State officials filed an emergency petition to freeze some of deceased Kokomo “wealth manager” Richard Schwartz’ assets Wednesday, alleging Schwartz was running a multi-million-dollar Ponzi scheme.
Attorneys representing more than a dozen potentially competing interests are expected in Howard Superior Court IV Friday morning, in the first round of what is likely to be a protracted battle over any remaining assets Schwartz held.
Schwartz, well-known from his billboards around Kokomo, ran RAS Associates, 1932 S. Dixon Road, which billed itself as an investment firm.
He committed suicide on Aug. 21 at a Simpsonville, Ky., mansion.The million-dollar estate, purportedly Schwartz' home, was owned by a company called Field of Dreams LLC.
Valerie Kroeger, a spokeswoman for the Indiana Secretary of State’s office, said state officials are “confident” Schwartz was running a Ponzi scheme.
“When we started looking into this, we received a large number of complaints from investors, saying there was a failure to pay. That’s typical with this sort of thing,” Kroeger said. “They receive monthly interest payments, and all of the sudden it starts to fall off, because [the schemer] can’t keep new investments coming in.”
Kroeger said state officials have already identified between $5 million and $10 million in possible victims’ losses in the case. She said those losses are expected to mount in the coming weeks.
“At this point, we’re still looking for victims,” she said. “They are all over the country, in Kentucky, Arizona and Indiana. We’re hesitant to put a number on it, because we’re just not sure at this point.”
The Indiana Attorney General’s office filed a motion on behalf of the Indiana Securities Commissioner’s office Wednesday, seeking to intervene before the court makes any rulings on Schwartz’ estate.
According to the filing, attorneys are due in court Friday to ask Judge George Hopkins to dissolve a constructive trust set up over Schwartz’ life insurance.
Kroeger said Schwartz’ life insurance could be worth $13 million.
Schwartz was a life insurance salesman for New York Life until he was terminated last year.
One of the parties to be represented Friday is Schwartz’ wife, Brielle Schwartz, who filed for divorce one day after the U.S. Southern District Court in Indianapolis entered a $1.45 million default judgment against her husband.
According to federal court records, New York Life terminated its agent’s contract with Schwartz in March 2012, and shortly thereafter demanded Schwartz make good on a negative ledger balance with the company.
New York Life officials said the money owed was “compensation credited to Schwartz for policies which were rescinded, declined, not issued, canceled, surrendered, foreclosed, expired, or reduced and replaced with new policies.”
In the lawsuit, company officials said efforts to arrange a repayment schedule ended when Schwartz stopped returning phone calls in June 2012.
“We need to make sure the judge understands there are people out there [Schwartz] owes millions of dollars to,” Kroeger said.
According to Wednesday’s court filing, Schwartz broke state law by failing to disclose he was spending investors’ money on himself, rather than placing investments into profit-generating enterprises.
"He lived a lavish lifestyle. There's no telling who he owes," Kroeger said.
Kroeger said the secretary of state’s securities division is asking victims to contact the office by calling 317-232-6681 or the state’s securities fraud hotline, 800-223-8791.