Allied Health Care Founder Charles Schwartz Gets 16 Years in Leasing Fraud

Allied Health Care Services Inc. founder Charles K. Schwartz was sentenced to 16 years and three months in prison for using a Ponzi scheme to defraud 74 financial institutions of $80 million.

Schwartz, 58, of Sparta, New Jersey, pleaded guilty in April to bilking lenders who invested $135 million in Orange, New Jersey-based Allied, falsely saying he was leasing medical equipment. Prosecutors said the lenders lost $80 million, including Sun Bancorp Inc., which was defrauded of $13 million.

Prosecutors said Schwartz used another company to carry out a phony-invoice scheme over eight years. Schwartz admitted he used the money he stole to pay himself and relatives and buy real estate, including property in New Jersey and a horse farm in upstate New York. Schwartz asked U.S. District Judge Susan Wigenton to impose a 10-year term.

“I’d like to apologize to the court for the actions which brought me here today,” Schwartz said today in federal court in Newark at his sentencing. “Words can never express how sorry I am for what I’ve done. I’d like to apologize to the victims of my crime. I’m truly sorry for what I’ve done.”

Wigenton ordered Schwartz to pay $80 million in restitution. He has previously agreed to forfeit $75 million. Under advisory sentencing guidelines, he faced between 15 and 19 years in prison. She said it “strains credulity” for Schwartz to say he carried out the scheme to save the jobs of employees.

She said the banks, most of which are small, will probably split less than $10 million after a bankruptcy trustee finishes recovering assets.

‘Very Much Victims’

“These are not Fortune 500 companies,” Wigenton said. “That doesn’t mean it’s a victimless crime. They are very much victims. They are very unlikely to see any of the money you took.”

Schwartz’s attorney John Whipple told the judge he had a “horrific childhood” and was abused as a child. He said Schwartz had contemplated suicide at the end of the scheme, and he cooperated fully after his arrest in September 2010.

“This case was a guilty plea from Day One,” Whipple said. “He made a lengthy statement upon his arrest. He fully confessed, 100 percent to the entire scheme. He laid out exactly how it worked, for how long. There’s always been full acceptance of responsibility.”

Assistant U.S. Attorney Jacob Elberg said he was troubled by what he said were suggestions from Whipple “that the victims are not worthy of their status as victims.”

Suicide

He noted that one of the employees at a defrauded financial institution took his own life after the fraud.

“Despite the fact that he had nothing to do with the fraud here, he felt that his reputation would be forever damaged in a way that nobody would ever trust him in the future,” Elberg said.

In addressing the judge, Schwartz said he had “suffered so much in the last 15 months” at the jail in Essex County, New Jersey.

“I’ve been threatened with murder and extorted many times,” he said. “I’ve talked three inmates out of suicide.”

He apologized extensively to his family who appeared in court. “I’m not a bad man,” Schwartz said. “I made a very bad decision.” He added that he “took a detour off the honorable path of integrity.”

“Charles Schwartz, who once bragged that victims fell for his fraud ‘hook, line and sinker,’ stole tens of millions of dollars from financial institutions and bankrupted his own company to float his Ponzi scheme and luxury lifestyle,” U.S. Attorney Paul Fishman said in a statement.

The case is U.S. v. Schwartz, 11-cr-239, U.S. District Court, District of New Jersey (Newark).

To contact the reporter on this story: David Voreacos in Newark, New Jersey, federal court at dvoreacos@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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