Take the Money and Run

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When it was time for Lewis to return to Auckland in September for the extradition trial, the first thing he and his New Zealand colleagues had to do was to explain why the case was still viable. It was, after all, fourteen years old, and it had been dismissed once already. The judge wanted to know why the Colorado Attorney General's Office hadn't appealed the earlier dismissal, but since there was no precedent in Colorado for reinstating a case without first appealing its dismissal, "we had to get creative," Lewis says. "Our argument was that the judge mistakenly dismissed the case [during the docket review] because notice wasn't given to the right prosecutor and that because of that, we didn't have an opportunity to be heard."

Finally, Lewis and the crown solicitors found a New Zealand case that had an identical twist: a criminal case that had been dismissed after notice was delivered to the wrong office had been allowed to move forward.

On October 8, 1998, the judge ruled that Lewis had proven his case for extradition. Schlaks was then jailed until January 1999, when a U.S. marshal and two Denver County sheriff's officers arrived to escort him back to Denver.

Before prosecutors were able to put Schlaks behind bars, though, they had to cross another hurdle: In October 1999, his attorney, Darren Cantor, tried to have the case dismissed on the grounds that the attorney general's office had lost evidence and had taken so much time prosecuting the case. "The government usually doesn't screw up this much. They usually don't lose evidence, and they usually don't cheat this explicitly," he says.

Cantor relied on a Colorado law that states that when one side destroys or doesn't produce evidence that is helpful to the other, the case can be dismissed. Although Lewis argued that the only side injured by the absence of the original bank records was the prosecution, Cantor countered that "because they'd been thrown out, I couldn't hire an accountant to look at those records to even say if they were helpful or not."

Cantor also questioned why the attorney general's office didn't try to extradite Schlaks a second time until eight years after the original attempt failed because of a mere technical error surrounding the affidavits. "They have their excuses, like someone left the office, but you know what? I don't buy that. If this case was so important, why did they wait so long? Jay was going by the same name, and he was living in the same country, at the same address; it's not like he was in hiding."

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.

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.

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Julie Jargon
Contact: Julie Jargon