Lone Tree man arrested and charged in $16 million securities fraud scheme
DENVER — The prosecutorial work of the Colorado Attorney General’s Office, following the investigative efforts of the Colorado Department of Regulatory Agencies and the Federal Bureau of Investigation, has resulted in the arrest and indictment of Kelly James Schnorenberg, 56, of Lone Tree, Colorado for theft and securities fraud of more than $16 million.
Schnorenberg was indicted last Thursday by a Colorado State Grand Jury. He is charged with two counts of theft, one over $20,000 and one over $1 million, and 37 counts of securities fraud. These charges are the result of the fraudulent acquisition of over $16 million from 245 known investors throughout the United States over a six year period. Schnorenberg has never held a license to offer or sell securities in Colorado.
It is alleged in the indictment that beginning in May of 2009, Schnorenberg began to solicit and accept funds from investors through his company, KJS Marketing. Both directly and through sales representatives, Schnorenberg would present the business opportunity as a pool of investors who would fund companies which sold insurance products. Investors were promised high returns on the profits from these companies (up to 12 percent per year), along with little to no risk.
It is further alleged that the insurance companies, also set up by Schnorenberg, utilized experienced agents who would recruit and train inexperienced agents, and Schnorenberg would offer stipends to help sustain operations until they were self-sufficient, though he often did not follow through with payments. Most businesses failed, in which case Schnorenberg would simply set up another. Over the course of six years, insurance businesses were set up by Schnorenberg under the names Salus Marketing Enterprises, Premier Advantage Insurance Agency, Trinity Affiliated Group, Hegemon Holdings, Quantum Success Strategies, and most recently, WealthSmart America.
As part of the alleged fraud, agents working at the companies were pressured to solicit financial investments in their companies, and the pitches lacked disclosure as to the true risk involved, and included false statements and unrealistic profit projections. Capital for these businesses was often solicited despite their impending failure, and current investors’ money was consistently “rolled over” into new ventures without their consent or knowledge. Investors were further kept in the dark regarding the millions in debt owed by Schnorenberg, who filed for bankruptcy in 2003, and by KJS.
The allegations in the indictment also provide that much of the invested funds were deposited directly into Schorenberg’s personal bank accounts where they were then withdrawn in cash and used for personal expenses. The allegations state that while the actual businesses generated little income, the vast amount of income that was returned was from new investors.
“The statewide grand jury's decision to indict concludes a lengthy and thorough investigation. We appreciate the hard work of our prosecutors and the Division of Securities at DORA,” said Attorney General Cynthia H. Coffman. “As Attorney General, I will seek to hold people who commit serious securities fraud accountable for their actions on behalf of Colorado investors. This was a good outcome for the people of Colorado.”
“This is a significant indictment for the State of Colorado involving a complex scheme that has victimized hundreds of people,” commented Colorado Securities Commissioner Gerald Rome, whose division conducted the investigation. “The cooperation between DORA, the Colorado Attorney General and the FBI is a key example of how we work to protect citizens as well as how important it is for various agencies to work together to go after the people behind these types of illegal and fraudulent schemes.”
Note: An arrest or indictment is not evidence that the defendant committed the crime(s) charged. The defendant is presumed innocent until the government meets its burden of proving guilt beyond reasonable doubt in court.