Kenneth A. Schneider, 57, Weston, Connecticut, pled guilty on November 30, 2010, before U.S. Magistrate Judge Jeremiah C. Lynch, to wire fraud. Sentencing has been set for March 10, 2011.
In an Offer of Proof, the government stated it would have proved at trial the following: For the past several years, perhaps beginning as early as 2003, Schneider, doing business as American Bridge Funding, Inc., represented himself as “specializing in problematic and opportunistic commercial direct bridge loan funding[.]” He advertised in national and regional publications like USA Today and the Salt Lake City Tribune, and also relied on referrals. He claimed to be capable of funding large-dollar, hard-money loans (usually for a few million dollars) to individuals or entities wishing to borrow against a parcel or parcels of real property.
Schneider required an up-front application fee that was normally either $7,500 or $10,000. Once he received the application fee, he visited the site of the real property and met with the potential borrowers. The site visits were followed by a commitment letter, which stated: “I am pleased to advise you of our commitment to provide financing. This commitment supersedes all previous communications and correspondence without limitation.” The letter detailed the amount of the loan, the collateral for the loan, the interest rate and repayment terms, and specified a closing date with the tag line, “time is of the essence.” The letter also encouraged the borrowers to hire an attorney licensed in New Jersey to represent their interests and obligated the borrower to pay Schneider‘s legal fees “provided in connection with this transaction.” The letter specified that the commitment would be effective only after it was fully executed and delivered to Schneider along with a commitment fee (which was 1% of the loan amount, but was sometimes waived).
After Schneider visited the property and sent the commitment letter, he became difficult to contact and eventually often communicated one or more problems with the collateral property, such as environmental issues, lack of ownership of mineral rights, or the borrowers’ inability to obtain flood insurance for an undeveloped parcel of real property. Many borrowers asked for their commitment or application fees back, but Schneider almost always refused.
During the time period alleged in the indictment, Schneider swindled in excess of $1.5 million from approximately 130 victims. Included among those victims are two residents of Missoula County and one resident of Ravalli County, who combined to pay Schneider $37,750 in application and commitment fees for a loan that never closed. On December 8, 2008, Schneider sent a terms sheet to one of the Montana victims and on December 23, 2008, the terms sheet was executed and $10,000 was wired into Schneider‘s JP Morgan Chase bank account. Schneider sent the commitment letter that same day (December 23, 2008). The remaining $27,750 was wired between January 2 and 9, 2009.
Schneider traveled to Montana to visit the collateral property on January 14, 2009. He gave every indication that he would fund the loan and did not express any concerns about the collateral. Following the site visit, Schneider complained that the owner of the collateral property did not also own the mineral rights. The victims attempted in vain to assuage Schneider‘s concerns, but eventually substituted a different parcel of land that did not have a severed mineral estate. Schneider responded with a second commitment letter, but later raised an issue about a stream that crossed the second parcel. The victims then attempted to substitute a third parcel, but never received a response from Schneider. At that time, the victims requested a refund, but Schneider responded that he deserved the money he had received, for what he characterized as “break up fees.”
During the time period alleged in the indictment, January 2008 until July 2010, Schneider spent in excess of $140,000 in fraudulently obtained funds on the mortgage for his residence in Connecticut, more than $394,000 advertising for his business, at least $94,000 on an apartment in New York City, and countless other sums on ATM and debit withdrawals.
When he was arrested in July 2010, Schneider acknowledged that his business was a fraud. He provided a hand-written statement in which he admitted that he “participated in a scheme to support [his] family,” and that he “never intended to provide funding” to any of the victims that he encountered.
Schneider faces possible penalties of 20 years in prison, a $250,000 fine and 3 years supervised release.
The investigation was conducted by the U.S. Secret Service.
The United States Attorney’s Office announced the guilty plea. The offer of proof was filed by Assistant U.S. Attorney Timothy J. Racicot.