Eric James Schultz Pleads Guilty in U.S. Federal Cour
The United States Attorney's Office announced that during a federal court session in Billings on May 21, 2010, before U.S. Magistrate Judge Carolyn S. Ostby, ERIC JAMES SCHULTZ, a 39-year-old resident of Bozeman, pled guilty to investment fraud and money laundering. A sentencing date will be set at a later time. He is currently released on special conditions.
In an Offer of Proof filed by First Assistant U.S. Attorney Carl E. Rostad, the government stated it would have proved at trial the following:
SCHULTZ owned and operated two lending businesses - American Mortgage and Big Sky Equity - which did business in Bozeman and Livingston. The businesses were real estate and mortgage investment enterprises.
Beginning in approximately March of 2008, SCHULTZ, through a business associate, met with another individual in Missoula. That individual, T.F., convinced SCHULTZ that he, T.F., had a program whereby securities would be purchased through a brokerage and then resold to pension funds for a huge profit. T.F. told SCHULTZ that he could turn $50,000 into $1.5 million in as little as two months. SCHULTZ was wary of the promotion and told T.F. that he would wait and see the results of the strategy before committing his own funds. The strategy never proved possible and SCHULTZ invested no monies.
When the deal did not come through, SCHULTZ searched for another investment vehicle to promote and found another opportunity through a second individual, M.M. M.M. used a "mid-term note" platform rather than T.F.'s "zero coupon bond" strategy. SCHULTZ sent M.M. $50,000 in May of 2008. When the deal did not materialize, M.M. returned SCHULTZ's $50,000 six weeks later, but without the benefit of the promised returns.
SCHULTZ, using an intermediary, T.C., approached several large investors and promoted the "mid term note" scheme. SCHULTZ told investors that their money was being placed in a relatively short term investment program that he had set up for maximum rate of return. SCHULTZ did not disclose that he would use any of the amount committed for investment to his personal use. SCHULTZ convinced these investors that their investments would return large amounts of money once invested in his program. One investor, Investor A, during conversations with T.C., was told that he would earn a rate of return of 10 to 1 in 60 days. Prior to investing, this investor received numerous documents from SCHULTZ regarding the investment program which confirmed these promised rates of return. Relying on both verbal and documentary promises, Investor A mailed SCHULTZ a check totaling $100,000 for which he was to receive $1.375 million return in 60 days, according to the documentation provided by SCHULTZ.
A second investor, Investor B, was also put in contact with SCHULTZ through T.C., SCHULTZ's intermediary, and the investor's personal investment broker. During conversations between Investor B and SCHULTZ, SCHULTZ explained the investment program and the rates of return. SCHULTZ explained that there was no risk to the invested money and the investor could receive up to 16 times the original investment. SCHULTZ also stated that the investment program would last only 60 days from the time that the investment was made at which time the investor would receive the rate of return promised. Prior to investing, Investor B received numerous documents from SCHULTZ confirming the investment program which detailed the rates of return. Investor B, along with other investors, wired $140,000 to SCHULTZ for which they were to receive $2.8 million return in 60 days.
During the period June 2008 through August 2008, SCHULTZ received, from Investors A and B, and others, $740,000. Of that amount, he diverted over $500,000 to his own personal use and benefit. He did invest the remaining $200,000, more or less, with T.F., who was promoting the "zero coupon bond" scheme, but not until September 2, 2008. That amount was also lost as the "zero coupon bond" scheme itself was a swindle. Even though he had been repaid his personal investment of $50,000 by early July 2008 without any profit, SCHULTZ had continued to take in monies from investors knowing that the second deal would not produce the promised returns.
Investors were told nothing about T.F.'s "zero coupon bond" concept. They were told they would be investing in a program put together by SCHULTZ to invest in mid-term notes, and believed they were investing the full amount of their payment.
SCHULTZ faces possible penalties of 20 years in prison, a $250,000 fine and at least 3 years supervised release.
The investigation was a cooperative effort between the Federal Bureau of Investigation and the Criminal Investigation Division of the Internal Revenue Service.
A copy of the Offer of Proof can be obtained by contacting Sally Frank at (406) 247-4638.