Free Proposed Jury Instructions - District Court of Colorado - Colorado

Case 1:04-cr-00103-REB-MEH

Document 1096-21

Filed 03/30/2007

Page 1 of 5

INSTRUCTION NO. G-20 Count 1 of the second superseding indictment charges that: 1. Beginning in or about April, 1999, and continuing thereafter until in or about October, 2004, in the State and District of Colorado, and elsewhere, the defendants, Norman Schmidt, George Alan Weed, Peter A. W. Moss, Charles Lewis, Jannice McLain Schmidt, Michael Smith, and George Beros, combined, conspired, confederated and agreed together and with others known and unknown to the Grand Jury, to commit Mail Fraud, in violation of Title 18, United States Code, Section 1341, Wire Fraud, in violation of Title 18, United States Code, Section 1343, and Securities Fraud, in violation of Title 15, United States Code, Sections 77q(a)(1) and 77x. MANNER AND MEANS OF THE CONSPIRACY 2. The defendants made and caused to be made false statements and representations about the nature of a fraudulent high-yield investment program and the high returns associated with it, including but not limited to the following: a. The defendants falsely promised to use current and prospective investors' money to trade medium term notes, bank debentures and government instruments through mechanisms frequently referred to as "high-yield investment programs." The defendants also falsely promised, suggested, or caused to be promised or suggested rates of return ranging from 2% to 400% per month; and b. The defendants sent and caused to be sent to investors monthly statements which falsely reflected the growth of and earnings on their

Case 1:04-cr-00103-REB-MEH

Document 1096-21

Filed 03/30/2007

Page 2 of 5

invested funds. These monthly statements reassured investors of the program's success and encouraged them to make additional investments and defer disbursements from their accounts for the supposed purpose of compounding earnings. 3. The defendants made and caused to be made false statements and representations about the lack of risk involved with investing money in the fraudulent high-yield investment program, including but not limited to the following: a. The defendants falsely represented or caused to be represented to current and prospective investors that their investments were safe because invested funds were deposited in a non-depleting account or trust account and could not be moved; and b. The defendants falsely represented or caused to be represented to current and prospective investors that their investments were insured from loss by various insurance companies or programs, including St. Paul insurance, Lloyds of London, and Securities Investors Protection Corporation or SIPC. The defendants provided and caused to be provided to current and prospective investors copies of insurance certificates, policies, and bonds. The defendants falsely represented that such documents or programs insured the safety of the investments and granted current and prospective investors rights in the insurance policies and bonds. 4. The defendants used a variety of tactics to lend an appearance of legitimacy to

Case 1:04-cr-00103-REB-MEH

Document 1096-21

Filed 03/30/2007

Page 3 of 5

the fraudulent high-yield investment program, including but not limited to the following: a. The defendants obtained, created, used and distributed or caused to be distributed to current and prospective investors documents containing legal terms, including but not limited to Cooperative Private Placement Agreements, High Yield Private Placements, Medium Term Note Private Placements, and Private Contract Agreements; b. The defendants used various entities through which the fraudulent highyield investment program was offered, including the Reserve Foundation Trust, Reserve Foundation, LLC, Smitty's Investments, LLC, Capital Holdings, LLC, Capital Holdings, International, LLC, Monarch Capital Holdings, LLC, Fast Track, LLC, Rocky Mountain Sports Promotions, LLC, and High Track Team, LLC; c. The defendants distributed and caused to be distributed to current and prospective investors promotional materials, treatises, and other apparently authoritative publications; d. The defendants made and caused to be made communications to current and prospective investors that contained false, fraudulent and misleading statements of fact, including but not limited to the following: i. That Norman Schmidt had a special relationship with the Federal Reserve which permitted him access to and allowed him to successfully trade financial instruments; ii. That Norman Schmidt and George Beros had a history of

Case 1:04-cr-00103-REB-MEH

Document 1096-21

Filed 03/30/2007

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successfully trading in financial instruments and were currently engaged in such trading; and iii. That George Alan Weed was an authorized representative for St. Paul insurance and administered insurance coverage for Superior Guaranty Insurance of Vermont and Lloyds of London; and 5. The defendants used investor funds for purposes other than those represented to current and prospective investors, including but not limited to the following: a. b. c. d. e. Payments to the defendants; Personal expenses of the defendants; Acquisition of unrelated businesses and assets; Payments to other investors; and Payments of monthly commissions or "overrides" to members of a network of individuals, acquaintances, and insurance agents recruited by the defendants to obtain new investors in the fraudulent high-yield investment program. Count 1 further alleges that thereafter one of the members then acted to achieve the goal of the alleged conspiracy or agreement or understanding by committing the following overt acts: a. On or about September 10, 1999, George Alan Weed sent an application for a commercial crime policy to St. Paul Fire & Marine Insurance Company; b. On or about February 14, 2000, Norman Schmidt executed a check in the amount of $50,000, payable to investor Orvalee Farris, on the closed

Case 1:04-cr-00103-REB-MEH

Document 1096-21

Filed 03/30/2007

Page 5 of 5

account of the Reserve Foundation Trust at New Frontier Bank of Greeley, Colorado; c. On or about April 1, 2000, Norman Schmidt and an unindicted coconspirator executed a contract in the name of the Reserve Foundation Trust to purchase America West Plastics and its associated real estate for $1,650,000; d. On or about May 16, 2000, Norman Schmidt and an unindicted coconspirator purchased real estate in Pitkin County, Colorado, known as the Redstone Castle Properties in the names of Peaceful Options, LLC, Tranquil Options, LLC, and Serenity Options, LLC using $6,500,000 in funds obtained from investors in the fraudulent high-yield investment program; e. On or about July 25, 2002, an unindicted co-conspirator executed a lease for office space in Denver, Colorado under the name North West Group, LLC, which was used for operating the fraudulent high-yield investment program; and f. On or about February 5, 2003, Norman Schmidt transferred $2,500,000 from the Capital Holdings, LLC account at Wells Fargo Bank to the Monarch Capital Holdings, LLC account at Bank One controlled by him and George Beros.

O'Malley, Grenig and Lee, Federal Jury Practice and Instructions, § 31.01 (5th ed. 2005) (modified).