To be deliberately oblivious or unaware. To ignore something obvious or fail to acknowledge it. To let someone get way with it without telling on them. Based on the character of Sgt. Schultz (whose nickname was Schultzie) from the Hogan's Heroes television show who often declared "I see nothing! Nothing!" after inadvertently walking in on some forbidden activity.
He walked in on us and caught us red-handed but he just did a Schultzie and left.
They were right in the middle of it and he just turned right around and kept going. Yeah, he totally pulled a Schutzie.
Dude, what if they see you? Ah, they'll just do a Schultzie like usual.