The $60 Million Pyramid

The first impression Joanne Schneider makes is that of a frazzled grandma.

She dresses smartly, in an old-fashioned churchgoing way. But when she tries to speak, she bursts into tears -- loud, hysterical sobbing. She is the portrait of a shattered woman.

"I surrounded myself with what I thought were really great people," she says, "and here I sit talking to you."

Schneider's at the center of what Cuyahoga County Prosecutor Bill Mason calls "one of the largest securities-fraud cases in the state of Ohio." She and husband Alan are accused of bilking as many as 740 investors out of more than $60 million. If found guilty on all 163 counts, the Schneiders could face more than 300 years in prison.

Just a few years ago, she was The Woman Who Could Save Parma Heights. Her Cornerstone Project was an ambitious bid to revitalize the suburb's sleepy business district with a $90 million retail and housing development. Its anchor would be the culmination of a lifelong dream: a family center based on a children's book she wrote.

Then it all suddenly collapsed. State regulators pored over the books. What they found bore the signs of a classic pyramid scheme. The Schneiders' assets were frozen.

Now, as a court-appointed receiver continues to sort through the wreckage, he and others have begun to question the role played by Roetzel & Andress, a politically wired law firm that represented the Schneiders.

A lawsuit alleges that the firm must have known that Cornerstone's funding was built on a foundation of sand, yet continued to push the deal forward to rake in hundreds of thousands of dollars in legal fees.

"There's no question that many people would be happy if this ended with the Schneiders holding the bag," says the couple's lawyer, Ian Friedman. "But we're not going to go away that quietly."

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It all started with Claire, a beautiful doll that Joanne's family bought for her.

One day, Joanne decided to write a children's book, with Claire as the main character. She titled it Claire and the Virtue of Love. It told of how "Claire and her pony, Swift Spirit, help a selfish boy and girl learn to give their greatest treasure away."

Joanne opened a gift shop in Middleburg Heights and named it Claire's Folly. The name would prove prophetic.

The shop was popular with West Siders, but many complained that it took too long to drive there. Joanne decided to build a bigger location in Parma Heights.

Mayor Martin Zanotti got word of the idea. It meshed with his desire to tear down an old Tops building at Pearl and West 130th.

Before long, the concept had grown into an ambitious downtown-revitalization project. "The project took on a life of its own," says Friedman.

The plans called for a "city within a city" on 34 acres, where a tight-knit community would live, work, and shop in a development modeled after the classic American town.

The anchor would be the new and improved Claire's Folly: a miniature Disney World, featuring waterfalls, an atrium, three restaurants, two arcades, and a roving cast of costumed characters from the Claire book.

If it sounded like pie in the sky, Joanne seemed like the kind of person who could pull it off. By then, she had built a 22-year-track record of success, having put together a thick portfolio of rental properties and businesses, including several wineries.

City leaders couldn't wait to pour money into the plan, called the Cornerstone Project. Parma Heights City Council voted unanimously to provide $200,000 for engineering and legal fees; it pledged another $4 million for roads and sewers.

It may have helped that two of the council members had skin in the game.

A few months earlier, Councilwoman Stacy Nickles had invested $5,000 with the Schneiders, according to public records. Councilman Robert Sepak's brother Kevin had given the couple $10,000. (When asked about it later, both said the investments didn't affect their vote.)

Additional public funding was to come from a $15 million bond issued by the Cleveland-Cuyahoga County and Toledo-Lucas County port authorities.

Private financing would pay for the rest.

But Joanne didn't wait for investors to be locked up. Instead, she decided to cover start-up costs with her personal fortune, believed to be $33 million.

An extravagant groundbreaking ceremony was held on July 10, 2003. Zanotti piloted a backhoe that gouged a huge chunk out of the old Tops building. Joanne told an assembled throng of 200 how important the development was to her.

"This comes not just as a business project," she said. "This comes from my very heart and soul."

Such pronouncements were her nature. She wore her Catholicism like a fur coat, decorating her office with a three-foot statue of the Pope, often praying with business partners to consummate a deal.

What was not publicly known was that the Schneiders' $33 million fortune was a mirage, according to the court-appointed receiver. The outwardly successful couple was actually tens of millions of dollars in debt.

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Not long after the groundbreaking, a man noticed something funny about his mom's finances: One of her investments was paying 18 percent interest -- four times the commercial rate.