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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Investment scammer gets five-year sentence

 (The Spokesman-Review)

A man who was selling reverse mortgages to senior citizens in Spokane earlier this year after being convicted of federal securities fraud in Colorado has been sentenced to five years in prison.

Upon his release, Michael Duane Smith must complete three years of federal parole, make $52,015 in restitution and pay a $75,000 fine.

He also will be prohibited from opening lines of credit without court approval while on supervised release.

Smith was part of a $50 million “high-yield” investment scheme, promoted in the Spokane area, Colorado and elsewhere, that defrauded an estimated 1,000 investors, investigators said.

The ringleader of the Ponzi scheme, identified as Norman Schmidt, 72, of Denver, used the money to pay his sales staff, including Smith, and buy foreign currency, eight NASCAR race cars and a $6.5 million mansion in Colorado.

Smith and six co-defendants were indicted in 2004.

The 45-year-old Spokane man, formerly of Montana, was convicted by a jury in May 2007 on three counts of securities fraud and acquitted on companion charges of wire and mail fraud and money laundering.

Smith’s attorney asked the court to reverse the jury’s guilty verdict, but U.S. District Court Judge Robert E. Blackburn, of Denver, refused to do that.

He allowed Smith to remain free on bond until he reports to a federal prison July 21.

After his felony conviction last year, Smith returned to Spokane, where he was hired as a “reverse mortgage planner” for Golf Savings, a subsidiary of Spokane-based Sterling Savings.

He was fired from that job earlier this year when The Spokesman-Review began making inquiries about his case.

A portion of the restitution Smith faces will be paid to a retired Mead couple who bought shares in Capital Holdings through Smith.

That restitution was tied to specific indictment counts tied to Smith by the jury verdict.

“I’m glad to hear this,” the woman said Tuesday upon hearing Smith faces five years in prison and will be required to make restitution payments.

“Our work days are over and this loss was devastating to us,” said the woman, who testified as a prosecution witness in Smith’s trial in U.S. District Court in April 2007.

In the 1990s, Smith was the chief financial officer for an anti-government, militia-style group called the U.S. Constitution Rangers.

He was indicted on federal charges in 1997 in New York in an unrelated case involving 1,100 terminally ill people, looking for quick cash, who were swindled out of $100 million when they sold their life insurance policies at discounted prices.

Those New York charges were dismissed shortly before Smith and the others were indicted in Colorado.