After a two-week trial in federal court in the Southern District of Florida a well-known and highly respected South Florida attorney faces decades in prison after being convicted of multiple counts of federal crimes.
James M. Schneider, who is 77 years old, is now awaiting sentencing for the crimes he was convicted of earlier this month which could easily amount to a lifetime in prison due to his age. A U.S. District Judge is set to sentence Schneider on Feb. 14, 2019.
In October, 2017, Schneider was charged with multiple counts of securities fraud, conspiracy to commit securities fraud, and conspiracy to commit money laundering and wire fraud. At sentencing, he now faces a maximum statutory sentence of twenty-five years for each count of the securities fraud and conspiracy counts, and ten years each for money laundering and the conspiracy to commit money laundering counts, as well as a fine up to $250,000 or double the proceeds of the scheme as to each.
A federal jury convicted him of a total of 33 counts of conspiracy, securities, and wire fraud.
Below I’ll explain in layman’s terms how this convoluted scheme was assembled and how Schneider and his multiple co-conspirators were brought to justice.
The scam that Schneider participated in was a scheme to operate fraudulent shell companies by originally filing several false documents with the Securities and Exchange Commission.
These filings deceptively stated that each of these companies was controlled by nominee chief executive officers.
The “straw” executive officers were listed as the owner of the majority of shares but in truth the companies were under the control of the undisclosed principals.
The control block (majority) of shares listed in the name of the sole officer of each of these companies were listed as restricted shares, temporarily preventing them from being sold to the public in any publicly traded market. The principals also listed the names of different shareholders for each company in the SEC filings making it seem that these shares were owned and maintained by individuals that were unaffiliated with the companies.
These same shares would later become available for trading after secretly being sold to shell buyers. Fraudulent documentation was provided to the SEC describing these companies’ business model and share ownership. The principals would then acquire consent to sell the entities’ shares in the publicly traded open market.
After this part of the swindle was set in motion, the principals would sell the companies to shell buyers. These new owners then secretly obtained more than fifty percent of the shares. These professed free trading shares were now offered to the investing public without disclosure to the SEC.
The buyers would then market the companies’ shares for the sole purpose of conducting pump-and-dump schemes as well as other securities manipulation measures.
At trial, evidence showed that the shares of the sham companies were then traded to unwitting investors making profits of millions of dollars for all involved in the scheme.
The arrests played out from coast to coast with two other lawyers convicted of the same or similar charges. David Lublin from West Hempstead, New York and Andrew Wilson of Nevada City, California were convicted co-conspirators.
There were nine other individuals convicted in connected cases including two other Florida men, Alvin S. Mirman of Sarasota, and Steven Sanders of Lake Worth. Both were previously convicted of related criminal charges. In addition to the lawyers, the group included a registered securities representative, a stock transfer agent, a securities broker-dealer from Delaney Equity Group, LLC, an accountant, and four stock promoters.
For his part in the scheme, Schneider, who was licensed to practice law in Florida was the author of numerous fraudulent legal opinion letters that specified that the shares of the multiple companies which by the time of the arrests totaled twenty, were owned by individuals who were not associates, when factually the shares were owned and controlled by his partners in the swindle. Based on evidence presented at trial he also created deceitful billing documents fraudulently demonstrating he was carrying out work for, and following directions from the bogus CEOs, while factually he took his marching orders from his co-conspirators, keeping their actual names from appearing on the fraudulent papers.
He also implemented purported escrow services for the sales of the shell companies, comprising the unlawful sale of the purported shares that became available for public trading, in addition to sending close to $6 million in profits to bank accounts set up and controlled by his accomplices. This was finalized although he had no endorsement from the named shareholders or substantiation that the individuals whose names were registered on the escrow agreements approved of or authorized these transfer transactions.
A total of eleven other of his co-conspirators were convicted in the Southern District of Florida in association with the fraud investigation. Schneider was also previously hit with comparable civil enforcement actions by the SEC.
After the verdict was delivered, Schneider’s attorney pointed out that his client was found not guilty of obstruction of justice and lying to the SEC. He also remarked that “We are evaluating the jury’s verdict, we’re evaluating other aspects of the case, and we have not yet made a decision, as to whether there are significant issues on appeal”.
His attorney, Ira Lee Sorkin gained notoriety by defending Bernie Madoff, as well as Jordan Belfort.
Madoff is serving a 150 year sentence; the maximum allowed under the law after being convicted of defrauding his clients of close to $65 billion in the largest Ponzi scheme tried in U.S. history.
Belfort who, post- conviction for securities fraud, wrote a memoir titled “The Wolf of Wall Street,” which was later made into a major motion picture. There is an article written on my website deals directly with a related case that further explains the story of this movie.
This article may be updated after Schneider is sentenced. Please check back next year.
Michael B. Cohen is a Fort Lauderdale based Criminal Defense Attorney specializing in the defense of federal crimes including Securities Fraud and all related cases.