Take the Money and Run

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Reichman spent his spare time over the next three years trying to understand securities fraud and familiarizing himself with the case. Then, in the fall of 1995, he got a call from an FBI agent bearing bad news. Schlaks and his wife had applied to be residents in New Zealand. Before the country grants residency, however, it contacts the courts in the immigrant's country of origin "to see if they're a Ted Bundy or a Mother Teresa," Reichman says. New Zealand officials found that there were federal "unlawful flight to avoid prosecution" warrants out for the Schlakses. But before the warrants could be enforced, the FBI needed to obtain the warrants in the state from which the fugitives had fled. The FBI agent could not find the warrants in Colorado, even though a Colorado judge had issued them years before.

Reichman found that, in fact, the warrants had been quashed two years earlier during a routine housecleaning. Every year, judges in Denver District Court hold a "docket day," in which old cases are reviewed to determine whether they should remain active. Since more than 90 percent of the state's criminal cases go through the district attorney's office, the judge who came across the nine-year-old file in 1993 must have assumed it was one of those, Reichman guesses. And when no one from the DA's office responded to the judge's inquiry, it must have been dismissed, and whatever arrest warrants were associated with it disappeared as well.

"We're not trying to blame anyone," Reichman says. "That's just what we think happened. All we know is that the case never made it back here, and so it was dismissed."

So Reichman had to resurrect the case and reissue the arrest warrants for Jay and Rebecca Schlaks. And doing that, he says, was "not just a walk over to district court."

By 1996, Reichman was so overloaded with work that he could no longer spend time on the Schlaks case, and it was turned over to James Lewis, who was reassigned from his role as a prosecutor of anti-trust cases to the securities-fraud unit. The extradition of Jay Schlaks became his sole mission.

Lewis started by locating as many surviving victims as he could -- many had moved away or were very old and sick or simply wanted to forget the entire thing. "We literally brought people in from nursing homes," Lewis says. Fourteen victims died between the time he started the case and the time he put it to bed. The remaining eight are still scattered across Colorado.

As for those who didn't want to get involved, Reichman says, "Here some jerk from the attorney general's office calls years later, and they're like, 'Oh, goody, why don't you remind me of how stupid I was.' A lot of them just told us to go away."

After Lewis had collected affidavits from those who were willing and able, he sent the paperwork off to New Zealand; an extradition hearing was scheduled for May 1998. But Schlaks's attorney filed several motions to dismiss the case, including one in which he argued that the wrong person had filled out the New Zealand arrest warrant for Schlaks. Lewis had to fly to Auckland to fight these motions. He was successful, and a trial was set for September 1998.

By then, however, New Zealand authorities were already well aware of Schlaks. According to Lewis, Schlaks was operating a business in an office he rented from the Bank of New Zealand. When he asked for permission -- and money -- to add space so he could expand the business, the bank consented. Sometime later, Schlaks approached the bank again, requesting more space. Again the bank agreed. But this time, Schlaks and his contractor agreed to bill the landlord for more work than was done and split the difference -- only Schlaks didn't split the difference with the contractor, according to the attorneys. The contractor wasn't going to let Schlaks get away with stiffing him, so he told the bank what had happened, and the bank filed a criminal suit against Schlaks. He was found guilty and sentenced to nine months in prison in the summer of 1998, but his sentence was suspended on the condition that he commit no other offenses for a year.

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Julie Jargon
Contact: Julie Jargon