James F. Battin Federal Courthouse

James F. Battin Federal Courthouse

A criminal bankruptcy fraud trial for a former Billings neurosurgeon has been postponed to give the defense more time to reach a plea deal.

U.S. District Judge Susan Watters of Billings has reset a jury trial for Dr. John Henry Schneider for April 9. The trial had been set for Feb. 12. The judge previously continued the first trial from Dec. 11.

Schneider pleaded not guilty in October to five counts of bankruptcy fraud for allegedly lying to hide his assets after filing for bankruptcy in 2014.

Meanwhile, Schneider and the trustee in the bankruptcy appear to have reached an agreement to settle a complaint the trustee filed in U.S. Bankruptcy Court against Schneider accusing the doctor of breach of contract, fraud and negligent misrepresentation.

Schneider’s defense attorney, John E. Smith, of Missoula, said in recent court records that more time was needed to finalize details in a proposed plea agreement with federal prosecutors.

The prosecution provided the defense about 28,000 pages of discovery information and, after having reviewed the documents, the parties have been “actively involved in plea negotiations,” Smith said.

Schneider is charged with two counts of false statements under oath in relation to a bankruptcy proceeding, two counts of concealment of assets and fraudulent transfer of assets. All of the counts carry maximum penalties of five years in prison and a $250,000 fine.

During the bankruptcy case, the trustee, Joe Womack of Billings, accused Schneider of avoiding paying his debts and lying about assets through a complex scheme of creating and using companies, trusts and transfers to rid himself of ownership and leaving nearly nothing for creditors.

A bankruptcy settlement agreement approved in June 2016 ordered Schneider to provide the estate $2.3 million for distribution to creditors, who had filed nearly $12 million in claims. Creditors included former patients with malpractice claims and former business partners.

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After the bankruptcy settlement, Womack filed a complaint against Schneider in which he accused the doctor of not disclosing a 2012 tax refund, misrepresenting a 2014 tax refund and failing to disclose the sale of irrigation equipment needed to operate a ranch Schneider owned in Wyoming.

Schneider denied all of the allegations and filed a counterclaim against Womack.

On Wednesday, Womack’s lawyers filed a motion in bankruptcy court to approve a compromise settlement to resolve the adversarial case.

Womack’s attorney, Trent Gardner of Bozeman, outlined the terms of an agreement, which would include the bankruptcy estate getting $60,000 from the liquidation of an account held by one of Schneider’s companies and Schneider not filing a claim for administrative expenses.

Schneider was indicted in June 2017 and arrested in Southern California on a warrant, then released when he failed to appear for an August arraignment in Billings. When he was arraigned in October in Billings, he was living in Encinitas, California, where he has a house.

Schneider is licensed in Montana but had his medical license revoked in Wyoming in 2014 when a Billings man died after Schneider performed surgery.

The Department of Veterans Affairs’ Medical Center in Iowa City, Iowa, hired Schneider in April 2017, but questions about Schneider’s employment led Schneider to resign on Nov. 29 in lieu of being terminated.

A VA spokesman said that after reviewing Schneider’s case, the agency found that his hiring was inconsistent with the law and that it got incorrect internal guidance during the hiring process.

U.S. Sen. Jon Tester, D-Mont., also scolded the VA for hiring Schneider contrary to hiring laws despite knowing about his malpractice and medical license history.

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