Court still sorting out Redstone fraud
September 26, 2007
REDSTONE A participant in a scam whose proceeds were used to buy the Redstone Castle has won an appeal that could lead to less time in prison, while a second participant has been sentenced to spend a year and a day behind bars and pay $286,739 in restitution to victims.Meanwhile, sentencings for several others recently convicted for their parts in the $56 million investment fraud have been postponed. Proceedings have been scheduled for U.S. District Court in Denver on Oct. 19 to determine how much financial loss each of them was responsible for helping cause, a factor that will be used in deciding on their sentences.The court on that day also is scheduled to make the same determination for Jannice Schmidt, who was sentenced to nine years in prison last year after pleading guilty to two counts of securities fraud. On Aug. 10, the 10th District Court of Appeals vacated her sentence and ordered the district court to reconsider the circumstances of her case and resentence her. She remains in prison.George Beros, of Shaker Heights, Ohio, was sentenced Aug. 3 after pleading guilty in March to one count of securities fraud. The sentence also included three years of probation.The restitution must be paid in monthly installments of at least $300 a month. Beros was ordered to pay about $202,000 to the Quebec-based estate of one man, about $27,000 to a Toronto resident, and more than $57,000 to the Abundant Life Christian Center in Elyria, Ohio.On May 29, four other men were convicted in Denver on a total of 53 felony counts and acquitted on 57 others in connection with the international investment scheme.One of them, Norman Eugene Schmidt of Denver, Jannice’s husband, was convicted of 37 felony counts, including conspiracy, mail fraud, wire fraud, securities fraud and money laundering.Also convicted were Charles Franklin Lewis of Littleton on 10 felony counts covering the same charges on which Schmidt was convicted; and George Alan Weed of Benton, Ill., and Michael Duane Smith of Colbert, Wash. Weed was convicted on one count each of mail, wire and securities fraud. Smith was convicted on three security fraud counts.The convictions followed a trial in U.S. District Court that lasted about six weeks, including two weeks of jury deliberations.Seven people originally were indicted in the investment fraud, which resulted in more than 1,000 victims. One man indicted in the case, Peter A.W. Moss of London, England, remains at large.The Internal Revenue Service seized the castle in 2003 as part of its investigation into the alleged scam. It also seized 60 bank accounts, eight NASCAR race cars and other cash and property worth more than $18 million in total. Cash from forfeited assets is being returned to victims.The IRS contended that shell companies were used to launder funds from the investment scheme to buy the 42-room castle. Leon and Debbie Harte headed up the $6.5 million purchase. 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.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 this year.Following this year’s trial, Lewis, Smith and Weed were released on bond pending sentencing. Schmidt remains in custody because of the number of charges on which he was convicted.Money laundering carries a federal prison sentence of up to 20 years per count, and conspiracy and security fraud, up to five years. Mail fraud and wire fraud are punishable by up to five years if committed before July 30, 2002, and up to 20 years if committed after that. All of the charges also are punishable by fines, including amounts as high as $1 million for mail and wire fraud.Investigators say that from 1999-2003, those behind the investment scheme misrepresented it as being high-yield and low-risk, and used proceeds for purposes different from what had been promised to investors.In Jannice Schmidt’s case, prosecutors initially said she played a role in defrauding victims of all of the $56 million involved in the case. She disagreed, and probation officials later linked her to $27 million in losses.However, Schmidt maintains she played a role in causing only $11.3 million in losses because she was involved in only one investment account used in the scam. The appeals court said the district court should have made a finding on whether she played roles in other accounts connected to the scam as well.