Take the Money and Run

It took sixteen years and international extradition, but the Colorado Attorney Generalís Office finally got its man.

In the end, the judge denied Cantor's motions to dismiss the case. "That was a real hurdle," says Reichman. "It was very significant. We breathed a huge sigh of relief."

Schlaks's Colorado trial was set for January 31, 2000. But rather than go before a jury, he chose to plead guilty to one count of theft and one count of securities fraud. The other six counts were dismissed as part of the plea agreement. Of the original 29 counts, several had to be dropped because of a treaty between the United States and New Zealand in which New Zealand will grant extradition only if the crimes someone is charged with in the United States are also considered crimes in New Zealand (for instance, selling securities without a license); several more were dropped because the deaths of some of the older witnesses left the attorney general's office unable to prosecute.

Very little is known about Schlaks -- neither Cantor nor the prosecutors know where he's from or whether he's ever had a legitimate career -- and he declined to talk to Westword. But court documents show that he used $848,601 of investor funds to buy such things as cars, jewelry, art, furniture, clothes (including an $8,000 layette for his newborn son), appliances, firearms, an ostrich-skin briefcase and precious metals and coins, as well as for travel expenses. The rest of the money went for office expenses, real estate purchases, the salaries of his associates and interest payments to investors. More than $200,000 was deposited in out-of-state banks or converted to cash.

Bad investment: Jay Schlaks lived in this Humboldt Street mansion while he bilked people out of millions of dollars.
James Bludworth
Bad investment: Jay Schlaks lived in this Humboldt Street mansion while he bilked people out of millions of dollars.

On December 17, 1999, Schlaks was sentenced to four years in jail on the theft count -- which was reduced to 34 months because he had already served a total of fourteen months during his jail stays in New Zealand and Denver -- and twelve years of probation on the securities-fraud count. In addition, he was ordered to pay $306,000 in restitution -- the total amount his eight remaining victims had invested in First Territorial Mortgage.

Some of the other players in Schlaks's charade have paid for their roles as well. William Kraemer, the lawyer for First Territorial Mortgage, was found guilty of securities fraud in 1986. He received four years' probation and was ordered to pay $20,000 in restitution. The New Mexico resident has since completed his probation and paid his dues.

Two other co-defendants received deferred sentences as part of a plea bargain; they both successfully completed the terms of the plea agreements, and the cases against them have been dismissed. One of the company's account executives was not charged in return for his cooperation in the prosecution of Schlaks. Several other account executives are long gone -- "We've searched all over the continent for them," explains Reichman -- but it doesn't trouble the prosecutors too much. They were just pawns, they say; it was Schlaks who orchestrated everything. "These people will never qualify for choirboy, but they're not Jay Schlaks," Reichman says.

Schlaks celebrated his 54th birthday last week at Camp George West, a minimum-security prison in Golden, but he didn't get a visit from his wife, Rebecca, or his two children. They are still more than 7,300 miles away in New Zealand, stuck in cross-continental limbo. Rebecca Schlaks can't become a New Zealand resident because of the outstanding warrant for her arrest in the United States, but she can't return here for the same reason -- and since her passport has expired, she can't go anywhere else. "She's a woman without a country," Reichman says. Which is fine with him. "We'll leave the warrant for her in place. But are we going to go through this brain damage again? No."

McSwigan, the woman who lost $22,000, doesn't blame the attorney general's office for the delays. "As long as [Schlaks] behaved in New Zealand, they couldn't do much," she says. "But once he got in trouble there, New Zealand was happy to be rid of him. I think the attorney general's office handled it as well as they could."

David, the man who lost $7,000, hopes some of the people who lost far more than he will take comfort in knowing Schlaks is paying for his crimes. "It was the persistence of people like Mr. Lewis that brought Mr. Schlaks to justice," says David, who saw Schlaks for the first time when he attended his sentencing in December. "The outcome could have been completely different had it not been for the ingenuity and persistence of these people."

Lewis and Reichman hope they never have to handle another extradition case, and they admit they were ill-equipped to handle this one. Since Colorado is a landlocked state, it's rare for fugitives to flee to other countries from here, they say. While the scam itself was plain vanilla compared to some fraud cases the two have tried, its prosecution had more twists and turns than any they'd ever encountered.

"It involved legal issues I'd never seen before," Reichman says. "Witnesses were dying. This stuff just doesn't happen. And then there was the New Zealand case that was right on par with ours. The whole thing was just bizarre. I started prosecuting cases in 1975, and I've never seen anything like it. Phil Feigin really deserves credit for keeping it going. He had this attitude that he wouldn't let this kind of thing happen in Colorado."

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