US Attorney Reports Investment Partnership Pleads Guilty To Defrauding Family Members & Others In Multimillion Dollar Scheme

LAWFUEL – The Legal Newswire – MICHAEL J. GARCIA, United States Attorney for the
Southern District of New York, announced that HOWARD SCHNEIDER
pleaded guilty today in Manhattan federal court to wire fraud
charges. The Indictment to which he pleaded charged him with
defrauding investors — many of whom were family members — out
of millions of dollars they had invested in an investment
partnership SCHNEIDER founded and managed. According to the
Indictment, other documents filed in this case, and statements
made in court:

Beginning around 1997, SCHNEIDER was the general partner
of Gateway Capital Partners, L.P. (“Gateway Capital”), a limited
partnership organized under the laws of the State of California.
In that capacity, SCHNEIDER was responsible for managing Gateway
Capital’s operations. SCHNEIDER purported to manage Gateway
Capital as an investment fund, soliciting money from investors by
representing that the money would be invested in various assets
and business endeavors in an effort to earn profits for Gateway
Capital and its investors. During the life of Gateway Capital,
SCHNEIDER induced various individuals to invest a total of
approximately $19 million.

In his role as general partner, SCHNEIDER reported to
Gateway Capital’s accountant and investors that he had invested
approximately $11 million of Gateway Capital’s money in an
offshore investment account held in the name of Gateway Capital.
In fact, SCHNEIDER transferred only approximately $4 million of
Gateway Capital’s funds to this account. Instead, he transferred
a net of approximately $5 million of Gateway Capital’s funds to
accounts he held in his own name. In order to conceal the
difference between the $11 million SCHNEIDER claimed he had
transferred and the actual amount, SCHNEIDER produced phony
receipts falsely purporting to be from the overseas brokerage and
acknowledging receipt of the full $11 million. Once in
SCHNEIDER’s personal accounts, these funds were spent on
SCHNEIDER’s personal expenses and investments, including personal
investment trading, a deposit on a house, car purchases and
leases, and the payment of personal credit card bills.
In addition, of the $4 million that SCHNEIDER wired
overseas, he embezzled approximately $3.7 million by having the
overseas brokerage wire the money back into his own personal

SCHNEIDER also used Gateway Capital’s funds to purchase
and take physical possession of approximately $3 million in gold
coins, the whereabouts of which are presently unknown.
SCHNEIDER, 63, of Los Angeles, California, pleaded
guilty today to one count of wire fraud. He faces a maximum
sentence of twenty years’ imprisonment and a maximum fine of the
greater of $250,000, or twice the gross gain or gross loss from
the offense.

Mr. GARCIA praised the Federal Bureau of Investigation
for its work in this investigation.
This prosecution is being handled by the Major Crimes
Unit of the United States Attorney’s Office. Assistant United
States Attorney MICHAEL A. LEVY is in charge of the prosecution.

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