Kelly Schnorenberg sentenced to 76 years in prison for securities fraud

DENVER - Kelly James Schnorenberg, 59, of Lone Tree, was sentenced this week to a total of 76 years in the Department of Corrections. Schnorenberg was found guilty by a Douglas County jury of 25 counts of securities fraud following a four-week trial in October 2018. Evidence at trial showed that Schnorenberg had raised over $16 million from over 240 investors as part of his scheme.

Schnorenberg’s conviction and sentencing was the result of the prosecutorial work of the Colorado Attorney General’s Office, and the investigative efforts of the Colorado Division of Securities, part of the Department of Regulatory Agencies (DORA).

“The court’s sentence sends a strong message that stealing Coloradans hard earned money will not be tolerated, and perpetrators will be discovered and prosecuted to the full extent of the law,” said Attorney General Coffman. “I hope that this outcome and Mr. Schnorenberg’s long jail sentence will provide some sense of justice to victims of this terrible fraud.”

"I'm pleased that the work done at the Division of Securities in partnership with the Attorney General's Office culminated in this outcome,” stated Securities Commissioner Myklebust. “At the Division of Securities, we hope that this news serves as a potent warning to investors that if a deal sounds too good to be true, it often is. When you're not sure about an alternative investment or the person selling it to you, please contact us."

Between 1999 and 2005, the Colorado Division of Securities sued Schnorenberg twice.  He resolved each suit by agreeing to a binding permanent ban on his involvement in selling securities in Colorado. Nonetheless, Schnorenberg began soliciting investments in May of 2009 without disclosing the prior bans to new investors. Schnorenberg solicited many of these investments personally, but also directed agents to solicit investments. From 2009 to 2015, Schnorenberg helped found a series of insurance marketing organizations that he pitched to potential investors. The investors were promised high returns (usually 12 percent per year), but were not informed of the many prior investors who had not received their returns as promised.

Once investors had agreed to invest in one of the insurance marketing organizations, Schnorenberg substituted his personal marketing companies in place of the insurance marketing organization he had pitched. If questioned, he would assure investors that his personal marketing companies held a profit interest in the insurance marketing organizations and that this arrangement was normal. Many investors had little prior experience with such investments and trusted Schnorenberg. Schnorenberg failed to disclose to these investors that his personal marketing companies became over-burdened with many millions of dollars of unpaid investor debt between 2009 and 2015. He also failed to disclose that his personal companies were used to accrue millions of dollars in off-balance sheet marketing and recruiting expenses on behalf of the insurance marketing organizations, which inflated those companies’ apparent financial prospects.

When one of the insurance marketing organizations encountered problems, Schnorenberg would move on to the next one. He would roll over the prior investors into the new company, often without even consulting them. Over the course of six years, Schnorenberg was involved in founding insurance marketing organizations under the names Salus Marketing Enterprises, Premier Advantage Insurance Agency, Trinity Affiliated Group, Hegemon Holdings, Quantum Success Strategies, and most recently, WealthSmart America.

Schnorenberg continued to solicit investments for the insurance marketing organizations even when he knew they were having major problems. When Quantum Success Strategies was having management disputes, Schnorenberg took steps to abandon that company and registered the next company in line: WealthSmart America. Nonetheless, he continued to solicit investors for QS2 without disclosing the management disputes or his new company. Schnorenberg accepted investments from retirees and hard-working Coloradans, and did not warn them that their money was in danger.

Douglas County District Court Senior Judge Paul King ordered the 76 year sentence after evaluating the evidence presented at a four week long jury trial and after examining written Victim Impact Statements from over 90 individuals defrauded by Schnorenberg. Schnorenberg, who received 47 days of credit for time served by Monday’s hearing, was immediately placed back into custody to begin serving his sentence.