State: Suspected $1 million securities fraud began in ’05
A million-dollar series of suspected investment frauds that led to the arrest of a Washoe County man appears to have begun in 2005, investigators say.
And they want to talk to other investors who may have lost money in the deals.
Jack A. Schwartz, 67, of Pleasant Valley was arrested by investigators from the Nevada Secretary of State Securities Division. He is charged with five counts of securities fraud and 10 felony counts of theft.
Efforts to reach Schwartz for comment last week were unsuccessful. A phone number listed to Schwartz was disconnected, and an e-mail drew no response.
Eight individual investors have been identified by the state as victims of the alleged fraud.
In a criminal complaint filed against Schwartz in Reno Justice Court in connection with his June 3 arrest, investigators say he raised at least $1 million from investors who thought they stood a chance of getting at least a 20 percent return from investments in businesses such as movie-production, fire-prevention technologies and cartilage rejuvenation.
But investigators say Schwartz apparently diverted the funds for personal use, including mortgage and credit card payments as well as deposits into a bank account of his ex-wife.
In the criminal complaint, the securities investigators contend that Schwartz took two approaches with investors.
In some cases, he pitched investments in companies he controlled directly.
Schwartz told investors that those companies, with names including Sierra High Technology Ventures LLC, Tahoe Venture Partners LLC, Tahoe Venture Fund L.P. and Tahoe Blue Productions L.P., were raising early-stage capital, investigators said.
A onetime securities broker in California and a non-practicing attorney, Schwartz also had written agreements with at least two companies, Orthogene LLC and Barricade International Inc., to raise investment capital. Executives of those companies, which aren’t implicated in the criminal case, said they were unaware that Schwartz had raised money from investors who thought they were getting a stake in their companies.
Investors in the deals sold by Schwartz included a man who’d been a longtime tennis partner as well as a man that Schwartz met during a Hawaiian vacation.
Other investors were drawn to Schwartz by recommendations from one early investor in Schwartz-related entities.
Dave Evans, a state securities investigator, said Schwartz presented himself as a venture capitalist who linked startup companies with investors seeking annual returns of 20 percent.
Others in the small venture-capital community in northern Nevada said last week they hadn’t heard of Schwartz or his investment vehicles.
After receiving partnership interests or signing subscription agreements, investors received reassuring messages from Schwartz.
Court documents quote one e-mail from Schwartz that read, “We are looking forward to a productive year in the venture industry, with our companies all progressing and growing into successful operating entities with high profits.”
But at least one investor grew suspicious and went to the Secretary of State’s investigators a couple of days before Christmas in late 2008.
And at least one investor filed a civil action against Schwartz. Washoe County court records show the case was settled in late 2010.
Evans encouraged other investors who believe they may have been victims of Schwartz-related frauds to call the Secretary of State’s office at 687-9950.
He said the Schwartz charges once again point up the need for investors to undertake careful due diligence investigating the person, the product and the company before making investments.
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