More On Legal & Compliancefrom The Advisor's Professional Library
- Pay-to-Play Rule Violating the pay-to-play rule can result in serious consequences, and RIAs should adopt robust policies and procedures to prevent and detect contributions made to influence the selection of the firm by a government entity.
- Anti-Fraud Provisions of the Investment Advisers Act RIAs and IARs should view themselves as fiduciaries at all times, whether they meet the legal definition or not. Deviating from the fiduciary standard of full disclosure while courting clients may cause the advisor significant problems.
A trustee and fiduciary for a number of employer pension plans was indicted on April 10 for 17 counts of wire fraud and 14 counts of theft.
U.S. Attorney Wendy Olson announced that Matthew Hutcheson, 41, of Eagle, Idaho, was indicted by a federal grand jury in Boise. Hutcheson was arrested by the FBI at his home on April 11.
The indictment alleges that Hutcheson was a trustee and fiduciary for the G Fiduciary Retirement Income Security Plan, National Retirement Security Plan 401(k) and the Retirement Security Plan and Trust. It accuses Hutcheson of perpetrating schemes to defraud the plans and misappropriate more than $5 million of plan assets.
“Pension plan fraud represents not only a violation of the law but a betrayal of trust,” said Phyllis Borzi, assistant secretary of labor for the Employee Benefits Security Administration. “Those who provide services for workers saving for retirement must serve the best interests of those workers. The Department of Labor will continue to pursue all possible avenues to root out fraud in employee benefits management. In this case, and many others, we are pleased to team with the Justice Department to aggressively investigate fraudulent conduct aimed at stealing workers’ hard-earned retirement savings.”
According to the indictment, from January 2010 through December 2010, Hutcheson misappropriated approximately $2 million of G Fiduciary Retirement Income Security Plan assets for his personal use. On 12 occasions, Hutcheson directed the plan's record keeper to make wire transfers of plan assets from an account at Charles Schwab to bank accounts controlled by Hutcheson and to other bank accounts for his personal benefit.
The indictment alleges that Hutcheson used these assets to extensively renovate his home, to repay personal loans, to purchase luxury automobiles, motorcycles and all-terrain vehicles and for other personal expenses. When plan record keepers and others requested information about the location and status of the plan assets, Hutcheson allegedly misrepresented that they were safely invested.
Hutcheson is also accused of misappropriating about $3 million of Retirement Security Plan and Trust assets to pursue the purchase of the Tamarack Resort in Donnelly, Idaho, on behalf of a limited liability corporation he controlled.
In December 2010, Hutcheson directed the plan’s record keeper to transfer approximately $3 million from the plan to an escrow account for the benefit of Green Valley Holdings LLC. Hutcheson directed the record keeper to describe the transaction in plan records as an investment in a fixed-income bank note. In reality, Hutcheson used the money to buy a bank note secured by a majority interest in the Osprey Meadows Golf Course and Lodge at the Tamarack Resort in the name of Green Valley Holdings.
When an auditor questioned Hutcheson about the investment, Hutcheson told the auditor there was no plan investment in a fixed income bank note and that he had “loaned” the money from the plan to Green Valley Holdings.
Hutcheson supposedly supplied fraudulent and forged documents to the record keeper.
Each count of wire fraud is punishable by up to 20 years in prison, a maximum fine of $250,000 or twice the gain or loss from the offense, and up to three years of supervised release. Each count of theft from an employee pension benefit plan is punishable by up to five years in prison, a maximum fine of $250,000 or twice the gain or loss from the offense, and up to three years of supervised release.
The case was investigated by the FBI and the EBSA, a unit of the Labor Department.