A former Billings neurosurgeon on Thursday denied federal criminal charges accusing him of lying about his assets when he filed for bankruptcy.
Dr. John Henry Schneider pleaded not guilty to a five-count indictment during a hearing before U.S. Magistrate Judge Timothy Cavan in Billings.
The indictment charges Schneider, 51, of Iowa City, Iowa, with two counts of false statements under oath in relation to a bankruptcy proceeding, two counts of concealment of bankruptcy assets and fraudulent transfer of assets.
Appearing with his attorney John Smith of Missoula, Schneider waived the reading of the charges.
Cavan released Schneider pending trial and imposed conditions, including having no contact with his sister, Kathleen Burrows, who is a witness. He also ordered Schneider to surrender his passport.
Assistant U.S. Attorney Colin Rubich told the judge that the no contact condition was important because of the nature of Schneider’s relationship with his sister. He also said Schneider’s history of interactions with witnesses caused concern.
Cavan further advised Schneider that violating release conditions, tampering with witnesses or failing to show up could lead to separate charges.
“Any questions?” Cavan asked.
“No sir, not at all,” Schneider responded.
Schneider initially failed to appear for arraignment in Billings in August and was arrested on a warrant on Sept. 18 in Encinitas, California, where he had moved, and released.
All of the bankruptcy fraud crimes carry maximum penalties of five years in prison and a $250,000 fine.
U.S. District Judge Susan Watters will hear the case.
The criminal charges are the latest in a series of troubles for Schneider, a once successful neurosurgeon who practiced in Montana and Wyoming and then filed for bankruptcy in 2014 in Montana.
During the bankruptcy, the trustee, Joe Womack of Billings, accused Schneider of scheming to avoid paying his debts and lying about his assets through a complex scheme of creating and using companies, trusts and transfers to technically rid himself of ownership of assets and leaving nearly nothing for creditors.
Womack said Schneider claimed a personal net worth of $17 million in 2011 but “virtually no assets” when he declared bankruptcy.
At the time of the bankruptcy, Schneider was facing a negligence claim in Wyoming by the family of Russell Monaco, a Billings man who died at age 47 in 2011 of an overdose of painkillers after Schneider had performed back surgery on him in Cody, Wyoming. The Wyoming Board of Medicine revoked Schneider’s license, and the Monaco estate calculated damages at more than $14 million.
The Monaco family filed a $2 million bankruptcy claim against Schneider.
A bankruptcy settlement approved in June 2016 ordered Schneider to provide the estate $2.3 million for distribution to creditors, who had filed almost $12 million in claims. Creditors included former patients with medical malpractice claims and former business partners.
The settlement provided for former patients, who had about $7 million in claims, to get about 15 percent of their claims paid, or about 15 cents on the dollar.
So far, none of the tort claimants has received any money, said Billings attorney Jon Moyers, who represents Monaco’s widow, Kathy Monaco, and attended Schneider’s arraignment along with the Monaco family.
Most of the money the trustee has received has gone to pay attorney fees and estate costs, Moyers said.
The Monaco family, Moyers said, is active in the litigations.
“We have every confidence in the U.S. Attorney’s Office,” Moyers said.
The settlement also called for Schneider to give to the estate for sale his Billings home and a Wyoming ranch located between Cody and Powell. Schneider got to keep a California house, valued at $1.8 million and owned by one of his companies.
During a bankruptcy hearing in April 2016, Schneider denied he’d done anything wrong and said he had cooperated with the trustee.
After the bankruptcy settlement, the trustee filed a complaint in June against Schneider alleging breach of contract, fraud and negligent misrepresentation.
Womack alleges that Schneider did not disclose a 2012 tax refund, misrepresented a 2014 tax refund and failed to disclose the sale of irrigation equipment needed for the operation of the Wyoming ranch.
Schneider filed a counter claim. The case is pending in bankruptcy court.