With a degree from the U.S. Military Academy at West Point and 10 years of Army service, Paul Schumack wouldn’t seem to be the type of man who could be easily duped into taking part in an $80 million virtual concierge scam that claimed 1,800 victims nationwide.
But, a psychologist told a federal judge Thursday, that despite his military training, Schumack was an easy mark for fraudsters.
“I regard Mr. Schumack as a total patsy,” said Glenn Caddy, a forensic psychologist who examined Schumack.
U.S. District Court Judge Daniel Hurley said Schumack might have been hoodwinked by Joseph Signore, the mastermind of the scheme that operated out of plush offices west of Jupiter. But, as chief of sales for the phony enterprise, Schumack deceived others on a massive scale, often using his West Point pedigree to reel in unsuspecting investors.
For that, Hurley said, Schumack should spent 12 years in prison.
“I really think you got taken by this,” Hurley said. “But you had to know something was wrong.”
Unlike hearings earlier this week, when Signore and his ex-wife, Laura Grande, launched into tear-streaked appeals for leniency, Schumack simply apologized for his actions. His 12-year sentence is less than Signore’s 20-year term but more than the 7-year sentence Grande received. Craig Hipp, vice president of manufacturing, is serving a seven-year sentence.
While some investors said the sentences weren’t harsh enough, a retired aircraft mechanic who lost $192,500 in the scam said he was satisfied. “I guess I’ve got a soft heart,” said Fred Myers, who purchased 55 electronic kiosks with the hope of earning big returns. “This will give them a lot of time to think.”
Myers, who lives outside Atlanta, Ga., said Schumack was the link to him and other Delta Air Lines employees. A former Delta worker knew Schumack through his successful and legitimate ATM sales business. That worker spread the word about Schumack’s new venture, Myers said.
Looking thinner than he did in December when he, Signore and Grande were convicted of multiple counts of fraud and money-laundering, Schumack acknowledged he took advantage of contacts he made in his ATM business.
“My investors weren’t just names in a phone book. They were friends, people I knew,” he said of those he urged to buy the phony kiosks. “I promoted these machines without checking further. I didn’t see the warning signs. Maybe I just didn’t want to.”
Caddy testified that Schumack lacks basic analytical skills. “He’s gullible to a profound fault,” he said. “He wants to believe people.”
That made him easy prey for Signore. “Mr. Schumack had a successful business model, but Mr. Signore had better talents as a sociopath,” he said.
Others also took advantage of Schumack. Worried about his fading sexual prowess, Schumack began buying testosterone from a former professional wrestler. He then gave the wrestler $1 million for a dubious venture without any contract in place to assure he would share in any profits, Caddy said.
“He was available emotionally, intellectually, spiritually to be manipulated,” Caddy said.
Such blind spots don’t excuse Schumack, Hurley said. He had to realize that investors who plunked down $3,500 for each machine with the promise of $300 in monthly returns weren’t getting paid. Further, while telling investors the machines were being placed in hospitals, hotels, casinos and sports venues, Schumack had to know few had been built and few advertisements, key to generating profits, were sold.
“As chief of sales, it’s inconceivable that you would not know they were not building the machines,” Hurley said.
Of the 22,000 machines that were sold, only 84 were produced. Meanwhile, Schumack and his wife bought a $1.5 million house in Coconut Creek and rented a beachfront condo in Highland Beach for $62,000 a month.
Some early investors were paid with money from those who invested later. Others persuaded credit-card companies to reverse the charges. Still, $31 million disappeared.
With the criminal action over, except for promised appeals, attention will turn to court-appointed receiver James Sallah. He has recovered about $8 million and has filed a series of lawsuits to get more for the victims.
Myers said he knows he will get “five cents on the dollar” from Sallah’s efforts. Hurley agreed. “There’s not any real hope these folks are going to be truly compensated,” he said.