and not more than 5 years in federal prison if committed prior to July 30, 2002, or up to 20 years in prison if committed after July 30, 2002, for each count.
Securities fraud carries a penalty of not more than 5 years in prison and/or a fine of up to $10,000 per count. Money laundering is punishable by up to 20 years in federal prison and/or up to either a $250,000 fine or a $500,000 fine, or two times the value of the associated property per count.
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.