Seeking to recoup the $5.3 million swindled by 401(k) advocate Matthew Hutcheson, retirement plans could end up with just 25% to 50%. Darla Mercado on the tough road ahead.
Prison is a certainty for disgraced 401(k) fiduciary advocate Matthew D. Hutcheson, but the future is a lot less clear for the two retirement plan clients who are owed more than $5 million in misappropriated assets.
Mr. Hutcheson was sentenced Wednesday to 17 years in prison in Idaho on wire fraud charges. Federal prosecutors accused him of misappropriating for personal purposes $5.3 million in retirement plan assets belonging to a pair of multiple employer retirement plans: G Fiduciary Retirement Income Security Plan and the Retirement Security Plan and Trust. So-called MEPs act as a retirement plan that can be used by groups of employers, provided there is no common ownership among them.
Though the adviser has been ordered to remit the money to the retirement plans — $2.03 million to G Fiduciary and $3.27 million to RSPT — the plans and their participants aren't optimistic.
“There is a difficult road ahead, and we're pursuing many different avenues,” said Jeanne Bryant, the court-appointed independent fiduciary of the RSPT plan. “We hope to have news in the next few weeks. It depends on the value received from pursuing the assets.”
Of the $2 million misappropriated from the G Fiduciary plan, much of it was spent on personal goods and services, including home renovations, cars, motorcycles and a pair of all-terrain vehicles. That money is essentially gone, noted Assistant U.S. Attorney Raymond E. Patricco, a prosecutor in the case.
“The house has been foreclosed on and the cars have been repossessed,” he said.
G Fiduciary has a $500,000 surety bond, however, and the trustee overseeing the plan appears to have made a claim against it, Mr. Patricco said. Calls to the plan's representative, Devitt Barnett, an attorney with Thorson Barnett and McDonald PC, were not immediately returned.
The situation is murkier for participants in the RSPT plan.
About $3 million in plan assets went toward a promissory note that was secured by a majority interest in the Osprey Meadows Golf Course and Lodge at the Tamarack Resort in Tamarack, Idaho. Mr. Hutcheson bought the interest in the name of Green Valley Holdings, an entity he created.
In turn, Mr. Hutcheson used the same promissory note as collateral for a $425,000 loan for Green Valley Holdings from a private lender in Virginia. That private lender is first in line to collect on the interest in the golf course and lodge should Green Valley default.
Mr. Hutcheson had told the participants in RSPT that their money was invested in a fixed-income fund.
Getting the money back to the RSPT participants will depend on the eventual sale of the golf course and lodge, Ms. Bryant noted. The plan has been frozen while she fights to get the money back.
Though the RSPT plan has a $500,000 fidelity bond, Ms. Bryant is battling Colonial Surety Co., the issuer, to get them to pay out. According to a suit RSPT filed against Colonial on July 11 in the U.S. District Court in Idaho, the issuer agreed to provide the bond in 2010 — the same year that Mr. Hutcheson transferred the $3 million to buy the promissory note secured by the golf course and lodge.
After Mr. Hutcheson's criminal indictment in 2012, RSPT notified Colonial of the loss, but the issuer denied coverage “based on an alleged failure to provide notice within the time frame outlined in the 2010 policy,” according to the suit.
A call to Colonial's attorney, Michael J. Leahy of Haight Brown and Bonesteel LLP, was not immediately returned. Mr. Hutcheson's attorney, Ryan P. Henson of Gulstrom Henson & Petrie PC, did not return a call for comment.
“The prospect of the plans getting all the money back is slim,” Mr. Patricco said. “There's the prospect of getting back 25% [of the funds] for G Fiduciary if the surety company meets the bond. RSPT might get back 50% if they get the payment on their bond and the sale of the golf course and lodge.”
Ms. Bryant acknowledged that though the road ahead is a difficult one, she is aiming to get back as much of RSPT's money as possible.
“We're pursuing getting everything back for the plan members,” she said. “These people can't get access to their funds until this is resolved. If we're 100% successful, that would be great.”
