Well-known fiduciary advocate Matthew D. Hutcheson was indicted this week on federal charges that he used retirement plan funds for home renovations and to buy an interest in a ski and golf resort.
The plan adviser was arrested Wednesday in Idaho and indicted on 17 counts of wire fraud and 14 counts of theft. Mr. Hutcheson pleaded not guilty and was released yesterday into third-party custody. According to Pamela Bearg, public information officer at the U.S. Attorney's Office in Boise, Idaho, the adviser will be subject to electronic monitoring.
Mr. Hutcheson has been on the advice industry's radar for some time. The professional independent fiduciary has maintained a high profile within the industry, as well as with the media. He hosted a radio show called "The Retirement Hour with Matt Hutcheson" and authored a course called "Retirement Plan Management: Compliance, Reporting and Ethics."
In July 2010, Mr. Hutcheson gave testimony to a congressional subcommittee in which he backed applying the fiduciary standard to 401(k) plan advisers (see video below). During the hearing, he noted that “not one participant under my fiduciary jurisdiction has ever been exposed to [Bernard] Madoff, Bear Stearns [Cos. Inc.], failed hedge funds, or such as those.”
The upcoming trial, however, is the latest chapter in a series of controversial developments surrounding the way Mr. Hutcheson allegedly handled retirement assets belonging to his plan sponsor clients. Last November, he was the subject of a Labor Department investigation into similar charges.
Indeed, the DOL — including its Employee Benefits Security Administration — were involved in the investigation that led to Mr. Hutcheson's arrest.
According to the U.S. Attorney's Office, Mr. Hutcheson was a fiduciary and trustee to a trio of multiple employer plans: the G Fiduciary Retirement Income Security Plan, the National Retirement Security Plan 401(k), and the Retirement Security Plan & Trust.
Through 2010, Mr. Hutcheson allegedly directed the record keeper of the G Fiduciary Plan to send a total of $2,031,688 via 12 wire transfers from the plan's account, which was kept at Charles Schwab & Co. Inc., to accounts that were controlled by the adviser or were for his personal benefit.
While Mr. Hutcheson told the record keeper to note on the plan's participant account statements that each of the money from the 12 transfers was invested in a cash equivalent, he in fact used the money to foot a variety of personal expenses, federal authorities allege.
According to the complaint, one of those personal expenses was a renovation of Mr. Hutcheson's home in Eagle, Idaho — including adding a swimming pool and hot tub and the construction of a 4,100-square-foot barn with a loft apartment and office. The total tab? $892,000, the U.S. Attorney alleges.
Other proceeds went toward the purchase of two motorcycles, luxury cars and a tractor, plus other personal expenses, according to the indictment.
Though employers in G Fiduciary were told in March 2011 to move their plan assets into the National Retirement Security Plan 401(k), there were insufficient funds to make the move, federal authorities charge. In August and September 2011, Mr. Hutcheson allegedly made false statements to the plan sponsors and record keepers about the location of the plan assets.
Federal authorities also claim that in 2010 Mr. Hutcheson set up an entity called Green Valley Holdings to acquire a golf course and ski lodge at the Tamarack Resort in Idaho.
The adviser allegedly prepared false documents, including a phony proof of funds letter supposedly from the president of TD Ameritrade Trust Co. that said the firm had $40 million in liquid funds and could wire Mr. Hutcheson the money to buy the resort property, according to the complaint.
In reality, Green Valley only had $55 in its bank account.
Mr. Hutcheson allegedly funneled $3 million in plan assets out of the Retirement Security Plan & Trust to help buy an interest in Tamarack, telling the plan's record keeper that he had planned to purchase a fixed-income bank note with the money, according to the complaint.
During an audit of the retirement plan, Mr. Hutcheson allegedly admitted to the auditor that there was no such investment. He told the auditor that about $3.2 million in plan assets had been loaned instead to Green Valley Holdings — which Mr. Hutcheson also allegedly acknowledged was a prohibited transaction under the Employee Retirement Income Security Act of 1974.
Federal authorities are seeking about $5.3 million in forfeitures from Mr. Hutcheson. Further, each count of wire fraud is punishable by up to 20 years in prison, while each count of theft from an employee pension benefit plan is punishable by up to five years.
A call to Mr. Hutcheson went to a voicemail system that was not set up. His attorney, Dennis Charney, said the case has two branches. "One branch alleges Matt used investor funds for personal expenses," he said. "That allegation is denied in it's entirety." The other branch, according to the attorney, alleges that Mr. Hutcheson used investor funds to invest in the Osprey Meadows golf course. "Under ERISA, [Matt] had full discretion to do so," said Mr. Charney. "Thus, this activity was not criminal in nature and we intend to fully defend all the allegations in court."