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Cedarburg man sentenced to 36 months in prison for Ponzi scheme (UPDATE)

By: Jonathan Anderson//February 26, 2013//

Cedarburg man sentenced to 36 months in prison for Ponzi scheme (UPDATE)

By: Jonathan Anderson//February 26, 2013//

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A Cedarburg man was sentenced Tuesday to 36 months in prison for defrauding investors of nearly $3 million in a Ponzi scheme.

Eric Schmickle, 38, was sentenced in U.S. District Court in Milwaukee. Schmickle’s sentence, handed down by U.S. District Judge Randolph Randa, includes restitution of $2.9 million, one year of supervised release and court costs.

That restitution is separate from the $30 million a Missouri jury last week ordered Schmickle to pay{} in punitive damages in a lawsuit filed by two investors. Schmickle lived in Missouri before moving to Wisconsin.

Schmickle, who owned two investment businesses trading commodity futures, pleaded guilty to one count of wire fraud in July. He admitted to authorities that he had been operating a Ponzi scheme — paying investors with money from other investors — and attempted to conceal that practice by falsifying account statements and invoices.

Schmickle committed the fraud for two and a half years, according to court documents, from late 2009 to April 2012. During that time, he accumulated 10 clients who invested more than $4 million, of which Schmickle bilked $2.9 million.

Under federal sentencing guidelines, Schmickle faced a maximum of 20 years in prison, a $250,000 fine and three years of supervised release. But citing an array of mitigating factors, both the prosecution and defense on Tuesday recommended a lighter punishment.

U.S. Assistant Attorney Stephen Ingraham acknowledged that Schmickle turned himself in even before authorities knew of the crime, that Schmickle was truthful and cooperative during the investigation and that the fraud was not meant to support a life of luxury.

Ingraham also said he didn’t expect Schmickle to be a repeat offender.

“Mr. Schmickle’s own sense of shame and guilt will deter him from doing this again,” Ingraham said.

But Ingraham also argued that the sentence should serve as a general deterrent to the public, and that the significance of the crime – the amount of money stolen – was a major factor.

“It’s important that the sentence not be overly lenient,” Ingraham said.

Randa adopted Ingraham’s recommended sentence, which did not include a fine. Because Schmickle is unlikely to ever fully repay the money he stole, Ingraham said, there would be no point in seeking a fine.

Since Schmickle turned himself in, he has been working various retail jobs and has been saving ten percent of his income for restitution, according to a sentencing memo.

Schmickle’s attorney, Joseph Bugni, a public defender, had proposed a six-month prison term and six months of home confinement.

Bugni argued that Schmickle wasn’t trying to live easy from the fraud. Rather, Bugni said, Schmickle was attempting to recover losses from a failed investment strategy. Schmickle did not intend to steal from his clients, Bugni said, many of whom were close friends and family.

“We’re punishing someone who wasn’t prone to greed,” the defender argued. “He was prone to pride.”

Schmickle, who wore a black suit and looked down for most of the hearing, apologized to the court Tuesday.

“Words can’t convey the pain that I know I caused my family and friends,” said Schmickle, who was choked up and made frequent pauses between statements. “I shattered friendships and bonds between my family. Every day I think about what I’ve done.”

Randa said he appreciated that Schmickle was forthright and cooperative with authorities. Still, the judge said, he agreed with the prosecutor that a significant factor in the sentence had to be the quantity and extent of the fraud.

“There’s no doubt this is a serious offense,” Randa said. “It involves a huge amount of money.”

The judge called Schmickle’s actions a “total betrayal of vulnerable people.”

Some of those people – including Schmickle’s father, mother, wife and sister-in-law – sat behind him on Tuesday in the courtroom gallery.

Schmickle must report to federal prison on or before June 17. His attorney requested that Schmickle be able to serve time near Missouri, where Schmickle is originally from.

The U.S. Commodity Futures Trading Commission, the federal agency charged with regulating commodity futures, filed a related enforcement action in September and seeks fines, restitution and trading bans against Schmickle.


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