Jonathan Todd Schwartz, an entertainment and sports manager, admitted in court papers today that he embezzled more than $6.5 million from his clients – including $4.8 million from singer Alanis Morissette.
Schwartz, a former partner at GSO Business Management in Sherman Oaks, CA, admitted in a plea agreement with the U.S. Attorney’s office that he took clients’ money for himself and falsified account records to conceal the embezzlement of client funds. He’s been charged with wire fraud and subscribing to a false tax return for failing to disclose the embezzled funds to the Internal Revenue Service.
Besides the money he embezzled from Morissette, who sued him last year for stealing more than $4 million from her, he also admitted in his plea agreement that he embezzled more than $1 million from another unnamed client and concealed the embezzlement by falsely coding the unauthorized cash withdrawals as money used for the client’s home renovations. He also admitted that that he embezzled $737,500 from yet another unnamed client and forged that client’s signature on at least two cash receipts.
Schwartz, is scheduled to make his initial appearance in U.S. District Court on February 1. Once he pleads guilty to the charges that have been filed in this case, he faces a maximum penalty of 23 years in federal prison, although under the plea agreement, the sentence will probably be four to six years.
“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 U.S. 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.”
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,” said Anthony J. Orlando, the acting special agent in charge of IRS Criminal Investigation. “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.”