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A former Billings neurosurgeon who was accused of lying to hide assets during a contentious bankruptcy is now facing federal criminal charges.

An indictment unsealed in U.S. District Court in Billings charges John Henry Schneider with five counts related to bankruptcy fraud.

Court records said Schneider, who moved to Encinitas, California, was arrested in Southern California on Sept. 18 on a warrant after he failed to show up for his arraignment in Billings on Aug. 29.

A federal magistrate judge in San Diego released Schneider without bond and ordered him to appear for arraignment in Billings on Oct. 12.

Schneider is facing 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.

All of the crimes carry maximum penalties of five years in prison and a $250,000 fine.

Assistant U.S. Attorney Colin Rubich of Billings alleges in the indictment that Schneider lied under oath in a bankruptcy financial statement in December 2014 when he omitted financial transfers of about $539,736, personal property valued at $15,495 and financial assets of about $309,686.

The prosecutors also said Schneider lied about the accuracy of that financial statement during testimony under oath during a creditors meeting in January 2015.

In addition, Rubich said Schneider hid $309,686 and a 2001 Harley Davidson motorcycle from the bankruptcy trustee and he fraudulently transferred $539,736 to another person “in contemplation of bankruptcy against his personal estate.”

Schneider’s financial problems ultimately led to a bankruptcy settlement approved in June 2016 in which he was ordered to provide to the bankruptcy estate $2.3 million for distribution to creditors, who had filed almost $12 million in claims.

Schneider also voluntarily waived a discharge of his debts, which meant that some creditors could still pursue him for money after the case closed.

Creditors include former patients with medical malpractice claims and former business partners.

Under the settlement, former patients, who had claims totaling about $7 million against Schneider, would get about 15 percent of their claims paid, or about 15 cents on the dollar.

One of the patient claims was 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. Monaco’s family had filed a $2 million claim against Schneider.

At the time of the settlement, Billings attorney Andy Patten, who represented former patients, called the deal “hardly adequate compensation” for the Monacos and other patients but said it stopped continued litigation and avoided “chasing Schneider around to try to recover assets.”

Another major creditor was Meridian Surgical Partners LLC and Meridian Partners — Montana LLC, which had filed a $3 million claim over a failed venture to build and operate a surgical center in Billings. The bankruptcy settled Meridian’s claim for $6,500.

The bankruptcy trustee, Joe Womack of Billings, had accused Schneider of scheming to avoid paying his debts and lying about his assets by creating and using companies, trusts and transfers to technically rid himself of ownership in assets and leaving nearly nothing for creditors.

In 2011, Schneider had claimed a personal net worth of $17 million but “virtually no assets” when he filed for bankruptcy in 2014, Womack said.

Under the settlement, Schneider had to give up the estate for sale, his Billings home and a Wyoming ranch between Cody and Powell. Schneider got to keep a California house, valued at $1.8 million and owned by one of his companies called MedPort, and all the household goods from his Billings home, the Wyoming ranch and the California house.

Schneider denied during a bankruptcy hearing in April 2016 that he’d done anything wrong and had cooperated with the trustee. He said he was working as a consultant for MedPort and teaching surgeons in foreign countries.

Schneider is licensed as a medical doctor with a specialty in neurological surgery with the Montana Department of Labor and Industry. His license expires March 31, 2018.

The Wyoming Board of Medical Review revoked Schneider’s license in 2014 over the Monaco case.

And in 2012, Schneider settled a separate multi-million dollar defamation claim filed against him by a Cody doctor, who had sued him over a disparaging flier.



Federal Court, Yellowtone County Reporter

Federal court and county reporter for The Billings Gazette.