Woman pleads guilty to defrauding Paonia man, others

Woman pleads guilty to defrauding Paonia man, others

Posted By Scarlett Law Group || 11-Oct-2006

Name : Katharhynn Heidelberg

Daily Press News Editor

DENVER - In a surprising move Friday, the woman the IRS says participated in one of the biggest prime banknote fraud schemes in Colorado changed her plea to guilty.

Jannice McClain Schmidt, 69, had been indicted in 2004 for her role in a prime bank note scheme the IRS contends bilked victims, including Cliff Seigneur of Paonia, out of a total of $56 million. Schmidt and her co-defendants George Beros, George Weed, Michael Smith, Charles Lewis, Norman Schmidt and Peter Moss allegedly used the money for such extravagant purchases as the Redstone Castle and NASCAR vehicles.

She pleaded guilty Friday to two counts of securities fraud and one count of criminal forfeiture, John Harrison, IRS investigator and regional public information officer said. Other charges will likely be dismissed. According to IRS charging documents, Schmidt's second securities fraud offense was committed when she deposited Seigneur's $25,000 cashier's check into an account at a Denver bank on May 20, 2003.

Schmidt was also charged with violating her bond conditions in 2005, after investigators said she committed further crimes, including mailing Seigneur a "lulling payment" to reassure him concerning investments he'd made.

"Two days after her release (on bond), Schmidt mailed money orders to a Paonia man named (Cliff) Seigneur," the IRS said in a news release. These were supposed to represent profits on money he'd given her for investment. According to the release, IRS agents also testified that Schmidt had "sent monthly statements falsely reflecting 10-percent per-month profits to investors after she was free on bond."

"I'm sort of glad to think the law will catch up with you eventually," Seigneur said Friday upon learning of the guilty plea. "That (plea) is telling of the whole thing."

He said the $25,000 he'd invested was the "minimum amount." Though he eventually "earned" back his initial investment, Seigneur said he never saw a dime of the profits he'd been promised by the personable Schmidts.

Seigneur had learned of the "investment opportunity" and the Schmidts from a neighbor. "I looked into it," Seigneur said. "Everything seemed to come pretty clean. I called them up. What started out being pretty good slowly turned sour. Fortunately, I recovered all of my money, but I didn't make any money."

Harrison said prime banknote fraud dates from at least the 1950s. Usually, those perpetrating it ask for upfront investments, promising returns of up to 400 percent at "no risk," sometimes in exchange for a confidentiality agreement that specifies investors are not to contact law enforcement. Such offers are often presented as a special trading market secret that banks and the government conceal from the average citizen. Often, victims are told their investment is insured.

Seigneur said he was told the Schmidts had contacts with the auto-racing world and were involved in publicity. The return on investment would be significant and come from promotions and advertising. "But it was never crystal clear. Now … I just ask myself: 'Why did you do that?'" he said.

In reality, there's no such thing as a "risk-free, insured" investment, let alone one that can pay dividends as high as 400 percent. Too, victims who become suspicious enough to demand money are sent token lulling payments, enough to string them along - sometimes, enough to convince them to spread the word to others.

Anyone can be a victim. Though he never dealt with financial crimes, Seigneur said he was a former assistant attorney general. But medical issues, including multiple scoleosis and a traumatic brain injury, left him vulnerable.

Seigneur said the amount of interest he'd been promised should've been a red flag.

"That's why I should have been suspicious, but at the time I was recovering. Whenever we get greedy, that's when you get taken," he said.

The payments Schmidt sent dwindled over time and he became suspicious.

"I didn't panic, though," Seigneur said. "I sort of stayed with it. Within a year, I got back my principal, but I certainly made no money. I was surprised. They seemed like really nice people. I'd never been taken before. I guess that's how it goes."

He said that when he questioned the Schmidts about the payments, he was told they were having "investment problems."

"But they wouldn't specify exactly what. I think they were having legal problems instead of investment problems."

Harrison said Seigneur was far not alone, as the overall scheme was thought to have involved more than 1,000 victims.

"This is the type that could impact an investor anywhere in Colorado, including in our own backyard of Paonia," he said. "As soon as people hear of these potentially great investments, word of mouth spreads. That's what they (fraudsters) rely on to get people hooked on these schemes."

Schmidt will be sentenced Aug. 25 in Denver and faces up to five years in prison on each charge, plus fines of up to $250,000 on each count. She could also be ordered to pay restitution and as part of her criminal forfeiture plea, will surrender Nebraska property she'd purchased with her apparently ill-gotten gains.

"Anytime you're taking advantage of other people financially, I think some sort of punishment is definitely correct," Seigneur said.

Source: http://www.montrosepress.com/articles/2006/05/07/local_news/5.txt

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