Denver man gets 330-year sentence for role in Redstone Castle fraud scheme
April 30, 2008
DENVER ” U.S. District Court Judge Robert Blackburn sentenced a man to 330 years in prison Tuesday for his role in a $56 million investment scam from which proceeds were used to buy the Redstone Castle.
At 72, it’s unlikely Norman Schmidt, of Denver, will ever be released.
An order of financial restitution hasn’t been entered, but Blackburn entered an order of forfeiture totaling $38.41 million, according to the U.S. Attorney’s Office.
Investigators believe Schmidt obtained tens of millions of dollars from hundreds of investors for his own personal gain.
Schmidt was found guilty of conspiracy to commit mail fraud, wire fraud and securities fraud, plus other counts and a money laundering count. He and his wife, Jannice Schmidt, plus five others were indicted in 2004. Jannice Schmidt was recently sentenced to nine years in prison. George Beros, of Shaker Heights, Ohio, was previously sentenced to a year and a day in prison and $286,739 in restitution. George Alan Weed, of Benton, Ill.; Charles Franklin Lewis, of Littleton; and Michael Duane Smith of Colbert, Wash., all await sentencing. Lewis was scheduled for sentencing today. Peter A.W. Moss, of London, England, remains at large.
“These people took a lot of people for a lot money, unfortunately, and a lot of them were good, honest, local valley people,” said Cynthia Lange.
Lange managed the castle for 15 years and now lives in Parker. She was a victim of the scam and testified against Schmidt last summer. She left the castle in 2000 shortly after the new owners took over, saying that she knew it wouldn’t work out for her and that the new owner was a drunk.
“It was like raising a child for 15 years then all of a sudden having someone coming in and saying, ‘You know what, we’re going to take this 15-year-old child and we’re going to do what we want with it,'” Lange said.
Schmidt worked with the others from 1999 to 2003 to defraud investors with a purportedly high-yield investment program. The group used “corporate alter-egos” named Reserve Foundation Trust, Smitty’s Investments, Capital Holdings, Monarch Capital Holdings and Fast Track. They promised investors returns of 2 to 400 percent per month and even sent out false monthly statements, authorities believe.
All the while the money was being used for things like purchasing the Redstone Castle, eight NASCAR race cars, a race truck and other race items. Investigators also seized 60 bank accounts and other property. The scam touched more than 1,000 victims.
Lange said the scam duped even seasoned investors who made their living by investing.
“It worked for a long time and it worked for millions and millions of dollars,” Lange said. “I can only speak for myself personally – what a traumatic effect it had on me – but I can only imagine what it did for everybody else. People were furious.”
Leon and Debbie Harte headed up the $6.5 million purchase of the castle. Leon Harte died before the 2004 indictments were handed down. Investigators believe Debbie Harte, who had been divorced from Leon before his death, was not a participant in the scheme.
Lange said it was unfortunate Harte died and avoided any repercussions because he seemed to be the main player.
“Leon was a bigger part of that than Norm,” she said. “Norm was just Leon’s good-old-boy.”
Built around the start of the 20th century by coal magnate John Osgood, the castle was sold by the IRS at auction in 2005 for $4 million to Ralli Dimitrius, a part-time Aspen resident. He reopened the castle for public tours last year. Redstone, a former coal-mining town, is located south of Carbondale on Highway 133.
The Federal Bureau of Investigation, Internal Revenue Service and Colorado Department of Regulatory Agencies said they conducted more than 800 interviews, reviewed close to 100,000 pages of documents and spent tens of thousands of hours over 2 1/2 years investigating the scheme. They also requested assistance from seven foreign countries.
Lange said she’s recouped only about half the money she lost in the scam but has moved beyond feeling upset about the ordeal.
“It was eight years ago,” she said. “If I worry about it now I’d be in a mental institution.”