Schmitz Complaint k5p6

EDWARD G. KOHLER, AUSA (312) 353-4086 W4444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444444

UNITED STATES DISTRICT COURT NORTHERN

DISTRICT OF

ILLINOIS, EASTERN DIVISION

UNITED STATES OF AMERICA v.

CRIMINAL COMPLAINT FRANCIS ALAN SCHMITZ, a/k/a F. ALAN SCHMITZ CASE NUMBER: (Name and Address of Defendant)

I, the undersigned complainant being duly sworn state the following is true and correct to the best of my knowledge and belief. During a period from in or about January 2009 to the present, in Cook County, in the Northern District of Illinois, Eastern Division, and elsewhere, defendant intended to devise, devised and participated in a scheme and artifice to defraud First Midwest Bank and to obtain money, including funds belonging to and in the custody of First Midwest Bank, by means of materially false and fraudulent pretenses, promises and representations and by material omissions, and for the purpose of executing the scheme and attempting to do so on or about April 18, 2009, knowingly caused to be deposited to be sent and delivered by commercial interstate carrier from the Northern District of Illinois to Sarasota, Florida certain documents related to obtaining a $2,850,000 line of credit in violation of Title 18 United States Code, Section 1341. I further state that I am a United States Postal Inspector and that this complaint is based on the facts contained in the attached Affidavit.

Continued on the attached sheet and made a part hereof:

X

Yes

No

Signature of Complainant

KEVIN J. O’BOYLE Postal Inspector United States Postal Inspection Service Sworn to before me and subscribed in my presence,

at Date

Chicago, Illinois City and State

MICHAEL T. MASON United States Magistrate Judge Name & Title of Judicial Officer

Signature of Judicial Officer

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS

) ) ss ) AFFIDAVIT

I, Kevin J. O’Boyle, being duly sworn, state as follows: BACKGROUND OF AFFIANT AND PURPOSE OF AFFIDAVIT 1.

I have been a Postal Inspector with the United States Postal Inspection Service for

approximately 16-1/2 years. I am currently assigned to a team in Chicago responsible for investigating various types of fraud schemes including those relating to applying for and obtaining loans and other extensions of credit. 2.

This affidavit is submitted in of a criminal complaint alleging that

FRANCIS ALAN SCHMITZ has engaged in a mail fraud scheme in connection with applying for and obtaining a $2,850,000 line of credit from First Midwest Bank in violation of Title 18, United States Code, Section 1341. Since this affidavit is being submitted for the limited purpose of establishing probable cause in of the criminal complaint, I have not included each and every fact known to me concerning this investigation. I have set forth only the facts necessary to establish probable cause to believe that FRANCIS ALAN SCHMITZ committed the criminal offense alleged in the complaint. 3.

This affidavit is based on my interviews of witnesses, on my review of bank

records, on my review of documents received from other sources and on my review of a bankruptcy hearing recording and documents. PROPOSED DEFENDANT 4.

FRANCIS ALAN SCHMITZ, also known as F. ALAN SCHMITZ (SCHMITZ),

resides in Long Grove, Illinois and is 58 years old. SCHMITZ was employed by the Northern Trust

Company as a vice president and manager of building/istrative services until in or about 1996. More recently, SCHMITZ has been representing himself to be a managing partner of Long Grove Real Estate Partners, LLC. and the president of F. Alan and Associates, Inc. In December 2009, SCHMITZ filed a voluntary bankruptcy petition. THE INVESTIGATION 5.

The investigation to date has focused on allegations that since at least in or about

2003, SCHMITZ has fraudulently attempted to obtain millions of dollars of loan proceeds from at least seven different lenders, including financial institutions. The evidence gathered to date in this ongoing investigation points to SCHMITZ making material misstatements and omissions to lenders about such matters as his financial condition, the collateral he offered in of the loan and his intended use of loan proceeds. 6.

The primary focus of this affidavit and the charge in the criminal complaint is a

$2,850,000 line of credit SCHMITZ applied for and received from First Midwest Bank in 2009. First Midwest Bank has approximately 100 branches in Illinois, Indiana and Iowa. Schmitz dealt with a branch of First Midwest Bank located in Morris, Illinois. The deposits of First Midwest Bank are insured by the Federal Deposit Insurance Corporation and were so insured at all times relating to the conduct charged in the criminal complaint. FIRST MIDWEST BANK LOAN 7.

According to a Northbrook, Illinois loan broker, the loan broker attempted to arrange

a loan for SCHMITZ in or about early 2009. SCHMITZ told the loan broker that he needed the funds for real estate investment deals involving property located in Long Grove, Illinois. 8.

Based on information provided by SCHMITZ, the loan broker prepared an executive

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summary of loan request, a copy of which is attached as Government Exhibit 1. Among other things, this executive summary represented that SCHMITZ was seeking a loan or line of credit of approximately $2,850,000 to be used as “earnest money deposits for 11 various properties.” The repayment of the loan would come “upon sale, development and property cash flow from various properties.” As collateral, according to the executive summary, SCHMITZ offered trust assets valued at $5,375,000. (These trust assets were purportedly in an at Winston and Huston Trust and Financial Services, LLC (Winston and Huston TFS)). The executive summary also represented that SCHMITZ had a net worth of $6,332,618 with $5,595,000 in liquid assets. 9.

The loan broker delivered the executive summary to a number of banks, including

First Midwest Bank. On or about January 24, 2009, SCHMITZ and the loan broker met with a loan officer from First Midwest Bank. During this meeting, according to the loan officer, SCHMITZ confirmed the information on the executive summary concerning his proposed use of loan funds, his net worth and his purported trust with over $5,000,000 being available for collateral for the loan. 10.

During the period starting before the meeting with the First Midwest Bank loan

officer and continuing to at least in or about April 2009, SCHMITZ, both himself and through the loan broker, provided information to First Midwest Bank in order to obtain the loan. This included, among other things, periodic statements for the trust, a personal financial statement, personal income tax returns for 2006 and 2007 and trust income tax returns for 2006 and 2007. TRUST 11.

SCHMITZ provided the loan broker and First Midwest Bank with purported periodic

statements for the trust from Winston and Huston TFS. The latest periodic

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statement provided to First Midwest Bank was for the period ending February 13, 2009. This statement detailed the investments held in the , of which SCHMITZ was purportedly the beneficiary and represented that the market value of the was $5,473,018. 12.

According to the periodic statements, Winston and Huston TFS was located

at 1990 Main Street, Suite 750, Sarasota, Florida and its telephone number was (941) 309-5269. According to information received from First Midwest Bank, the bank was unable to independently that Winston and Huston TFS existed.1 13.

I have conducted an investigation of the 1990 Main Street address and have

determined that the Regus Group operated a virtual office business out of that location. According to information received from the Regus Group, SCHMITZ purchased virtual office services for Winston and Huston TFS in 2007. SCHMITZ also arranged to have the Regus Group answer the assigned virtual office telephone number - - - (941) 309-5269 - - - by saying “Good morning/Good afternoon Thank you for calling Winston & Huston, how may we help you?” The service was then either to send the caller to voicemail or to take a message. 14.

According to the Regus Group, SCHMITZ also arranged to have mail received

at the virtual office forwarded to Winston and Huston TFS at 4238 North Arlington Hts. Rd. #349,

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Leaders Bank was another of the financial institutions approached by the loan broker and SCHMITZ to provide the loan. An officer of the bank met with them on January 12, 2009. During the meeting, the bank officer told them that he needed to independently the existence of Winston and Huston TFS, because the bank could find no information about it on Google. According to the bank officer, “after the meeting I ed Chris Pohlman at Mesirow to help find information on this firm. He and his assistant looked online at websites that have every money manager listed and couldn’t find the firm. They checked another site that had every individual that held a Series 7 license and couldn’t find any of the brokers listed on the Winston and Huston statement.” 4

Arlington Heights, IL 60004. My investigation has shown that this was a mail drop rented by SCHMITZ at a UPS Store. 15.

According to the Regus Group, SCHMITZ also made arrangements to send mail to

the Regus Group “ that we want sent out from your (our home) location to clients.” In other words, the mail would look like it had been sent by Winston and Huston TFS from its own office, when it was actually the Regus Group doing the mailing. 16.

Winston and Huston TFS also purportedly had a website at whtfs.com. According

to information received from 1&1 Internet Inc., SCHMITZ was the person who opened this website on October 2, 2007 using his Arlington Heights, Illinois mail drop address. 17.

On or about March 3, 2009, SCHMITZ represented to First Midwest Bank that

approximately $4,800,000 of the T-bills, mutual funds and equities contained in the trust were being moved by Winston and Huston TFS into an at Edward Jones in Sarasota, Florida. 18.

As a part of my investigation, I interviewed the General Counsel of Edward Jones

and obtained documents from the company. Edward Jones is a nationally known securities broker. SCHMITZ did open an in the name of F. Alan Schmitz at Edward Jones on March 3, 2009, but it was never funded. Moreover, a control agreement purportedly acknowledging First Midwest Bank’s interest in the Edward Jones and agreeing not to effect any transfer of assets from the without the bank’s prior approval contained a forged signature of an Edward Jones broker. 19.

In December 2009, SCHMITZ filed a voluntary bankruptcy petition.

In it,

SCHMITZ claimed to have total assets of less than $500,000 ($455,500 of which was the combined

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value of his residence and a time share) and monthly income of only $2,500. SCHMITZ made no mention of the trust in his bankruptcy petition, but did testify at a bankruptcy hearing under oath in substance that he had been the beneficiary of a trust for upwards of ten years, that the trust did not exist any more and that he had been unable to William J. Huston about what happened to the trust. PERSONAL FINANCIAL STATEMENT 20.

SCHMITZ provided First Midwest Bank with a personal financial statement “as of

December 1, 2008.” On this financial statement, SCHMITZ claimed to have total assets of $7,702,093, of which $5,379,113 were in the trust. Although he listed liabilities of $1,369,475, SCHMITZ did not include the approximately $1,750,000 he owed Inland Bank & Trust on a defaulted loan. Under a category called “Credit previously obtained at,” SCHMITZ failed to list Inland Bank & Trust plus at least three other banks, which had previously provided SCHMITZ with loans of almost $350,000 in July 2003, $500,000 in June 2007 and $750,000 in September 2007. 21.

On his personal financial statement, SCHMITZ also represented that he was the

president of F. Alan and Associates, Inc. and senior managing member of Long Grove Partners, LLC. SCHMITZ represented that his gross annual salary from these two positions was $275,000. In his December 2009 bankruptcy petition, SCHMITZ disclosed his total income from employment as being $15,000 in 2007, $16,626 in 2008 and $14,000 in 2009. FEDERAL INCOME TAX RETURNS 22.

SCHMITZ provided First Midwest Bank with purported personal and trust federal

income tax returns for 2006 and 2007. 23.

Both personal income tax returns reflected total income over $300,000, even though

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SCHMITZ only reported income of $15,000 for 2007 in his bankruptcy petition. 24.

Both trust income tax returns also reported total income over $300,000. This once

again is inconsistent with SCHMITZ reporting income of only $15,000 for 2007 in his bankruptcy petition. USE OF LOAN FUNDS 25.

As mentioned earlier, SCHMITZ represented that the line of credit would be used in

connection with real estate transactions in Long Grove. Money generated from these transactions would be used to make loan payments. 26.

SCHMITZ caused the entire $2,850,000 line of credit to be disbursed almost

immediately upon its approval. $350,000 was escrowed pursuant to SCHMITZ’ agreement with the bank for payment of interest. $35,625 was wired to the loan brokers. $23,500 was used to pay bank fees in connection with the line of credit. The remaining $2,440,850 was transferred on April 22, 2009 into an at Chase in the name of Long Grove Real Estate Partners LLC controlled by SCHMITZ. 27.

Within days SCHMITZ wire transferred $1,630,274.83 of these funds to Inland Bank

& Trust in payment of the defaulted loan2 and used another $40,200 of these funds to pay past due 2

On November 5, 2008 Inland Bank & Trust filed a civil lawsuit in the Circuit Court of Cook County against SCHMITZ claiming in part that SCHMITZ had defrauded the bank in obtaining a revolving line of credit of $1,750,000 in December 2007. As a part of its claim, Inland Bank & Trust alleged that SCHMITZ had offered his purported trust fund as collateral, but the bank discovered Winston and Huston TFS “is not a Florida company and cannot be located anywhere.” The bank also alleged that “the Collateral and the Winston & Huston Trust & Financial Services entity do not exist.” At the time SCHMITZ made the $1,630,274.83 payment to Inland Bank & Trust in April 7

rent. Over the next 10 day period, SCHMITZ used $20,000 more of these funds to pay an unrelated civil judgment and transferred an additional approximately $380,000 of these funds to his personal at Chase. My review of his personal bank records at Chase indicates that SCHMITZ used most if not all of these funds for his own personal benefit rather than the purchase of real estate in Long Grove. CURRENT LOAN STATUS 28.

On or about May 5, 2009, about two weeks after First Midwest Bank had provided

SCHMITZ with the $2,850,000 line of credit, the bank discovered “there was no money in a trust held under the name of F. Alan and Huston Trust” at Edward Jones and “that the signature we had received on our First Midwest Bank control agreement was fraudulent.” The bank almost immediately attempted to get SCHMITZ to repay the loan in full. The bank also demanded an ing from SCHMITZ as to how he spent the funds from the line of credit. 29.

On or about May 6, 2009, SCHMITZ provided the bank with a written ing

of his use of the line of credit funds, a copy of which is attached as Government Exhibit 2. SCHMITZ falsely detailed spending $2,200,000 on real estate escrows and options and disclosed nothing about paying funds to Inland Bank & Trust. 30.

First Midwest Bank kept the $350,000 from the loan proceeds escrowed to pay

interest due on the line of credit. In addition, SCHMITZ returned the remaining $200,000 in the Long Grove Real Estate Partners LLC at Chase to the bank. SCHMITZ still owes First

2009, this litigation was ongoing. Also, on or about April 23, 2009, SCHMITZ used funds from the First Midwest Bank line of credit to pay $12,698.45 to the law firm, which represented him in the litigation with Inland Bank & Trust and in at least one other litigation filed by a lender.

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Midwest Bank approximately $2,400,000.

USE OF COMMERCIAL INTERSTATE CARRIER 31.

On or about April 18, 2009, a First Midwest Bank loan officer met with SCHMITZ.

During this meeting, SCHMITZ executed documents relating to his application for a line of credit. The bank then sent certain of these documents including the control agreement to the purported address of Winston and Huston TFS in Sarasota, Florida for signature by William Huston. According to the Fed Ex tracking detail, the package originated in Lombard, Illinois on April 18, 2009 and was delivered by interstate private courier to Sarasota, Florida on April 20, 2009. This use of this commercial interstate carrier was in furtherance of SCHMITZ’ scheme to fraudulently obtain the line of credit. CONCLUSION 32.

In brief summary, there is probable cause to believe that, in applying for and

obtaining a $2,850,000 line of credit from First Midwest Bank, SCHMITZ knowingly made material misrepresentations about, among other things, his income, his net worth, his ownership of trust assets for collateral purposes, his intended use of loan funds, his liabilities and the loans he had received from other financial institutions. There is also probable cause to believe that SCHMITZ knowingly caused use of a commercial interstate carrier in furtherance of his scheme to defraud .

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33.

Based on the foregoing, there is probable cause to believe that SCHMITZ has

committed mail fraud in violation of Title 18, United States Code, Section 1341.

KEVIN J. O’BOYLE Postal Inspector, U.S. Postal Inspection Service

SUBSCRIBED AND SWORN to before me on May 4, 2010

MICHAEL T. MASON United States Magistrate Judge

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