LOS ANGELES – The business manager for Alanis Morissette and other entertainment and sports figures admitted in court papers filed today that he embezzled more than $6.5 million from his clients.
Jonathan Todd Schwartz, 48, who now resides in Playa Vista, but was living in Agoura Hills at the time of the criminal conduct, was charged today with wire fraud and subscribing to a false tax return for failing to disclose the embezzled funds to the Internal Revenue Service.
In conjunction with the criminal information filed today, prosecutors also filed a plea agreement in which Schwartz agreed to plead guilty to the two felony offenses.
Schwartz was a member of GSO Business Management, LLC, a business management firm based in Sherman Oaks that provides financial guidance to clients, including managing bank accounts, providing accounts payable services, and preparing short- and long-term budgets.
In the plea agreement, Schwartz admitted that he took clients' money for himself and falsified account records to conceal the embezzlement of client funds. Schwartz admitted that between May 2010 and January 2014, he withdrew approximately $4.8 million belonging to “Client Number 2” – Alanis Morissette – without her knowledge or authorization. Schwartz further admitted that he falsely labeled the unauthorized cash withdrawals as “sundry/personal expenses” on the accounting records GSO maintained for Morissette. When confronted about the missing funds, Schwartz stated that the money was an investment in illegal marijuana “grow” businesses, a statement that Schwartz has now admitted was false.
“Money managers have fiduciary and moral responsibilities to their clients that begin with preserving client assets and not using that money to line their own pockets,” said United States Attorney Eileen M. Decker. “This defendant violated this basic principle, and then engaged in further criminal conduct by attempting to hide his ill-gotten gains from the Internal Revenue Service. Despite those efforts, however, the defendant will now face serious consequences for victimizing his clients and American taxpayers.”
In the plea agreement, Schwartz also admits that he embezzled over $1 million from another client and concealed the embezzlement by falsely coding the unauthorized cash withdrawals as money used for the client's home renovations. Schwartz further admitted that he embezzled $737,500 from yet another client and forged that client's signature on at least two cash receipts.
“Mr. Schwartz was hired to protect his clients' money by managing it professionally, but instead misappropriated millions to enrich himself,” said Deirdre Fike, the Assistant Director in Charge of the FBI's Los Angeles Field Office. “This case should serve as a warning that there are serious consequences for those who abuse their positions of trust to embezzle funds.”
While he has agreed to plead guilty to filing a false tax return for the year 2012, Schwartz admitted in the plea agreement that he did not report any of the approximately $6.5 million he obtained through his embezzlement scheme to the IRS. As a result of the entire scheme, Schwartz acknowledges that he owes the IRS more than $1.7 million in federal income taxes.
“Schwartz was caught with his hand in the proverbial cookie jar,” stated IRS Criminal Investigation Acting Special Agent in Charge Anthony J. Orlando. “No matter what the source of income, all income is taxable. The IRS works regularly with our law enforcement partners in cases like these to prevent other financial professionals from duping their clients.”
Schwartz is expected to make his initial appearance in United States District Court on February 1.
Once he pleads guilty to the charges that have been filed in this case, Schwartz will face a statutory maximum penalty of 23 years in federal prison. While the plea agreement contemplates a sentence of approximately four to six years, the actual sentence will be determined by the judge that hears the case.
This case was investigated by the Federal Bureau of Investigation and IRS Criminal Investigation. GSO Business Management, LLC fully cooperated during the investigation.
This case is being prosecuted by Assistant United States Attorney Ranee A. Katzenstein, Chief Assistant for Trials, Integrity and Professionalism.
USAO – California, CentralUpdated January 19, 2017
Central District of California DOJ/ 17-012 / January 19, 2017