Monday, August 30, 2010
Francis Alan Schmitz Plea Agreement
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA )
) No. 10 CR 361
v. ) Judge Rebecca L. Pallmeyer
)
FRANCIS ALAN SCHMITZ )
PLEA AGREEMENT
1. This Plea Agreement between the United States Attorney for the Northern
District of Illinois, PATRICK J. FITZGERALD, and defendant FRANCIS ALAN
SCHMITZ, and his attorney, RONALD L. BELL, is made pursuant to Rule 11 of the Federal
Rules of Criminal Procedure and is governed in part by Rule 11(c)(1)(A), as more fully set
forth below. The parties to this Agreement have agreed upon the following:
Charges in This Case
2. The information in this case charges defendant with mail fraud affecting a
financial institution in violation of Title 18, United States Code, Section 1341 and bank fraud
in violation of Title 18, United States Code, Section 1344.
3. Defendant has read the charges against him contained in the information, and
those charges have been fully explained to him by his attorney.
4. Defendant fully understands the nature and elements of the crimes with which
he has been charged.
Charge to Which Defendant is Pleading Guilty
5. By this Plea Agreement, defendant agrees to enter a voluntary plea of guilty
to Count One of the information, which charges defendant with engaging in a scheme to
defraud financial institutions and others in violation of Title 18, United States Code, Section
1341.
Background
6. Defendant will plead guilty because he is in fact guilty of the charge contained
in Count One of the information. In pleading guilty, defendant admits the following facts
and that those facts establish his guilt beyond a reasonable doubt:
During a period beginning no later than in or about 2004 and continuing to in or about
May 2010, in the Northern District of Illinois, Eastern Division, and elsewhere, defendant
Francis Alan Schmitz devised and participated in a scheme to defraud financial institutions
and others and to obtain money and property from financial institutions and others by means
of materially false and fraudulent pretenses and representations and of material omissions.
Defendant Schmitz held himself out as being engaged in the real estate development
business through various entities, including Long Grove Real Estate Partners, LLC. The
defendant represented himself to be a managing partner of Long Grove Real Estate partners,
most recently located in Arlington Heights, Illinois. This office was a mail drop at a UPS
Store.
Beginning no later than in or about 2004 until the defendant’s arrest in May 2010, the
defendant claimed to be the beneficiary of a multi-million dollar trust, sometimes referred
to as the F. Alan and Huston Trust. During this same approximate period of time, the
defendant attempted to obtain millions of dollars of funding from various sources, including
at least six banks with deposits insured at the time by the Federal Deposit Insurance
Corporation. These banks included:
The Scheme
As a part of a fraudulent financing scheme designed to benefit himself and his
business ventures and to make ponzi-type payments to earlier providers of funds, defendant
Schmitz fraudulently obtained over $6,000,000 in funds primarily through seeking and
obtaining loans and other extensions of credit.
In seeking and obtaining these funds, defendant Schmitz made and caused to be made material misstatements and omissions about, among other things, his income, his liabilities, his net worth, his ownership of trust assets, and his intended use of funds. The defendant also, among other things, used forgeries, assumed other identities, made fraudulent court filings, made misrepresentations under oath during a bankruptcy hearing and made ponzi-type payments to earlier complaining funders
to further the scheme.
As a part of his fraudulent financing scheme, the defendant fraudulently obtained
funds in other ways as well. For instance, the defendant continued to receive and use
social security benefit payments intended for his brother for a period of about 15 months
after his brother died. This amounted to over $14,000.
Defendant Schmitz falsely represented and caused to be falsely represented to certain
prospective funders that he was the beneficiary of a multi-million trust fund and that the trust
assets were available to collateralize funding. The periodic account statements for the trust,
federal income tax returns for the trust and communications from persons associated with the
trust, e.g. accountant, trustee, broker, were fraudulently created and disseminated by the
defendant.
Defendant Schmitz also falsely represented to certain prospective funders that his trust
assets were held at various institutions, including Winston and Huston Trust and Financial
Services, LLC. (Winston and Huston). The defendant had no trust assets at these institutions,
including Winston and Huston. The defendant created Winston and Huston, set up its
website, arranged for its virtual office space and authored emails and other communications
of fictitious Winston and Huston employees the defendant created.
Additionally, defendant Schmitz provided to certain prospective funders false and
fraudulent federal income tax returns for the purported trust and for himself. For instance,
the defendant provided at least one prospective funder with personal and trust federal income
tax returns for 2007 showing both personal and trust income as being over $300,000. In his
bankruptcy petition, the defendant reported employment income of only $15,000 for 2007.
Defendant Schmitz also provided to certain prospective funders false and fraudulent personal
financial statements. For example, the defendant provided to at least one prospective funder
a personal financial statement as of December 1, 2008, in which the defendant represented
that he had trust assets of $5,379,113 and gross annual salary of $275,000. In his bankruptcy
petition filed in December 2009, the defendant reported no trust assets and total income from
employment as being $15,000 in 2007, $16,626 in 2008 and $14,000 in 2009. Although the
defendant listed $1,369,475 in liabilities on his personal financial statement as of December
1, 2008, he did not include the more than $1,500,000 the defendant owed Inland Bank &
Trust, a previously defrauded financial institution, on a defaulted loan.
Defendant Schmitz also falsely represented to certain prospective funders his intended
use of the funds obtained. As an example, defendant Schmitz represented to at least one
prospective provider of funds that the funds would be used in connection with real estate
transactions in Long Grove, Illinois. The defendant used little if any of the funds from this
$2,850,000 line of credit in connection with Long Grove real estate transactions. The
defendant intended to and did use $1,630,274 from this lender to make a ponzi-type payment
to a previous complaining lender and misappropriated another amount in excess of $300,000
of these funds for his own benefit. Defendant then concealed these misappropriations by
providing the lender with a fraudulent written accounting.
Defendant Schmitz concealed, hid, and continued the scheme by, among other things,
making ponzi-type payments to earlier complaining lenders, making fraudulent filings in
related civil litigations and making false statements under oath in a bankruptcy proceeding
about his purported trust fund.
As a result of the scheme, defendant Schmitz fraudulently obtained over
$6,000,000 from financial institutions and others and used a significant portion of the funds
to make ponzi-type payments to earlier funders and to benefit himself. Victims of the
scheme ultimately lost over $3,000,000.
On or about April 18, 2009, in the Northern District of Illinois, Eastern Division, and
elsewhere, defendant Schmitz, for the purpose of executing the scheme and attempting to do
so, knowingly caused to be deposited to be sent and delivered by commercial interstate
carrier from the Northern District of Illinois to Sarasota, Florida certain documents related
to obtaining a $2,850,000 line of credit, including a control agreement concerning the
defendant’s purported trust assets; In violation of Title 18, United States Code, Section 1341.
Maximum Statutory Penalties
7. Defendant understands that the charge to which he is pleading guilty carries
the following statutory penalties:
a. A maximum sentence of 30 years' imprisonment. This offense also
carries a maximum fine of $1,000,000, or twice the gross gain or gross loss resulting from
that offense, whichever is greater. Defendant further understands that the judge also may
impose a term of supervised release of not more than five years.
b. Defendant further understands that the Court must order restitution to the victims of the offense in an amount determined by the Court.
c. In accord with Title 18, United States Code, Section 3013, defendant
will be assessed $100 on the charge to which he has pled guilty, in addition to any other
penalty or restitution imposed.
Sentencing Guidelines Calculations
8. Defendant understands that in imposing sentence the Court will be guided by
the United States Sentencing Guidelines. Defendant understands that the Sentencing
Guidelines are advisory, not mandatory, but that the Court must consider the Guidelines in
determining a reasonable sentence.
9. For purposes of calculating the Sentencing Guidelines, the parties agree on the
following points:
a. Applicable Guidelines. The Sentencing Guidelines to be considered in this case are those in effect at the time of sentencing. The following statements regarding the calculation of the Sentencing Guidelines are based on the Guidelines Manual currently in effect, namely the November 2009 Guidelines Manual.
b. Offense Level Calculations.
i. The base offense level for the charge in Count One of the information is 7, pursuant to Guideline §2B1.1(a)(1);
ii. Since the offense caused losses of more than $2,500,000, 18 offense levels are added pursuant to Guideline 2B1.1(b)(J);
iii. As a part of the offense, the defendant made material misrepresentations under oath in a bankruptcy proceeding resulting in a 2 offense level increase under Guideline 2B1.1(b)(8)(B);
iv. The defendant used sophisticated means as part of the offense resulting in another 2 offense level increase pursuant to Guideline 2B1.1(b)(9)(C);
v. Since the defendant obtained more than $1,000,000 in gross receipts from financial institutions, another 2 offense levels are added under Guideline 2B1.1(b)(14)(A);
vi. Defendant has clearly demonstrated a recognition and affirmative acceptance of personal responsibility for his criminal conduct. If the government does not receive additional evidence in conflict with this provision, and if defendant continues to accept responsibility for his actions within the meaning of Guideline §3E1.1(a), including by furnishing the United States Attorney’s Office and the Probation Office with all requested financial information relevant to his ability to satisfy any fine or restitution that may be imposed in this case, a two-level reduction in the offense level is appropriate.
vii. In accord with Guideline §3E1.1(b), defendant has timely notified the government of his intention to enter a plea of guilty, thereby permitting the government to avoid preparing for trial and permitting the Court to allocate its resources efficiently. Therefore, as provided by Guideline §3E1.1(b), if the Court determines the offense level to be 16 or greater prior to determining that defendant is entitled to a two-level reduction for acceptance of responsibility, the government will move for an additional one level reduction in the offense level.
c. Criminal History Category. With regard to determining defendant's criminal history points and criminal history category, based on the facts now known to the government and stipulated below, defendant's criminal history points equal 1 and defendant's criminal history category is I:
i. On or about June 19, 2002, defendant was convicted of misdemeanor theft in the Circuit Court of Lake County, Illinois and sentenced to a term of probation. One criminal history point is assigned as a result of this conviction.
d. Anticipated Advisory Sentencing Guidelines Range. Therefore, based on the facts now known to the government, the anticipated offense level is 28, which, when combined with the anticipated criminal history category of I, results in an anticipated advisory Sentencing Guidelines range of 78 to 97 months’ imprisonment, in addition to any supervised release, fine, and restitution the Court may impose.
e. Defendant and his attorney and the government acknowledge that the above Guideline calculations are preliminary in nature, and are non-binding predictions upon which neither party is entitled to rely. Defendant understands that further review of the facts or applicable legal principles may lead the government to conclude that different or additional Guideline provisions apply in this case. Defendant understands that the Probation Office will conduct its own investigation and that the Court ultimately determines the facts and law relevant to sentencing, and that the Court's determinations govern the final Guideline calculation. Accordingly, the validity of this Agreement is not contingent upon the probation officer’s or the Court's concurrence with the above calculations, and defendant shall not have a right to withdraw his plea on the basis of the Court's rejection of these calculations.
f. Both parties expressly acknowledge that this plea agreement is not governed by Fed.R.Crim.P. 11(c)(1)(B), and that errors in applying or interpreting any of the Sentencing Guidelines may be corrected by either party prior to sentencing. The parties may correct these errors either by stipulation or by a statement to the Probation Office or the Court, setting forth the disagreement regarding the applicable provisions of the Guidelines.
The validity of this Plea Agreement will not be affected by such corrections, and defendant shall not have a right to withdraw his plea, nor the government the right to vacate this Plea Agreement, on the basis of such corrections.
Agreements Relating to Sentencing
10. The government agrees to recommend that the Court impose a sentence of
imprisonment at the low end of the applicable guidelines range and to make no further
recommendation concerning what sentence of imprisonment should be imposed.
11. It is understood by the parties that the sentencing judge is neither a party to nor
bound by this Plea Agreement and may impose a sentence up to the maximum penalties as
set forth above. Defendant further acknowledges that if the Court does not accept the
sentencing recommendation of the parties, defendant will have no right to withdraw his
guilty plea.
12. Regarding restitution, defendant acknowledges that pursuant to Title 18, United
States Code, § 3663A, the Court must order defendant to make full restitution to victims in
an amount to be determined by the Court at sentencing, which amount shall reflect credit for
any funds repaid prior to sentencing.
13. Restitution shall be due immediately, and paid pursuant to a schedule to be set
by the Court at sentencing. Defendant acknowledges that pursuant to Title 18, United States
Code, Section 3664(k) he is required to notify the Court and the United States Attorney's
Office of any material change in economic circumstances that might affect his ability to pay
restitution.
14. Defendant agrees to pay the special assessment of $100 at the time of
sentencing with a cashier’s check or money order payable to the Clerk of the U.S. District
Court.
15. Defendant agrees that the United States may enforce collection of any fine or
restitution imposed in this case pursuant to Title 18, United States Code, Sections 3572,
3613, and 3664(m), notwithstanding any payment schedule set by the Court.
16. After sentence has been imposed on the count to which defendant pleads guilty
as agreed herein, the government will move to dismiss the remaining count of the
information as to defendant.
Acknowledgments and Waivers Regarding Plea of Guilty
Nature of Plea Agreement
17. This Plea Agreement is entirely voluntary and represents the entire agreement
between the United States Attorney and defendant regarding defendant's criminal liability
in case 10 CR 361.
18. This Plea Agreement concerns criminal liability only. Except as expressly set
forth in this Agreement, nothing herein shall constitute a limitation, waiver or release by the
United States or any of its agencies of any administrative or judicial civil claim, demand or
cause of action it may have against defendant or any other person or entity. The obligations
of this Agreement are limited to the United States Attorney's Office for the Northern District
of Illinois and cannot bind any other federal, state or local prosecuting, administrative or
regulatory authorities, except as expressly set forth in this Agreement.
19. Defendant understands that nothing in this Plea Agreement shall limit the
Internal Revenue Service (IRS) in its collection of any taxes, interest or penalties from
defendant and his spouse or defendant's partnership or corporations.
Waiver of Rights
20. Defendant understands that by pleading guilty he surrenders certain rights,
including the following:
a. Right to be charged by indictment. Defendant understands that he has
a right to have the charges prosecuted by an indictment returned by a concurrence of twelve
or more members of a grand jury consisting of not less than sixteen and not more than
twenty-three members. By signing this Agreement, defendant knowingly waives his right
to be prosecuted by indictment and to assert at trial or on appeal any defects or errors arising
from the information, the information process, or the fact that he has been prosecuted by way
of information.
b. Trial rights. Defendant has the right to persist in a plea of not guilty
to the charges against him, and if he does, he would have the right to a public and speedy
trial.
i. The trial could be either a jury trial or a trial by the judge sitting
without a jury. Defendant has a right to a jury trial. However, in order that the trial be
conducted by the judge sitting without a jury, defendant, the government, and the judge all
must agree that the trial be conducted by the judge without a jury.
ii. If the trial is a jury trial, the jury would be composed of twelve
citizens from the district, selected at random. Defendant and his attorney would participate
in choosing the jury by requesting that the Court remove prospective jurors for cause where
actual bias or other disqualification is shown, or by removing prospective jurors without
cause by exercising peremptory challenges.
iii. If the trial is a jury trial, the jury would be instructed that
defendant is presumed innocent, that the government has the burden of proving defendant
guilty beyond a reasonable doubt, and that the jury could not convict him unless, after
hearing all the evidence, it was persuaded of his guilt beyond a reasonable doubt and that it
was to consider each count of the information separately. The jury would have to agree
unanimously as to each count before it could return a verdict of guilty or not guilty as to that
count.
iv. If the trial is held by the judge without a jury, the judge would
find the facts and determine, after hearing all the evidence, and considering each count
separately, whether or not the judge was persuaded that the government had established
defendant's guilt beyond a reasonable doubt.
v. At a trial, whether by a jury or a judge, the government would
be required to present its witnesses and other evidence against defendant. Defendant would
be able to confront those government witnesses and his attorney would be able to crossexamine
them.
vi. At a trial, defendant could present witnesses and other evidence
in his own behalf. If the witnesses for defendant would not appear voluntarily, he could
require their attendance through the subpoena power of the Court. A defendant is not
required to present any evidence.
vii. At a trial, defendant would have a privilege against selfincrimination
so that he could decline to testify, and no inference of guilt could be drawn
from his refusal to testify. If defendant desired to do so, he could testify in his own behalf.
c. Appellate rights. Defendant further understands he is waiving all
appellate issues that might have been available if he had exercised his right to trial and may
only appeal the validity of this plea of guilty and the sentence imposed. Defendant
understands that any appeal must be filed within 14 calendar days of the entry of the
judgment of conviction.
d. Defendant understands that by pleading guilty he is waiving all the
rights set forth in the prior paragraphs. Defendant's attorney has explained those rights to
him, and the consequences of his waiver of those rights.
Presentence Investigation Report/Post-Sentence Supervision
21. Defendant understands that the United States Attorney's Office in its
submission to the Probation Office as part of the Pre-Sentence Report and at sentencing shall
fully apprise the District Court and the Probation Office of the nature, scope and extent of
defendant's conduct regarding the charges against him, and related matters. The government
will make known all matters in aggravation and mitigation relevant to sentencing.
22. Defendant agrees to truthfully and completely execute a Financial Statement
(with supporting documentation) prior to sentencing, to be provided to and shared among the
Court, the Probation Office, and the United States Attorney’s Office regarding all details of
his financial circumstances, including his recent income tax returns as specified by the
probation officer. Defendant understands that providing false or incomplete information, or
refusing to provide this information, may be used as a basis for denial of a reduction for
acceptance of responsibility pursuant to Guideline §3E1.1 and enhancement of his sentence
for obstruction of justice under Guideline §3C1.1, and may be prosecuted as a violation of
Title 18, United States Code, Section 1001 or as a contempt of the Court.
23. For the purpose of monitoring defendant's compliance with his obligations to
pay a fine and restitution during any term of supervised release or probation to which
defendant is sentenced, defendant further consents to the disclosure by the IRS to the
Probation Office and the United States Attorney’s Office of defendant's individual income
tax returns (together with extensions, correspondence, and other tax information) filed
subsequent to defendant's sentencing, to and including the final year of any period of
supervised release or probation to which defendant is sentenced. Defendant also agrees that
a certified copy of this Plea Agreement shall be sufficient evidence of defendant's request to
the IRS to disclose the returns and return information, as provided for in Title 26, United
States Code, Section 6103(b).
Other Terms
24. Defendant agrees to cooperate with the United States Attorney’s Office in
collecting any unpaid fine and restitution for which defendant is liable, including providing
financial statements and supporting records as requested by the United States Attorney’s
Office.
25. Defendant understands that pursuant to Title 12, United States Code, Section
1829, his conviction in this case will prohibit him from directly or indirectly participating in
the affairs of any financial institution insured by the Federal Deposit Insurance Corporation
(FDIC) except with the prior written consent of the FDIC and, during the ten years following
his conviction, the additional approval of this Court. Defendant further understands that if
he violates this prohibition, he may be punished by imprisonment for up to five years and a
fine of up to $1,000,000.
26. The United States agrees not to seek additional criminal charges in the
Northern District of Illinois against defendant for the over $14,000 Social Security
Administration fraud and for the making of false statements under oath in a bankruptcy
proceeding about his purported trust fund, which occurred in the Northern District of Illinois
and which are described in paragraph 6 above. However, nothing in this Plea Agreement
limits the United States in prosecuting the defendant in other districts or in this district for
other crimes not described above in this paragraph, except as expressly set forth in this
Agreement.
Conclusion
27. Defendant understands that this Plea Agreement will be filed with the Court,
will become a matter of public record and may be disclosed to any person.
28. Defendant understands that his compliance with each part of this Plea
Agreement extends throughout the period of his sentence, and failure to abide by any term
of the Agreement is a violation of the Agreement. Defendant further understands that in the
event he violates this Agreement, the government, at its option, may move to vacate the
Agreement, rendering it null and void, and thereafter prosecute defendant not subject to any
of the limits set forth in this Agreement, or may move to resentence defendant or require
defendant’s specific performance of this Agreement. Defendant understands and agrees that
in the event that the Court permits defendant to withdraw from this Agreement, or defendant
breaches any of its terms and the government elects to void the Agreement and prosecute
defendant, any prosecutions that are not time-barred by the applicable statute of limitations
on the date of the signing of this Agreement may be commenced against defendant in
accordance with this paragraph, notwithstanding the expiration of the statute of limitations
between the signing of this Agreement and the commencement of such prosecutions.
29. Should the judge refuse to accept defendant's plea of guilty, this Plea
Agreement shall become null and void and neither party will be bound thereto.
30. Defendant and his attorney acknowledge that no threats, promises, or representations have been made, nor agreements reached, other than those set forth in this Plea Agreement to cause defendant to plead guilty.
31. Defendant acknowledges that he has read this Plea Agreement and carefully reviewed each provision with his attorney. Defendant further acknowledges that he understands and voluntarily accepts each and every term and condition of this Agreement.
AGREED THIS DATE: _____________________
PATRICK J. FITZGERALD FRANCIS ALAN SCHMITZ
United States Attorney Defendant
EDWARD G. KOHLER RONALD L. BELL
Assistant U.S. Attorney Attorney for Defendant
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA )
) No. 10 CR 361
v. ) Judge Rebecca L. Pallmeyer
)
FRANCIS ALAN SCHMITZ )
PLEA AGREEMENT
1. This Plea Agreement between the United States Attorney for the Northern
District of Illinois, PATRICK J. FITZGERALD, and defendant FRANCIS ALAN
SCHMITZ, and his attorney, RONALD L. BELL, is made pursuant to Rule 11 of the Federal
Rules of Criminal Procedure and is governed in part by Rule 11(c)(1)(A), as more fully set
forth below. The parties to this Agreement have agreed upon the following:
Charges in This Case
2. The information in this case charges defendant with mail fraud affecting a
financial institution in violation of Title 18, United States Code, Section 1341 and bank fraud
in violation of Title 18, United States Code, Section 1344.
3. Defendant has read the charges against him contained in the information, and
those charges have been fully explained to him by his attorney.
4. Defendant fully understands the nature and elements of the crimes with which
he has been charged.
Charge to Which Defendant is Pleading Guilty
5. By this Plea Agreement, defendant agrees to enter a voluntary plea of guilty
to Count One of the information, which charges defendant with engaging in a scheme to
defraud financial institutions and others in violation of Title 18, United States Code, Section
1341.
Background
6. Defendant will plead guilty because he is in fact guilty of the charge contained
in Count One of the information. In pleading guilty, defendant admits the following facts
and that those facts establish his guilt beyond a reasonable doubt:
During a period beginning no later than in or about 2004 and continuing to in or about
May 2010, in the Northern District of Illinois, Eastern Division, and elsewhere, defendant
Francis Alan Schmitz devised and participated in a scheme to defraud financial institutions
and others and to obtain money and property from financial institutions and others by means
of materially false and fraudulent pretenses and representations and of material omissions.
Defendant Schmitz held himself out as being engaged in the real estate development
business through various entities, including Long Grove Real Estate Partners, LLC. The
defendant represented himself to be a managing partner of Long Grove Real Estate partners,
most recently located in Arlington Heights, Illinois. This office was a mail drop at a UPS
Store.
Beginning no later than in or about 2004 until the defendant’s arrest in May 2010, the
defendant claimed to be the beneficiary of a multi-million dollar trust, sometimes referred
to as the F. Alan and Huston Trust. During this same approximate period of time, the
defendant attempted to obtain millions of dollars of funding from various sources, including
at least six banks with deposits insured at the time by the Federal Deposit Insurance
Corporation. These banks included:
- First National Bank - Employee Owned;
- Harris N.A.;
- Inland Bank & Trust;
- First Choice Bank;
- Leaders Bank; and
- First Midwest Bank.
The Scheme
As a part of a fraudulent financing scheme designed to benefit himself and his
business ventures and to make ponzi-type payments to earlier providers of funds, defendant
Schmitz fraudulently obtained over $6,000,000 in funds primarily through seeking and
obtaining loans and other extensions of credit.
In seeking and obtaining these funds, defendant Schmitz made and caused to be made material misstatements and omissions about, among other things, his income, his liabilities, his net worth, his ownership of trust assets, and his intended use of funds. The defendant also, among other things, used forgeries, assumed other identities, made fraudulent court filings, made misrepresentations under oath during a bankruptcy hearing and made ponzi-type payments to earlier complaining funders
to further the scheme.
As a part of his fraudulent financing scheme, the defendant fraudulently obtained
funds in other ways as well. For instance, the defendant continued to receive and use
social security benefit payments intended for his brother for a period of about 15 months
after his brother died. This amounted to over $14,000.
Defendant Schmitz falsely represented and caused to be falsely represented to certain
prospective funders that he was the beneficiary of a multi-million trust fund and that the trust
assets were available to collateralize funding. The periodic account statements for the trust,
federal income tax returns for the trust and communications from persons associated with the
trust, e.g. accountant, trustee, broker, were fraudulently created and disseminated by the
defendant.
Defendant Schmitz also falsely represented to certain prospective funders that his trust
assets were held at various institutions, including Winston and Huston Trust and Financial
Services, LLC. (Winston and Huston). The defendant had no trust assets at these institutions,
including Winston and Huston. The defendant created Winston and Huston, set up its
website, arranged for its virtual office space and authored emails and other communications
of fictitious Winston and Huston employees the defendant created.
Additionally, defendant Schmitz provided to certain prospective funders false and
fraudulent federal income tax returns for the purported trust and for himself. For instance,
the defendant provided at least one prospective funder with personal and trust federal income
tax returns for 2007 showing both personal and trust income as being over $300,000. In his
bankruptcy petition, the defendant reported employment income of only $15,000 for 2007.
Defendant Schmitz also provided to certain prospective funders false and fraudulent personal
financial statements. For example, the defendant provided to at least one prospective funder
a personal financial statement as of December 1, 2008, in which the defendant represented
that he had trust assets of $5,379,113 and gross annual salary of $275,000. In his bankruptcy
petition filed in December 2009, the defendant reported no trust assets and total income from
employment as being $15,000 in 2007, $16,626 in 2008 and $14,000 in 2009. Although the
defendant listed $1,369,475 in liabilities on his personal financial statement as of December
1, 2008, he did not include the more than $1,500,000 the defendant owed Inland Bank &
Trust, a previously defrauded financial institution, on a defaulted loan.
Defendant Schmitz also falsely represented to certain prospective funders his intended
use of the funds obtained. As an example, defendant Schmitz represented to at least one
prospective provider of funds that the funds would be used in connection with real estate
transactions in Long Grove, Illinois. The defendant used little if any of the funds from this
$2,850,000 line of credit in connection with Long Grove real estate transactions. The
defendant intended to and did use $1,630,274 from this lender to make a ponzi-type payment
to a previous complaining lender and misappropriated another amount in excess of $300,000
of these funds for his own benefit. Defendant then concealed these misappropriations by
providing the lender with a fraudulent written accounting.
Defendant Schmitz concealed, hid, and continued the scheme by, among other things,
making ponzi-type payments to earlier complaining lenders, making fraudulent filings in
related civil litigations and making false statements under oath in a bankruptcy proceeding
about his purported trust fund.
As a result of the scheme, defendant Schmitz fraudulently obtained over
$6,000,000 from financial institutions and others and used a significant portion of the funds
to make ponzi-type payments to earlier funders and to benefit himself. Victims of the
scheme ultimately lost over $3,000,000.
On or about April 18, 2009, in the Northern District of Illinois, Eastern Division, and
elsewhere, defendant Schmitz, for the purpose of executing the scheme and attempting to do
so, knowingly caused to be deposited to be sent and delivered by commercial interstate
carrier from the Northern District of Illinois to Sarasota, Florida certain documents related
to obtaining a $2,850,000 line of credit, including a control agreement concerning the
defendant’s purported trust assets; In violation of Title 18, United States Code, Section 1341.
Maximum Statutory Penalties
7. Defendant understands that the charge to which he is pleading guilty carries
the following statutory penalties:
a. A maximum sentence of 30 years' imprisonment. This offense also
carries a maximum fine of $1,000,000, or twice the gross gain or gross loss resulting from
that offense, whichever is greater. Defendant further understands that the judge also may
impose a term of supervised release of not more than five years.
b. Defendant further understands that the Court must order restitution to the victims of the offense in an amount determined by the Court.
c. In accord with Title 18, United States Code, Section 3013, defendant
will be assessed $100 on the charge to which he has pled guilty, in addition to any other
penalty or restitution imposed.
Sentencing Guidelines Calculations
8. Defendant understands that in imposing sentence the Court will be guided by
the United States Sentencing Guidelines. Defendant understands that the Sentencing
Guidelines are advisory, not mandatory, but that the Court must consider the Guidelines in
determining a reasonable sentence.
9. For purposes of calculating the Sentencing Guidelines, the parties agree on the
following points:
a. Applicable Guidelines. The Sentencing Guidelines to be considered in this case are those in effect at the time of sentencing. The following statements regarding the calculation of the Sentencing Guidelines are based on the Guidelines Manual currently in effect, namely the November 2009 Guidelines Manual.
b. Offense Level Calculations.
i. The base offense level for the charge in Count One of the information is 7, pursuant to Guideline §2B1.1(a)(1);
ii. Since the offense caused losses of more than $2,500,000, 18 offense levels are added pursuant to Guideline 2B1.1(b)(J);
iii. As a part of the offense, the defendant made material misrepresentations under oath in a bankruptcy proceeding resulting in a 2 offense level increase under Guideline 2B1.1(b)(8)(B);
iv. The defendant used sophisticated means as part of the offense resulting in another 2 offense level increase pursuant to Guideline 2B1.1(b)(9)(C);
v. Since the defendant obtained more than $1,000,000 in gross receipts from financial institutions, another 2 offense levels are added under Guideline 2B1.1(b)(14)(A);
vi. Defendant has clearly demonstrated a recognition and affirmative acceptance of personal responsibility for his criminal conduct. If the government does not receive additional evidence in conflict with this provision, and if defendant continues to accept responsibility for his actions within the meaning of Guideline §3E1.1(a), including by furnishing the United States Attorney’s Office and the Probation Office with all requested financial information relevant to his ability to satisfy any fine or restitution that may be imposed in this case, a two-level reduction in the offense level is appropriate.
vii. In accord with Guideline §3E1.1(b), defendant has timely notified the government of his intention to enter a plea of guilty, thereby permitting the government to avoid preparing for trial and permitting the Court to allocate its resources efficiently. Therefore, as provided by Guideline §3E1.1(b), if the Court determines the offense level to be 16 or greater prior to determining that defendant is entitled to a two-level reduction for acceptance of responsibility, the government will move for an additional one level reduction in the offense level.
c. Criminal History Category. With regard to determining defendant's criminal history points and criminal history category, based on the facts now known to the government and stipulated below, defendant's criminal history points equal 1 and defendant's criminal history category is I:
i. On or about June 19, 2002, defendant was convicted of misdemeanor theft in the Circuit Court of Lake County, Illinois and sentenced to a term of probation. One criminal history point is assigned as a result of this conviction.
d. Anticipated Advisory Sentencing Guidelines Range. Therefore, based on the facts now known to the government, the anticipated offense level is 28, which, when combined with the anticipated criminal history category of I, results in an anticipated advisory Sentencing Guidelines range of 78 to 97 months’ imprisonment, in addition to any supervised release, fine, and restitution the Court may impose.
e. Defendant and his attorney and the government acknowledge that the above Guideline calculations are preliminary in nature, and are non-binding predictions upon which neither party is entitled to rely. Defendant understands that further review of the facts or applicable legal principles may lead the government to conclude that different or additional Guideline provisions apply in this case. Defendant understands that the Probation Office will conduct its own investigation and that the Court ultimately determines the facts and law relevant to sentencing, and that the Court's determinations govern the final Guideline calculation. Accordingly, the validity of this Agreement is not contingent upon the probation officer’s or the Court's concurrence with the above calculations, and defendant shall not have a right to withdraw his plea on the basis of the Court's rejection of these calculations.
f. Both parties expressly acknowledge that this plea agreement is not governed by Fed.R.Crim.P. 11(c)(1)(B), and that errors in applying or interpreting any of the Sentencing Guidelines may be corrected by either party prior to sentencing. The parties may correct these errors either by stipulation or by a statement to the Probation Office or the Court, setting forth the disagreement regarding the applicable provisions of the Guidelines.
The validity of this Plea Agreement will not be affected by such corrections, and defendant shall not have a right to withdraw his plea, nor the government the right to vacate this Plea Agreement, on the basis of such corrections.
Agreements Relating to Sentencing
10. The government agrees to recommend that the Court impose a sentence of
imprisonment at the low end of the applicable guidelines range and to make no further
recommendation concerning what sentence of imprisonment should be imposed.
11. It is understood by the parties that the sentencing judge is neither a party to nor
bound by this Plea Agreement and may impose a sentence up to the maximum penalties as
set forth above. Defendant further acknowledges that if the Court does not accept the
sentencing recommendation of the parties, defendant will have no right to withdraw his
guilty plea.
12. Regarding restitution, defendant acknowledges that pursuant to Title 18, United
States Code, § 3663A, the Court must order defendant to make full restitution to victims in
an amount to be determined by the Court at sentencing, which amount shall reflect credit for
any funds repaid prior to sentencing.
13. Restitution shall be due immediately, and paid pursuant to a schedule to be set
by the Court at sentencing. Defendant acknowledges that pursuant to Title 18, United States
Code, Section 3664(k) he is required to notify the Court and the United States Attorney's
Office of any material change in economic circumstances that might affect his ability to pay
restitution.
14. Defendant agrees to pay the special assessment of $100 at the time of
sentencing with a cashier’s check or money order payable to the Clerk of the U.S. District
Court.
15. Defendant agrees that the United States may enforce collection of any fine or
restitution imposed in this case pursuant to Title 18, United States Code, Sections 3572,
3613, and 3664(m), notwithstanding any payment schedule set by the Court.
16. After sentence has been imposed on the count to which defendant pleads guilty
as agreed herein, the government will move to dismiss the remaining count of the
information as to defendant.
Acknowledgments and Waivers Regarding Plea of Guilty
Nature of Plea Agreement
17. This Plea Agreement is entirely voluntary and represents the entire agreement
between the United States Attorney and defendant regarding defendant's criminal liability
in case 10 CR 361.
18. This Plea Agreement concerns criminal liability only. Except as expressly set
forth in this Agreement, nothing herein shall constitute a limitation, waiver or release by the
United States or any of its agencies of any administrative or judicial civil claim, demand or
cause of action it may have against defendant or any other person or entity. The obligations
of this Agreement are limited to the United States Attorney's Office for the Northern District
of Illinois and cannot bind any other federal, state or local prosecuting, administrative or
regulatory authorities, except as expressly set forth in this Agreement.
19. Defendant understands that nothing in this Plea Agreement shall limit the
Internal Revenue Service (IRS) in its collection of any taxes, interest or penalties from
defendant and his spouse or defendant's partnership or corporations.
Waiver of Rights
20. Defendant understands that by pleading guilty he surrenders certain rights,
including the following:
a. Right to be charged by indictment. Defendant understands that he has
a right to have the charges prosecuted by an indictment returned by a concurrence of twelve
or more members of a grand jury consisting of not less than sixteen and not more than
twenty-three members. By signing this Agreement, defendant knowingly waives his right
to be prosecuted by indictment and to assert at trial or on appeal any defects or errors arising
from the information, the information process, or the fact that he has been prosecuted by way
of information.
b. Trial rights. Defendant has the right to persist in a plea of not guilty
to the charges against him, and if he does, he would have the right to a public and speedy
trial.
i. The trial could be either a jury trial or a trial by the judge sitting
without a jury. Defendant has a right to a jury trial. However, in order that the trial be
conducted by the judge sitting without a jury, defendant, the government, and the judge all
must agree that the trial be conducted by the judge without a jury.
ii. If the trial is a jury trial, the jury would be composed of twelve
citizens from the district, selected at random. Defendant and his attorney would participate
in choosing the jury by requesting that the Court remove prospective jurors for cause where
actual bias or other disqualification is shown, or by removing prospective jurors without
cause by exercising peremptory challenges.
iii. If the trial is a jury trial, the jury would be instructed that
defendant is presumed innocent, that the government has the burden of proving defendant
guilty beyond a reasonable doubt, and that the jury could not convict him unless, after
hearing all the evidence, it was persuaded of his guilt beyond a reasonable doubt and that it
was to consider each count of the information separately. The jury would have to agree
unanimously as to each count before it could return a verdict of guilty or not guilty as to that
count.
iv. If the trial is held by the judge without a jury, the judge would
find the facts and determine, after hearing all the evidence, and considering each count
separately, whether or not the judge was persuaded that the government had established
defendant's guilt beyond a reasonable doubt.
v. At a trial, whether by a jury or a judge, the government would
be required to present its witnesses and other evidence against defendant. Defendant would
be able to confront those government witnesses and his attorney would be able to crossexamine
them.
vi. At a trial, defendant could present witnesses and other evidence
in his own behalf. If the witnesses for defendant would not appear voluntarily, he could
require their attendance through the subpoena power of the Court. A defendant is not
required to present any evidence.
vii. At a trial, defendant would have a privilege against selfincrimination
so that he could decline to testify, and no inference of guilt could be drawn
from his refusal to testify. If defendant desired to do so, he could testify in his own behalf.
c. Appellate rights. Defendant further understands he is waiving all
appellate issues that might have been available if he had exercised his right to trial and may
only appeal the validity of this plea of guilty and the sentence imposed. Defendant
understands that any appeal must be filed within 14 calendar days of the entry of the
judgment of conviction.
d. Defendant understands that by pleading guilty he is waiving all the
rights set forth in the prior paragraphs. Defendant's attorney has explained those rights to
him, and the consequences of his waiver of those rights.
Presentence Investigation Report/Post-Sentence Supervision
21. Defendant understands that the United States Attorney's Office in its
submission to the Probation Office as part of the Pre-Sentence Report and at sentencing shall
fully apprise the District Court and the Probation Office of the nature, scope and extent of
defendant's conduct regarding the charges against him, and related matters. The government
will make known all matters in aggravation and mitigation relevant to sentencing.
22. Defendant agrees to truthfully and completely execute a Financial Statement
(with supporting documentation) prior to sentencing, to be provided to and shared among the
Court, the Probation Office, and the United States Attorney’s Office regarding all details of
his financial circumstances, including his recent income tax returns as specified by the
probation officer. Defendant understands that providing false or incomplete information, or
refusing to provide this information, may be used as a basis for denial of a reduction for
acceptance of responsibility pursuant to Guideline §3E1.1 and enhancement of his sentence
for obstruction of justice under Guideline §3C1.1, and may be prosecuted as a violation of
Title 18, United States Code, Section 1001 or as a contempt of the Court.
23. For the purpose of monitoring defendant's compliance with his obligations to
pay a fine and restitution during any term of supervised release or probation to which
defendant is sentenced, defendant further consents to the disclosure by the IRS to the
Probation Office and the United States Attorney’s Office of defendant's individual income
tax returns (together with extensions, correspondence, and other tax information) filed
subsequent to defendant's sentencing, to and including the final year of any period of
supervised release or probation to which defendant is sentenced. Defendant also agrees that
a certified copy of this Plea Agreement shall be sufficient evidence of defendant's request to
the IRS to disclose the returns and return information, as provided for in Title 26, United
States Code, Section 6103(b).
Other Terms
24. Defendant agrees to cooperate with the United States Attorney’s Office in
collecting any unpaid fine and restitution for which defendant is liable, including providing
financial statements and supporting records as requested by the United States Attorney’s
Office.
25. Defendant understands that pursuant to Title 12, United States Code, Section
1829, his conviction in this case will prohibit him from directly or indirectly participating in
the affairs of any financial institution insured by the Federal Deposit Insurance Corporation
(FDIC) except with the prior written consent of the FDIC and, during the ten years following
his conviction, the additional approval of this Court. Defendant further understands that if
he violates this prohibition, he may be punished by imprisonment for up to five years and a
fine of up to $1,000,000.
26. The United States agrees not to seek additional criminal charges in the
Northern District of Illinois against defendant for the over $14,000 Social Security
Administration fraud and for the making of false statements under oath in a bankruptcy
proceeding about his purported trust fund, which occurred in the Northern District of Illinois
and which are described in paragraph 6 above. However, nothing in this Plea Agreement
limits the United States in prosecuting the defendant in other districts or in this district for
other crimes not described above in this paragraph, except as expressly set forth in this
Agreement.
Conclusion
27. Defendant understands that this Plea Agreement will be filed with the Court,
will become a matter of public record and may be disclosed to any person.
28. Defendant understands that his compliance with each part of this Plea
Agreement extends throughout the period of his sentence, and failure to abide by any term
of the Agreement is a violation of the Agreement. Defendant further understands that in the
event he violates this Agreement, the government, at its option, may move to vacate the
Agreement, rendering it null and void, and thereafter prosecute defendant not subject to any
of the limits set forth in this Agreement, or may move to resentence defendant or require
defendant’s specific performance of this Agreement. Defendant understands and agrees that
in the event that the Court permits defendant to withdraw from this Agreement, or defendant
breaches any of its terms and the government elects to void the Agreement and prosecute
defendant, any prosecutions that are not time-barred by the applicable statute of limitations
on the date of the signing of this Agreement may be commenced against defendant in
accordance with this paragraph, notwithstanding the expiration of the statute of limitations
between the signing of this Agreement and the commencement of such prosecutions.
29. Should the judge refuse to accept defendant's plea of guilty, this Plea
Agreement shall become null and void and neither party will be bound thereto.
30. Defendant and his attorney acknowledge that no threats, promises, or representations have been made, nor agreements reached, other than those set forth in this Plea Agreement to cause defendant to plead guilty.
31. Defendant acknowledges that he has read this Plea Agreement and carefully reviewed each provision with his attorney. Defendant further acknowledges that he understands and voluntarily accepts each and every term and condition of this Agreement.
AGREED THIS DATE: _____________________
PATRICK J. FITZGERALD FRANCIS ALAN SCHMITZ
United States Attorney Defendant
EDWARD G. KOHLER RONALD L. BELL
Assistant U.S. Attorney Attorney for Defendant
# posted by Cal Skinner : 10:44 AM
