A New York woman entered a guilty plea to charges that she masterminded two Ponzi schemes - one purporting to dabble in overseas machinery and another touting real estate - that collectively scammed investors out of nearly $7 million. Laurie Schneider pleaded guilty to a single charge of wire fraud before U.S. District Judge Dennis R. Hurley. As part of the plea agreement with prosecutors, Schneider also agreed to the entry of a $1 million judgment against her. Schneider was indicted in February 2012 on three counts of wire fraud.
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.
A sentencing date has not yet been scheduled. Wire fraud carries a potential sentence of up to twenty years in prison.