Ponzi Man Is on the Lam, SEC Says
WASHINGTON, D.C. (CN) - A recidivist scammer bilked investors out of $22 million through a "web of seemingly legitimate companies," and fled the country when his tax lien scheme collapsed, the SEC claims in court.
Defendant Lawrence Schmidt ran the Ponzi scheme for six years through his companies FutureGen Capital and Commercial Equity Partners, the SEC claims.
"Schmidt defrauded investors by creating a web of seemingly legitimate companies that were in fact simply designed to entice investment and conceal his misuse and commingling of funds," the complaint states. "Over a six year period, from 2008 to 2014, Schmidt raised nearly $22 million from over 200 unsuspecting investors, siphoning off almost $2 million for his own benefit, paying old investors with new investor money and ultimately firing all his employees and fleeing the country when his scheme collapsed."
Defendants include FGC Distressed Assets Investment #1, FutureGen Capital DDA CG Fund, FGC Tax Lien Fund #2, FGC Trading Fund #1, FGC SPE No. 1, FGC SPE No. 2 and FGC CM Note Fund.
"In May 2008, struggling financially and having filed for personal bankruptcy a few months earlier, Schmidt formed Commercial Partners and began the fraudulent scheme," the 22-page complaint states. "Commercial Partners' supposed business model was to issue debt securities to investors, many of whom were unsophisticated with limited assets, promising to pay a fixed rate or return, and invest those funds in tax liens. Schmidt failed to register these securities offering with the Commission."
Commercial Partners' website "boasted of an experienced management team that predated Schmidt's arrival at the company and identified Schmidt as only the Senior Vice President for Tax Liens," the SEC added.
This "calculated" lie was meant to deceive investors, however, and management biographies were actually the copied resumes of unaffiliated banking industry professionals.
Schmidt started FutureGen in 2009, a separate entity meant to serve as successor to Commercial Partners.
Schmidt, 54, also formed the various FutureGen Fund entities, the SEC says, and operated the companies the same as Commercial Partners - issuing debt securities; promising a fixed rate of return; and claiming to invest the money in investor-designated asset lines, such as tax liens, commercial mortgages and distressed debt.
Schmidt pocketed $1.7 million in salary and additional personal payments from the funds, the SEC says, to pay the mortgage on a home in Georgia and rent on residences in Washington, D.C.
Faced with a lack of new investors and "massive obligations" to existing investors, the SEC says, Schmidt bolted in April.
He allegedly acknowledged the scheme in a letter to his goddaughter, in which he apologized and "begged forgiveness."
"At this point in my life I have three choices, suicide, prison more than likely or to try to start over and make ever [sic] right by everyone," Schmidt wrote, according to the SEC.
In a separate email to FutureGen's part-time accountant the day after he fled, Schmidt wrote: "I went through the book and we owe investors like $13 Mil and only have about $7 Mil in Assets. I don't know how I let it get to this ... I have to figure out a way to make this money back, but so much pressure. I feel like I have failed everyone. ... We have assets but I can't be trusted to manage this," according to the lawsuit.
Schmidt's "lengthy" criminal record, spanning the 1980s and early 1990s, is dotted with at least six convictions for crimes involving dishonesty, including check fraud, the SEC says.
In 2003, the Pennsylvania Securities Commission issued a cease and desist order against Schmidt and ATC Investment Group and ordered him to stop offering or selling investments in the state.
The Tennessee Securities Division issued a similar order the following year, finding Schmidt and ATC - and related entity Pilatus Financial Center - offered unregistered securities.
Schmidt attempted to launch the online, for-profit St. James Business College in 2005, the complaint adds, and filed for bankruptcy in 2008.
The bankruptcy petition, in which Schmidt allegedly forged the name of his purported wife Dawn Kil, was dismissed for failure to pay filing fees.
The SEC seeks an injunction, disgorgement of ill-gotten gains and civil penalties.