A Long Island woman will spend the next three years in federal prison for orchestrating a Ponzi scheme that duped victims out of nearly $7 million. Laurie Schneider, 39, received the sentence from U.S. District Judge Denis Hurley after previously pleading guilty to a single count of wire fraud earlier this spring. In addition to the prison sentence, Schneider's plea agreement calls for her to forfeit $1 million to the government.
Beginning in September 2006, Schneider began soliciting investors for Janitorial Close-Out City Corporation. ("Janitorial Close-Out"). Investors were told that Janitorial Close-Out invested in industrial equipment and machinery produced by Chinese companies, and that the company was able to purchase and re-sell janitorial equipment and machinery at a profit margin of 15% to 60% over a short-time period. It was these high profits margins, according to Schneider, that allowed her to pay annual interest payments to investors of up to 60%. In total, authorities estimate that Schneider solicited investments in Janitorial Close-Out of over $4 million from over 25 individuals.
In another venture, Schneider operated Eager Beaver Realty LLC ("Eager Beaver"), which purported to buy and re-sell real estate on Long Island at a discount or that were on the verge of foreclosure. Potential investors were promised annual returns of up to 20%, and received written paperwork indicating that all of their investment would be used to buy and sell real estate. Investors entrusted nearly $5 million to Schneider and Eager Beaver.
In reality, the healthy returns promised by Schneider were made possible through the operation of a classic Ponzi scheme in which incoming investor funds were used to pay returns to existing investors. Schneider also formed the Eager Beaver scheme to establish a new source of funds to pay returns to investors in Janitorial Close-Out. Investor funds were also diverted for Schneider's personal expenses, which included luxury car purchases and country club dues.
Schneider was indicted on three counts of wire fraud in February 2012.