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Insurance swindle case to go to jury trial

The case of a Cloquet man charged with swindling his client is going to jury trial, even though he’s effectively already lost his insurance license in a separate Department of Commerce decision.

Steven William Schmidt, 56, of Cloquet was initially charged with felony theft by swindle and felony theft by false representation in November 2012. As investigation of the case continued, Assistant Carlton County Attorney Jeffrey Boucher has since filed three additional criminal charges — all for insurance fraud — against Schmidt.

The two sides met Jan. 27 in Carlton County Court for a settlement conference, but reached no resolution. A jury trial has been set for June 2.

According to the criminal complaint:

Schmidt has conducted business under multiple names, including Schmidt and Associates, Schmidt Consulting LLC and Schmidt Wealth Management. The most recent business was Safe Money Solutions, LLC, currently located on the 600 block of North Road in Cloquet. According to the Better Business Bureau website, Safe Money Solutions offers financial services for post retirement, estate and annuities.

Department of Commerce Detective Brandon Johnson began investigating Schmidt, a licensed insurance provider in Minnesota, in October 2012, following a complaint from a client of Schmidt’s who said he had advised her to withdraw money from her annuities between 2004 and 2008, claiming he would use the proceeds for other retirement investments.

Boucher explained that although the state did the investigation, the county attorney’s office is prosecuting the alleged crime.

The complaint notes that on or about Nov. 12, 2007, three “request for annuity” policy fund forms were sent to Allianz Life Insurance Company. The forms were signed by Schmidt’s client, but were completed in different handwriting using a different pen. The fax imprint forms read SW Schmidt and Associates. The client received $42,403 in proceeds from those three requests. However, on or about Nov. 19. 2007, a check in the amount of $39,258 was made out to Schmidt Consulting from the client’s account, a check she said she thought Schmidt completed but she signed.

According to the complaint, when Detective Johnson examined Schmidt’s bank records, he found no record the $39,258 was invested for the client. Examination of the bank records instead provides probable cause for the State and the client to believe that the money was used entirely for the enrichment of Schmidt, his family and associates. The detective also found several instances in which funds appeared to be used for personal reasons: a $30,000 transfer from Schmidt’s business to his personal account on Nov. 28, 2007 (one day after checks made out to Cash were written from Schmidt’s personal account in the amounts of $25,000 and $1,000); a check to a car dealer for $7,925 on Dec. 6, 2007, and a check for $11,150 in cash drafted from his business account.

In continuing the investigation, according to the amended criminal complaint, Johnson discovered a total of three occasions when the client wrote checks to Schmidt after receiving funds from insurance annuity policies. Schmidt allegedly took those funds and, instead of investing them on his client’s behalf, spent them. Those checks were in the amount of $20,000 on Oct. 15, 2007, and $35,000 on Nov. 15, 2008, in addition to the check for $39,258 previously mentioned.

Although the criminal case in this matter hasn’t been resolved, the Department of Commerce held a separate hearing in the matter of Schmidt’s insurance producer license (No. 655330) in November 2013 regarding the same allegations as the criminal case. Schmidt appeared with his attorney, Robert Mathias. Assistant Attorney General Oliver J. Larson appeared on behalf of the Department of Commerce. The only witness was the client whose money Schmidt allegedly spent rather than invested.

According to the public records of the Department of Commerce hearing, Schmidt said he was unable or unwilling to return the client’s funds, and presented no evidence concerning the location of the funds, nor did he deny that he retains the funds.

According to the administrative hearing findings of fact, Schmidt told his attorney that the funds were a loan from his client to him. The client testified that the money was not a loan.

Minnesota law states that insurance agents should not solicit or accept a loan from someone they’re doing business with, unless the agreement is in writing (and records kept for six years) and is lawful.

Administrative Law Judge Barbara Case ruled that Schmidt violated Minnesota law “when he either took a loan from [the client] in violation of Minnesota law or converted her funds to his own use,” she wrote in the final conclusion point. “For the same reason and based on the same facts, Respondant violated Minn. Statute 60K.43(8) by using fraudulent, coercive, or dishonest practices and demonstrating untrustworthiness and financial irresponsibility involving the business of insurance in Minnesota.”

Judge Case recommended Schmidt’s license be revoked. The Commissioner of Commerce has 90 days from the Dec. 23, 2013, decision date to issue a decision; otherwise the report and Judge Case’s recommendation will become the final agency decision.