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Cedarburg man to pay $30 million in Ponzi scheme, faces federal sentence next week

By: DOLAN MEDIA NEWSWIRES//February 22, 2013//

Cedarburg man to pay $30 million in Ponzi scheme, faces federal sentence next week

By: DOLAN MEDIA NEWSWIRES//February 22, 2013//

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By Donna Walter
Dolan Media Newswires

A Cedarburg man who defrauded two Illinois lawyers in a three-year investment scheme must pay them $30 million in punitive damages, a Polk County, Mo., jury decided Tuesday.

The verdict comes roughly four months after Missouri Circuit Judge John Sims granted a summary judgment motion ordering Eric Schmickle of Wisconsin to pay plaintiffs Randy Gori and Barry Julian a combined $98,898 in damages to reimburse them for the money they lost.

Gori and Julian are partners in Gori Julian & Associates, a national asbestos law firm based in Edwardsville, Ill. They met the defendant through his brother, Ben Schmickle, who practiced at the firm.

The plaintiffs wanted to send a message that “they don’t want a Bernie Madoff character in Bolivar,” said W. Elliott Benoist Jr., an associate at Lewis, Rice & Fingersh who represented Gori and Julian.

In July, Schmickle pleaded guilty to wire fraud in a related federal criminal case.

Benoist said the plaintiffs in the civil case asked the jury to award $40 million in punitive damages, which is 10 times the amount Schmickle admitted stealing in his plea in the federal case in U.S. District Court in Milwaukee.

In the civil case, the Missouri jury awarded $20 million to Gori and $10 million to Julian. Schmickle did not attend Tuesday’s trial, nor was he represented by an attorney.

Schmickle is scheduled to be sentenced Tuesday for the federal case in Eastern District Court.

According to court documents:

Eric Schmickle presented himself as a successful trader and chief investment strategist for Bolivar, Mo.-based Q Wealth Management Inc. In May 2009, he formed Aquinas SF LLC, which Gori and Julian invested in. Schmickle’s father and brothers also invested but are not parties to this lawsuit.

From September 2009 to March 2012, Schmickle reported to the plaintiffs and other Aquinas members that their investments were making significant profits, and he encouraged them to invest more. These representations, however, were false. In his last report to the plaintiffs, in March, Schmickle said the Aquinas account had a total value of $3.8 million, but in fact it was nearly empty. The following month the plaintiffs learned the FBI was investigating Schmickle.

Relying on the false statements, Gori paid the IRS $18,898 in taxes he thought he owed on profits he actually never made. Gori invested $70,000 with Schmickle, and Julian invested $10,000. In his summary judgment order last October, Sims awarded Gori $88,898 and Julian $10,000.

Benoist said Aquinas was never intended to be a legitimate company. It was created, he said, to get money to cover the losses of Q Wealth Management, which Benoist believes Schmickle intended to be legitimate when he set it up.

He said Schmickle was not licensed as a commodities broker.

According to the plea agreement:

From about November 2009 until April 2012, Schmickle traded commodity futures on the Chicago Mercantile Exchange and the Chicago Board of Trade through both Q Wealth Management and Aquinas. He did this from a computer at a residence in Cedarburg, Wis., except for the period of time between February and June 2011, when he traded from a residence in Missouri.

He sent false account statements and invoices to his investors. To cover up his scheme, he allowed investors to withdraw funds that he told them were from profits; the investors, however, were withdrawing their own money or that of other investors.

Through his acts, he fraudulently obtained $4.2 million from 10 investors. By April, he lost more than $3 million of invested funds. He agreed to pay $2.9 million in restitution.

In September, the U.S. Commodity Futures Trading Commission filed a civil enforcement action against Schmickle and Q Wealth Management Inc.

The complaint, filed in the federal court in Milwaukee, alleges that from at least May 2009 through April 2012 Schmickle operated his fraudulent scheme through Q Wealth Management, a commodity trading adviser, and Aquinas, a commodity pool operator.

The CFTC alleges the defendants solicited at least $5.3 million from at least 10 customers and in the solicitations misrepresented their trading performance. The defendants lost $3 million in trading, and Schmickle misappropriated about $1.7 million of customers’ money for his own business and personal use and to pay purported returns to at least one customer with funds of other customers, according to the civil complaint.

The Missouri case is Gori et al. v. Schmickle, 12PO-CC00042. The federal criminal case is U.S. v. Schmickle, 2:12-CR149. The CFTC case is U.S. Commodity Futures Trading Commission v. Schmickle et al., 2:12-cv-971.

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