Keep this GPB executive, a convicted fraudster, in prison

“Don’t do the crime if you can’t do the time,” is the line Sammy Davis Jr. sang in the theme song for 1970s cop show “Baretta.”

“Don’t do it,” was the response from the chorus.

Leap forward roughly 50 years, and white collar criminals, including those in the financial advice industry, are singing a different tune.

Felons want to get out of prison, and President Donald J. Trump has obliged some so far. “I’ve done the crime, who cares about the time,” is the verse to be sung in President Trump’s second administration.

And in this show, the tough, New York city cop catches the crooks and then, in the episode's final minutes, transforms into a wily attorney who, Presto Chango, gets the crook out of lock up, no questions asked.

Witness the case of convicted fraudster Jeffry Schneider, 57, a longtime broker-dealer executive who was at the center of the $1.8 billion “Ponzi-like” scheme, according to the federal government, known as GPB Capital Holdings.

From 2013 to 2018, Schneider and his partners at GPB, David Gentile and Jeffrey Lash, worked with dozens of broker-dealers to sell high-risk private placements. In turn, GPB promised to invest that capital into a series of businesses, mostly auto dealerships, and generate 8% annual returns for clients.

Remember, brokers sold the high-risk GPB private placements, which generated steep commissions for brokers, during a time when interest rates were next to nothing. Clients, particularly the elderly, are at times bedazzled by the promise of such returns when interest rates are weak. 

Turns out Schneider, Gentile and Lash were running a fraud. The federal goverment charged GPB used phony documents to goose sales of private placements; feds in 2021 charged that Gentile and Schneider allegedly used phony, back-dated documents and paid distributions, or dividends, to investors using their own money, rather than coming clean and admitting that the performance of GPB funds was not as steady as it appeared.

A jury in federal court in Brooklyn in the summer of 2024 found Gentile guilty of five counts of fraud and he later got a sentence of 7 years in prison. Schneider was found guilty on three counts and then got six years. The federal government’s charges stemmed from Gentile and Schneider's management of GPB Capital Holdings. It took the jury five hours to convict. 

Lash, an auto executive, testified against his partners and was sentenced to time served.

Now, after watching his colleague Gentile’s sentenced commuted in November by President Trump, Schneider wants to get out prison, too.

In an unusual move, the White House went into detail about its reasoning for giving a get-out-of-jail pass to Gentile.

President Trump Thanksgiving weekend commuted Gentile’s sentence, leaving many in the financial advice industry in disbelief. 

Unlike similar companies, GPB paid regular annualized distributions to its investors, a White House official in December told InvestmentNews, on condition of anonymity.

In 2015, GPB disclosed to investors the possibility of using investor capital to pay some of these distributions rather than funding them from current operations. 

"Even though this was disclosed to investors the Biden Department of Justice claimed this was a Ponzi scheme," the official said. "This claim was profoundly undercut by the fact that GPB had explicitly told investors what would happen."  

This doesn’t make GPB special. Far from it. Alternative investments such as private placements routinely warn investors their capital may be used to cover distributions, similar to dividends. It’s part of boiler plate disclosures in all such investments.

So, what’s so singular about Gentile, GPB, and now Schneider? 

Gentile, a former accountant from Long Island, was home for the rest of the holidays.

But this month, Schneider reported to FCI Bastrop in Texas, a “low security federal correctional institution with an adjacent minimum security satellite camp,” according to the Federal Burau of Prisons website.

That’s not fair, is what Schneider is most likely thinking right now. His attorney on Wednesday declined to comment.

If two guys plan to rob a bank, and only one of them gets sent to prison, there is something wrong with justice in the United States. That appears to be Schnedider's argument.

In a court filing last month to U.S. district court judge Rachel P. Kovner, Schneider’s attorneys wrote that they “request that the court reconsider his sentence and reduce it to time served,” according to the filing.

“Extraordinary and compelling circumstances have arisen since sentencing, including the President’s commutation of co-defendant David Gentile’s sentence and the accompanying justification, which repudiate the core theory of fraud advanced at trial and upon which this Court relied at sentencing,” according to the filing.

“Given these developments, Mr. Schneider’s sentence of six years’ imprisonment results in an unwarranted and unjust disparity between similarly situated codefendants convicted of overlapping conduct, upsetting the balance the court sought to achieve at sentencing,” according to Schneider’s attorneys.

A senior brokerage executive who spoke privately about the matter saw Schneider’s jail time in a different light.

“I get that point, but why is justice being applied seemingly unequally in the first place,” the executive asked. “What’s behind the decision for the White House to give a pass to one and not the other, particularly as Gentile was convicted on more counts and got a harsher sentence?”

If two guys plan to rob a bank, and only one of them gets sent to prison, that means no one cares about the victims of the crime, in my mind. In the GPB fraud, who’s thinking about the clients?

Those are the thousands of investors, many of them elderly, who bought the private placements from their brokers in good faith, only to be cheated and harmed in the end. Investors who wind up owning fraudulent investments often suffer in silence, behind closed doors, embarrassed and afraid to admit they’ve been ripped off.

Many GPB investors haven't received distributions from their investments since 2018, when the company's problems began. Meanwhile, the broad stock market has far more than doubled since then. 

Like Sammy Davis Jr. told us in the seventies, “Don’t do the crime if you can’t do the time.”

Between Gentile and Schneider, there appears to be an unequal application of the law.

That doesn’t mean Schneider deserves to get off prison. It means something is wrong right now with the federal government’s punishment of white collar criminals.