By JENNIFER SQUIRES
Sentinel staff writer
A Santa Clara real estate investor may spend the rest of his life in prison for one of the biggest fraud cases in Santa Cruz County history.
Michael Schneider, 44, pleaded no contest Tuesday in Santa Clara County Superior Court to 173 felony charges for residential burglary, elder financial abuse, embezzlement, grand theft and forgery.
Schneider took more than $43 million from investors, including seven Santa Cruz County residents who collectively lost almost $18 million, according to Santa Cruz County prosecutor Bill Atkinson.
Schneider was arrested in June 2006 when a Santa Cruz investor reported the fraud to the District Attorney's Office. The case snowballed when investors across the San Francisco Bay Area surfaced and Santa Clara County sheriff's deputies got involved.
"It just took on a totally different life," Atkinson said of the case.
Schneider solicited clients to invest in what he advertised as secure real estate loans through his company, California Plan Inc. Prosecutors say Schneider was keeping the money for himself while sending his clients phony statements leading them to believe they were earning income from their investments. Many of the investors were retirees who lost millions. One said some clients lost their life savings.
Tuesday's no-contest plea applied to all charges from Santa Cruz and Santa Clara counties.
"Michael has never denied what he did was wrong," defense attorney Dan Horowitz said. "Even before he was arrested, he told investors what he'd done"
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Horowitz had another explanation of how the investments vanished. He said Schneider, who bought California Plan in 1995, was trying to cover bad loans made by the company's previous owner by playing the real estate market and was on the verge of making enough money to cover people's investments when housing prices leveled off.
"He just kept balancing things to try to keep everybody happy," Horowitz said. "He was doing everything. He was doing good loans. He was dong bad loans. Ultimately, a slow down in the legitimate market that [caused him to] hit a wall"
Schneider tried to hand over his assets — reportedly worth $8 million to $14 million — to clients prior to his arrest, but eventually bankruptcy and investors' attorneys began liquidating his estate, according to Horowitz. Clients may recover 25-40 percent of their losses, but attorney's fees may eat up more than $2 million of that restitution payment, Horowitz said.
Schneider, who has been held in Santa Clara County Jail since his arrest, is scheduled to be sentenced in November. He faces 169 years in state prison.
MediaNews contributed to this report.
Contact Jennifer Squires at jsquires@santacruzsentinel.com.