A Milwaukee-based broker was sentenced to more than five years in prison after defrauding investors of about $2.6 million, the Department of Justice announced last week.
Edward E. Matthes pleaded guilty to charges of wire fraud last year. According to the DOJ, Matthes’ 27 victims included many elderly investors, as well as his own parents.
“This fraudster took advantage of some of our most vulnerable citizens,” Robert Hughes, the FBI special agent in charge, said in response to the sentencing. “Most of his victims were elderly, and he spent years gaining their trust, only to wipe out a lifetime of their savings.”
Matthes’ industry experience spans more than two decades, according to his BrokerCheck profile. His history includes stints with Thrivent Investment Management and Mutual of Omaha Investor Services, where he began work in 2012. Starting in April 2013, Matthes began persuading clients to invest in a number of fictitious accounts at Mutual of Omaha Investor Services, claiming their returns would be greater.
In some instances, he urged investors to make the transfers, but in other cases he got written authorization from clients allowing him to independently transfer funds, according to a plea agreement he signed in November. But Matthes didn’t open new accounts for these clients; instead, he transferred the funds into his own personal U.S. Bank accounts. Matthes acknowledged he was “living beyond his means” in conversations with federal criminal investigators.
“Matthes stated that he stole the money in order to ‘keep up appearances’ that he was a successful business owner and community member,” the plea agreement reads. “Matthes used the stolen money for his personal benefit, including to pay for the purchase of a home, living expenses, vacations, child support obligations, antiques, vehicles and other valuable items.”
To cover up the scheme, Matthes would tell clients that their investments were performing well, and he would also create fake quarterly earnings statements. But some clients became suspicious after Matthes did not send them 1099 fax forms documenting the fund transfers. In addition to the impact on victims, Mutual of Omaha spent “considerable resources” investigating the scheme and had to reimburse many victims, according to a company representative who testified at the sentencing hearing.
In addition to his own personal use, Matthes spent about $170,000 of the purloined funds making payments to existing investors to keep the scheme alive, according to an SEC complaint filed in January of last year against the broker. On March 12, 2019, Mutual of Omaha Investor Services fired Matthes, and FINRA barred him from the industry on March 22. The State of Wisconsin Department of Financial Institutions Securities Division barred him later that year, according to the SEC complaint. Finally, the SEC barred him from the industry in February of last year for his actions, according to his BrokerCheck profile.
