“He started off with good intentions.” – Defense Attorney Chris Beechler
Unethical behavior and fraud go hand-in hand. You might expect me to say that. However, I would wish to add that unethical behavior and fraud know no boundaries. So, it was absolutely no surprise to me when Russell Joseph Mutter, now 52-year-old former and so-called financial advisor and fiduciary, not only defrauded 12 elderly people. One of those poor souls was his own father.
Major Jail Time for Investments
In all, the investors who trusted him lost a little over $3 million. He carefully and methodically fleeced them over a period of eight years. According to an article by Hayley Fowler for the North Carolina, The News & Observer (February 14, 2022):
“Mutter faced 41 counts of fraud, financial exploitation of an older adult and obtaining property by false pretenses — all of which were consolidated into three felony charges for the purpose of sentencing.”
The man has been sentenced for up to 20 years. He has already been in jail since 2018.
Secretary of State Elaine Marshall said upon the February 8, 2022 sentencing:
“Mr. Mutter utterly disregarded his fiduciary responsibility to act in his clients’ best interests. He targeted retirees — including his own father — and instead of protecting their finances he misled them, used their faith against them to gain their trust, and ultimately created a Ponzi scheme to cover up his losses with funds from new investors…”
Naturally Mutter, acting under the business name “RJM Financial” defended himself by saying he never meant for this to happen, that he had good intentions and was only trying to support his family.
A Hard Case to Make
The case that Mutter and his lawyer attempted to make was that he was “really trying” to pay off his debts. In actuality, he was running a Ponzi scheme and funneling money from his clients into his personal bank accounts.
The clients, perhaps “wealthy,” were nonetheless naïve. He would promise to give his clients annual reports of their investments and never did, or in the least, provide erroneous statements. No one truly knew where he was investing their money.
In the case of one investor who placed $500,000 with RJM, Mutter returned $210,000 as a return, but more than $300,000 remained unaccounted for. The money was essentially used to promote a luxurious lifestyle.
The judge was (rightfully) deaf when Mutter explained in the case of the above client that he was “attempting to raise money, through investments, to repay the plaintiff in full.” Even in court he promised to repay the funds he had stolen. It was years too late.
RJM, which had once held $17 million in funds from the investors, ultimately took millions without their knowledge. The Secretary of State pointed out “When these speculative investments failed, Mutter sought to hide the losses by fabricating fraudulent account statements.”
Mutter, like other fiduciary fraudsters before him (e.g., Bernie Madoff) faked the entire operation. In the end, at least 12 older investors are left nearly penniless.
Who’s at Fault?
Yes, Russell Joseph Mutter is a fraudster who deserved all of the jail time he received. However, it does not solve the larger problem: why does this type of fraud keep repeating itself over and over again?
Fiduciary means “involving trust, especially with regard to the relationship between a trustee and a beneficiary.” How then, does trust get breeched? Why did Mutter turn to fraud as a way to make a living? Perhaps it was because he felt as though no one was watching, and for years, he operated in an ethical shadow. Whether New York, North Carolina or North Dakota (and, by the way, all three states, had such fraud in 2021), something is missing when it comes to ethical training.
What is missing? Expectations. It is why I advocate third-party ethical training on a yearly basis for all fiduciaries. For someone listening, even if only one, will deter themselves from making a catastrophic decision. Mutter will have 20 years to think about his.
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