Jonathan, keep the files where they are for me. Okay? Is this about one of the client accounts? >> To his clients, [music] Jonathan Todd Schwartz was a trusted partner who handled every dollar of their financial lives. To federal investigators, he was the architect of an $8.7 [music] million fraud hiding in plain sight inside a renovation ledger. [music] >> We're looking at several transfers that don't match the records. There are a lot of moving parts in these accounts. >> She would not be the first artist by the man she trusted with every dollar she earned. She would only be the most public. Within 18 months, federal agents would unwind a 6-year scheme >> [music] >> that drained $4.8 million from Alanis Morissette's accounts and nearly 2 million more from other clients sitting at the same firm. 6 years in federal prison, [music] $8.7 million in restitution, and one word written hundreds of times on a single home renovation ledger that should have been caught the first time anyone looked. Quick question before we get into this one. How carefully do you actually read the line items on a bill from someone you trust? Drop a number in the comments, 0 to 10. >> [music] >> Be honest. And if you are new to this channel, subscribe now. >> [bell] >> We cover the people who weaponize [music] that trust every single week, and this case is one of the cleanest examples of how it actually works. Jonathan Todd Schwartz was born in 1976 in Encino, California, on the warm flat side of the Santa Monica Mountains, where the entertainment industry's accountants, lawyers, and business managers raised their families in stucco ranch houses with lemon trees in the backyards. His father worked in finance. His mother kept the household. From a young age, Jonathan understood that his neighborhood was not Hollywood. His neighborhood was the place Hollywood paid to manage what Hollywood earned. By the time he was 12, he could read a brokerage statement. By the time he was 15, he was reconciling his father's personal checkbook on weekends with a sharpened pencil and a 10-key calculator that sat on the dining room table like a small altar. He liked the way the numbers closed. He liked the certainty of a column that added to exactly what it was supposed to add to. Friends remembered a kid who was already dressing like a small adult by sophomore year of high school. Button-down shirts, leather belt, brown loafers, a backpack with a thin profile because he did not like the way overstuffed bags rounded his shoulders. He graduated from Birmingham High School in 1994 and crossed the city to the University of Southern California, where he enrolled in the Marshall School of Business with a stated intention to study accounting. His professors described him in language that would later be quoted in his own firm's promotional materials. Detail-oriented, discreet, comfortable with high net worth casework. One internship coordinator wrote that Jonathan had a rare patience for sitting with a single ledger until every figure agreed. He graduated with honors in 1998. He passed the Uniform CPA Examination on his first attempt. By 2000, he had taken an entry-level position at a mid-size business management firm in Sherman Oaks, where he learned the specific shape of the work that would eventually define his career. Business management in Los Angeles is not accounting. Accountants prepare tax returns and file them. Business managers run the entire financial life of their clients. They open and close bank accounts. They pay mortgages. They wire money to contractors. They cut checks to assistants, gardeners, nannies, personal trainers. They reimburse the client for the client's own expenses. For entertainers who spend half the year on tour and the other half in a recording studio, the business manager is the person who keeps the lights on, literally. They pay the electric bill. Jonathan loved it. He loved the proximity to fame without the burden of being famous. He loved the access. He loved the way a client who could not balance a checkbook would sign a single form putting him in charge of $40 million in liquid assets. In 2004, he was recruited to GSO Business Management, a boutique firm with offices in a glass tower on Avenue of the Stars in Century City. The starting salary was $115,000 and a small bonus structure tied to billable hours. By 2008, he had been named a partner. His name went on the firm letterhead. His face went on the firm website. He was 32 years old. He married a woman he had met during his second year at USC, a soft-spoken graphic designer who worked freelance from a converted second bedroom in their Studio City home. They had two children. Jonathan coached the older one's youth soccer team on weekends, the same way his father had coached him. He drove a sensible black sedan. He bought a four-bedroom house with a swimming pool, but did not put in a tennis court because his wife thought it would be obnoxious. From the outside, he was indistinguishable from every other partner track CPA in the western half of Los Angeles County. His clients, however, knew something his neighbors did not. Jonathan Todd Schwartz controlled, at the peak of his career, somewhere north of $200 million in entertainment industry money. Not all of it was his to control. None of it was his to keep. To understand what Jonathan did, you have to understand what GSO did and what the entire ecosystem of celebrity business management looks like when you pull off the front panel. A working entertainer signs a single document called a power of attorney for financial matters. That document allows the business manager to open bank accounts in the client's name without the client present. Sign checks on the client's behalf. Move money between accounts. Pay vendors. Settle invoices. File tax returns. Negotiate small contracts and authorize wire transfers up to certain pre-approved thresholds. In some firms, the threshold is $50,000. In other firms, there is no threshold at all. The business manager is, for all practical purposes, the client. The client receives a monthly statement. The statement is a summary. It shows opening balances, closing balances, large categorical line items, and any unusual activity flagged by the firm's internal review. The statement does not show every check. It does not show every wire. It does not show every cash withdrawal labeled as a contractor payment. To see those, the client has to ask. The client almost never asks. GSO's specific structure made the asymmetry worse. The firm assigned a single partner to each client as the primary point of contact. The partner had unilateral authority over day-to-day operations of the client's accounts. A junior associate prepared the monthly statement and ran a basic reconciliation. A second partner was supposed to perform a quarterly review on a sample of accounts. Rotating. So that every client got a second set of eyes at least once every 12 months. That second review was supposed to be the break. In practice, partners reviewed each other's accounts. Partners signed off on each other's work. Partners trusted each other. Because they had passed the same exam. Worked at the same firms. Attended the same continuing education seminars in the same hotel ballrooms in Pasadena. The break was made of paper. It worked exactly until a partner decided it did not work, and then it did not work at all. Alanis Morissette had been a GSO client since the early 2000s. She was a recording artist who had sold tens of millions of albums, toured continuously, licensed her catalog into film and television, and managed a steady stream of merchandise, residuals, and publishing income. Her accounts moved constantly. There was almost never a month in which a six-figure wire was not coming in or going out. To an honest business manager, that velocity was a feature. To a dishonest one, it was a fog. A single extra wire of 30 or 40,000 dollars in a month with 17 other six-figure transactions does not announce itself. It hides. The trust at the center of the relationship was absolute. She had hired GSO because she did not want to spend her career thinking about money. She wanted to make records. She wanted to raise her son. She wanted to know that when she came off a tour, the mortgage had been paid, the staff had been paid, the taxes had been filed, and what was left was hers. She paid GSO 5% of gross revenue for that peace of mind. She believed she was buying it. For 6 years, she was not. The first withdrawal that prosecutors would later be able to document came in May of 2010. Jonathan was 33 years old. He had been a partner for 2 years. He had been Alanis Morissette's primary point of contact for roughly 18 months. The amount was modest. He moved roughly 250,000 dollars out of one of her checking accounts and into a holding account he had opened in the name of a vendor that did not exist. The vendor name was generic enough to read like a legitimate maintenance company. The transfer was labeled as payment for routine property services. He did this on a Tuesday afternoon while the rest of the GSO partners were in a long lunch meeting on the 18th floor. Nothing happened. No one called. No one asked. The monthly statement went out 3 weeks later with the transaction buried among 40 other line items. Alanis Morissette was on tour in Europe. Her assistant skimmed the statement, saw nothing unusual at the summary level, and filed it in a banker's box in a storage room in Brentwood. Jonathan waited. He watched. He understood that the first theft was not the dangerous one. The dangerous one was the second, because the second theft was the one that confirmed whether anyone was looking. 6 weeks later, he moved another $180,000 the same way. Different vendor name, same general category, same silence on the other end. He had his system. Over the next several years, he refined it into something that looked, from the inside of his own head, like a small business. He opened bank accounts at three different institutions in the names of three different fictitious vendors. He spread the withdrawals across the accounts to avoid triggering any internal threshold. He kept individual transfers below the levels that required a second partner's signature. He varied the descriptions: property maintenance, landscape services, pool repair, tax preparation pre-pay, catering deposits for events that had never been scheduled. He kept a running spreadsheet of his own fabrications so that he would not repeat a vendor name too often or describe the same fake service in two consecutive months. He learned the rhythm of her professional life. When she was on tour, he moved more aggressively. When she came home and was likely to ask questions, he slowed down. When her assistant was on maternity leave, he doubled his pace. When the firm conducted its quarterly reviews, he stayed quiet for 3 weeks on either side. He was not the only client he was stealing from. Investigators would later document withdrawals from at least four other entertainment industry accounts at GSO, totaling nearly $2 million on top of the $4.8 million taken from Morissette. The other clients were smaller in profile. One was a working comedian. One was a producer with a steady residual stream. None of them noticed, either. By 2013, the lifestyle had started to leak. Jonathan bought a vacation home in Palm Desert that was not, in any reasonable sense, affordable on a partner's draw at a mid-size firm. He upgraded the cars in his driveway twice in 18 months. He took his family to Hawaii at a resort that charged $1,200 a night for an oceanfront suite. His wife, who handled none of the household finances, assumed that the firm was doing extraordinarily well, and that Jonathan's bonus structure had finally compounded into something material. His colleagues at GSO assumed the same. He was, after all, a partner. Partners did well. The single most important refinement of the scheme came in 2014, when Alanis Morissette began a major renovation on one of her residences. Renovations involve cash. Renovations involve contractors who insist on being paid in cash. Renovations involve invoices that are vague by industry standard, that describe lump sum work, that list categories like framing and finish work and general site cleanup, and that almost no one outside the construction trade can meaningfully audit. Jonathan understood immediately what the renovation gave him. It gave him a category. He began labeling cash withdrawals he took for himself as construction expenses on her renovation ledger. He wrote the word construction next to amounts that ranged from a few thousand dollars to nearly fifty thousand dollars per entry. He repeated the word in his own neat handwriting and in the firm's accounting software hundreds of times across two years. He bet correctly for a very long time that a client deep in a multi-million dollar home project would never sit down with a calculator and ask whether every single line marked construction had actually paid for construction. The smoking gun, when it finally came, would be that single word. Construction. Written in his hand. Pointing at money that had never touched a building. Every long-running fraud ends the same way. It ends because the person committing it can no longer keep up with the version of reality they have invented. In early 2016, Alanis Morissette began making decisions about her financial life that would, in retrospect, look like the first tugs on the thread. She brought in an outside advisor to review the structure of her holdings. She asked her assistant to pull copies of recent statements. She mentioned, in a passing conversation, that she wanted a fuller picture of where the renovation budget had landed. The request, as relayed through her assistant, was routine. She wanted the renovation ledger. She wanted every invoice. She wanted the bank statements that corresponded to the period of the construction. She did not ask in a tone that suggested suspicion. She asked in the tone of a person who was about to make a decision about whether to extend the project and wanted a clean picture of what had been spent. Jonathan stalled. He delivered partial documents. He claimed that some of the invoices were with the contractor and that he was awaiting their return. He proposed scheduling a sit-down meeting in 2 weeks where he could walk her through the numbers personally. He tried to insert himself between her and the paper. It did not work. The outside advisor she had hired pulled bank statements directly from the institutions. Bank statements showed wire transfers that did not match the invoice trail. Wire transfers went to vendor names the contractor on the actual renovation had never heard of. The vendor names led to small holding accounts that contained almost no money because the cash had been moved through them and out within days. The advisor sent a quiet, careful email to GSO senior leadership in March of 2016 asking for clarification on a list of specific transactions. GSO senior leadership pulled the underlying documents. The senior managing partner sat in his office for 3 hours with a calculator and a stack of printouts and [snorts] at the end of the third hour walked down the hallway to Jonathan's office and asked him to come into the conference room. Within 72 hours the firm had retained outside counsel. Within 2 weeks it had retained a forensic accounting team. Within 30 days it had voluntarily contacted both the Federal Bureau of Investigation and the Criminal Investigation Division of the Internal Revenue Service. GSO understood correctly that its only path forward was full cooperation. The firm would lose clients no matter what it did. The only question was whether it would also lose its license. Jonathan was placed on administrative leave the same week. He drove home from Century City that evening in the sensible sedan he had owned since before the scheme began and he sat in the driveway of his Studio City house for 40 minutes before going inside. His wife had not yet been told. His children were in the living room watching a movie. He understood, sitting in the driveway, that everything he had built for himself outside of work was about to be detonated by what he had built at work. We are about to get into the federal investigation, and I want you here for it. If you have made it this far, and you want more of this kind of breakdown, subscribe. We do not sensationalize these cases. We just lay out what happened, who got hurt, and what the system did or did not do about it. The verdict in this one is going to surprise you. The federal investigation into Jonathan Todd Schwartz had two enormous advantages that most white-collar investigations do not. It had the cooperation of the victim's firm, and it had a paper trail that the suspect had personally constructed for 6 years. Forensic accountants from the FBI and the IRS spent 4 months walking every transaction in every account Jonathan had touched. They pulled bank records from the three institutions where he had opened fictitious vendor accounts. They subpoenaed the underlying account-opening documents. They identified the IP addresses from which the accounts had been accessed. The IP addresses traced back to his desk at GSO and to a wireless network in the Studio City home. The smoking gun was the renovation ledger. Investigators sat down with the actual contractor who had performed the actual work on Alanis Morissette's home. They walked the GSO renovation ledger line by line. Every entry marked construction that corresponded to a real invoice from a real subcontractor was confirmed. Every entry marked construction that did not have a corresponding invoice was flagged. The flagged entries totaled, when finally compiled, several hundred separate withdrawals over more than 2 years. The total of the flagged entries on the renovation ledger alone ran into the seven figures. It was the word itself that became the case. Construction, written in Jonathan's own handwriting, attached to amounts that had never paid for construction. He had been so consistent with the label that the forensic team could simply filter for the word and produce a ranked list of fraudulent transfers. Then they expanded outward. Every account Jonathan had touched at GSO was reviewed for similar patterns. The other victimized clients were identified one by one. Property maintenance for an artist who did not own that property anymore. Landscape services for a comedian whose landscaper was paid by direct deposit on a published schedule. Tax preparation prepaid for a producer whose tax returns had been prepared on a flat fee. Each fabricated category, once isolated, produced a clean column of theft. The financial side was matched by a digital one. Jonathan had used his GSO email to communicate with banks about the fictitious vendor accounts. He had used the firm's accounting software to enter the false categorizations. He had logged into the holding accounts from his own laptop. There was no plausible deniability. There were no other partners with access. There was no shared password problem to muddy the chain of custody. The investigation included a tax component. Jonathan had not reported the stolen money as income on his federal returns. He had not even tried. The Internal Revenue Service treats embezzled funds as taxable income in the year of the embezzlement. That is settled law going back decades. By failing to report it, he had committed a separate stackable federal offense. By signing the returns, he had certified them under penalty of perjury. He had handed prosecutors a second charge that did not require them to reprove the underlying theft. In late 2016, Jonathan and his attorney entered into plea negotiations. The federal prosecutors had every advantage. They had documentary evidence. They had cooperating witnesses inside the firm. They had a victim with sympathetic public standing. They had a clean tax count waiting on the table. There would be no trial. There would be a plea agreement. The confrontation in this case did not happen at gunpoint, and it did not happen with handcuffs in a parking lot. It happened in a glass conference room on the 14th floor of a Century City office tower on an afternoon in March of 2016 between Jonathan Todd Schwartz and the senior managing partner of GSO Business Management. The senior partner sat at the head of the conference table with a stack of bank statements, a printout of the renovation ledger with rows highlighted in yellow, and a single sheet of paper that listed 17 wire transfers in chronological order. He did not raise his voice. He did not editorialize. Senior partner, Jonathan, I have been sitting with these numbers since 7:00 this morning. I want to give you the chance to walk me through them. Schwartz, walk you through what? Senior partner, this wire on November 14th, $42,000. The vendor name is one I do not recognize. The account on the receiving end has no other activity except deposits from us. Help me understand. Schwartz, I would have to look at the file. Senior partner, the file is in front of you. I have flagged 17 of these. I am going to ask about each one. If at any point you would like to stop and call counsel, I will respect that. I am asking, Jonathan, did this money pay for what the ledger says it paid for? There was a long pause. Jonathan stared at the highlighted rows. He did not speak for nearly a minute. When he did speak, his voice was flat. Schwartz, I want to call my attorney. Senior partner, that is your right. Effective immediately, you are on administrative leave. Your credentials will be deactivated this afternoon. The firm will be cooperating fully with whatever follows. I am sorry, Jonathan. He drove home in the sensible sedan. He did not return to the building as a partner. He did not return at all. A federal grand jury in the Central District of California returned an indictment against Jonathan Todd Schwartz in late 2016 on two counts. Count one was wire fraud under Title 18 of the United States Code Section 1343. Count two was filing a false federal income tax return under Title 26 of the United States Code Section 7206. He pleaded guilty to both counts on January 17th, 2017 before the Honorable Dolly M. Gee of the United States District Court for the Central District of California. The plea agreement was specific. He admitted to embezzling $4.8 million from Alanis Morissette and nearly $2 million from at least four other GSO clients. He admitted to forging a client's signature on at least one occasion to authorize a withdrawal. He admitted to fabricating vendor names and falsifying ledger entries. He admitted to labeling personal cash takings as construction expenses on a client's home renovation account. He admitted to omitting the embezzled funds from his federal income tax return. Sentencing was set for May of 2017. The pre-sentencing process produced a string of victim impact statements. Alanis Morissette submitted a written statement to the court. Through her attorney, she described not the lost money, which her insurer would ultimately recover, but the loss of trust in her own ability to assess the people she had hired. She described nights of going through years of statements herself, trying to understand what she had missed, and when she should have noticed. She described what it felt like to learn that the line item marked construction on her own home had been the cover for a stranger's vacation house. She used the phrase upended. Other victims submitted statements with the same shape. A comedian who had not been able to make a quarterly tax payment one year because the cash was not where his manager had said it was. A producer who had paid penalties to the IRS for amounts that turned out to have been stolen rather than spent on the categories his statements described. Each statement was, in its own way, a description of the texture of betrayal by an adviser. The dollars were not the point. The dollars had been replaced by the firm and its insurers. The point was what it cost to no longer be able to trust a paper statement from a person you had paid to be trustworthy. Judge Dolly M. Gee delivered her sentencing remarks from the bench. She did not raise her voice either. She said that the conduct before her was insidious. She used the word audacious. She said that the defendant had not only stolen money, but had engineered a paper reality in which the theft looked like ordinary upkeep. She said that the harm to the victims was not merely economic, but psychological. And that their lives had been, in her words, upended. She said that the sentence she was about to impose had to reflect the deliberateness of the scheme, the duration of the scheme, the number of victims, and the breach of fiduciary trust at its center. She sentenced Jonathan Todd Schwartz to 72 months in federal prison, 6 years. She ordered restitution in the amount of $8.7 million to be paid jointly to the victimized clients and to the firm's insurers who had reimbursed them. She imposed 3 years of supervised release to follow the prison term with conditions including a permanent bar on any future employment involving fiduciary responsibility for the funds of others. He self-surrendered to Federal Correctional Institution Lompoc, a low-security facility on California's Central Coast in the summer of 2017. He served the bulk of his sentence there. He participated in the facility's inmate financial literacy program where he taught basic bookkeeping to other inmates preparing for release. He was released to supervised release in 2022. The $8.7 million restitution order followed him out. He will be paying it in installments for the rest of his working life. He will never again hold a California CPA license. He will never again be permitted to manage another person's money in any professional capacity. The firm where he made partner at 32 no longer exists under the same name. It was absorbed in a quiet restructuring shortly after his sentencing. Its remaining clients transferred to a successor entity with different leadership and a different compliance regime. Alanis Morissette gave one public interview about the case in the months after sentencing. She did not speak about the money. She spoke about a single afternoon she had spent at her kitchen table with a calculator and a stack of statements finding the word construction next to amounts she could not match to any work that had actually been done on her house. She said that the worst part of the experience had not been the theft. The worst part had been realizing how easily she could have caught it years earlier if she had simply looked. That is the lesson of this case, and it is the lesson that every business manager fraud carries with it. The systems we use to outsource our attention are only as safe as the people we hand them to. A line item marked construction on a statement is worth a second look. So is a line marked landscape services. So is a line marked tax preparation prepay. The people who steal from the wealthy and the busy do not steal with a gun. They steal with a word written in neat handwriting that nobody bothers to question. This case was unsettling, but the case on the right-hand side of your screen is even harder to look away from. Click it now.