A Clemmons man was indicted Monday on charges that he mismanaged nearly $1 million in three men’s retirement accounts, losing the money and causing the men to face possible tax liabilities as a result.
Russell Joseph Mutter, 48, of Curraghmore Road in Clemmons, was indicted by a Forsyth County grand jury on a total of 12 felonies – four counts of investment advisor fraud, four counts of financial exploitation and four counts of obtaining property by false pretenses. The indictments cover a period of six years between 2012 and 2018.
During a hearing Tuesday in Forsyth Superior Court, Shannon O’Toole, a special agent with the Securities Division of the N.C. Secretary of State, said Mutter likely defrauded nine additional people who were clients of Mutter’s company, RJM Financial LLC. That amounts to a total number of 12 people whose money Mutter mismanaged, and those people’s losses amount to $2.2 million, O’Toole said.
The company and Mutter are now under a permanent order from the N.C. Secretary of State that prevents the company from ever recruiting new clients and conducting business. The state agency had issued a temporary cease and desist order and a summary suspension in February based on the allegations of fraud and Mutter’s failure to file proper paperwork with the state. The order became permanent in April after Mutter failed to file a response or request a hearing.
Judge Eric Morgan of Forsyth Superior Court set bond Tuesday at $5 million. Mutter is scheduled to next appear in Forsyth Superior Court on June 25.
According to indictments, Mutter is alleged to have defrauded these three men – Phillip K. Edwards, Phillip E. Boydston and Walter R. Whiteman. All three men were in their 60s and 70s at the time of the alleged incidents. Mutter handled Individual Retirement Accounts for Edwards and Boydston and an Individual Designated Beneficiary Account for Whiteman, the indictments allege.
Mutter took a total of $904,000 from the men’s retirement accounts. The men thought they were making “safe and reasonable investments,” Forsyth County District Attorney Jim O’Neill said in court Tuesday. Instead, Mutter “put (their money) in a one in a million homerun shot that would pay off only if the market collapsed.”
In other words, according to O’Neill and O’Toole, Mutter was making a bet. But Mutter was wrong about the market collapsing. And as a result, he lost the bet and the men’s money along with it, O’Neill and O’Toole said in court.
Realizing he lost their money, Mutter tried to cover his tracks, they said. To do that, he created fake documents that he would send to the three men, making them think everything was going well with their investments. Mutter is accused of taking $500,000 of Boydston’s retirement money. He was able to return $210,000 to Boydston’s account.
He was only able to return the $210,000 to Boydston by taking from other people’s retirement account, they said.
“I truly believe, in his mind, he thought the market would correct,” O’Toole said in court. “He was swinging for the fences and he was waiting for that.”
O’Toole began investigating on Jan. 10, and a search warrant was executed at Mutter’s house on Feb. 28. O’Toole also interviewed Mutter. He said Mutter admitted to two victims and also admitted he created false documents.
All of Mutter’s clients have been mailed a letter, telling them about the investigation and the possibility that their retirement accounts could have been mismanaged. RJM Financial LLC had between 20 and 70 clients.
Boydston sued Mutter and his company in Forsyth Superior Court in 2017. In the lawsuit, his attorneys, Joshua Bennett and Jasmine Pitt, allege Mutter had worked as a financial advisor with Charles Schwab, an investment firm in Winston-Salem. While there, he managed Boydston’s account. When Mutter established his own company in 2010, he contacted Boydston about becoming a client, the lawsuit said.
Mutter persuaded Boydston to give Mutter $60,000 to invest in exchange for a 15 percent stake in Mutter’s company. Then in 2012, Mutter advised Boydston to entrust him with $500,000 from his IRA account so that he could invest the money into “blue chip” bonds and U.S. Treasury Inflation Protected Securities (TIPS). After returning about $200,000 of Boydston’s money, Mutter gave various explanations to Boydston about what had happened to the remaining $300,000 and then stopped communicating with Boydston, the lawsuit alleged.
The lawsuit said Mutter never even formed RJM Financial LLC and instead, misappropriated Boydston’s money. Judge Stuart Albright of Forsyth Superior Court granted a $900,000 civil judgment in the case on March 6, saying that Boydston was entitled to relief on his claims of fraud, violation of the N.C. Investment Adviser’s Act, breach of fiduciary duty, unfair and deceptive trade practices, conversion and unjust enrichment.” Bennett said Tuesday that he and Pitt made a motion for judgment based on the pleadings after Mutter filed his answer. Since there appeared to be no disagreement on the allegations, Albright granted the motion, Bennett said.
Mutter said in the answer to the Boydston lawsuit that he had made certain investments to protect Boydston’s money.
“When the investment products began to decline in value Mr. Mutter was embarrassed, shamed and mentally distraught and did not want to disappoint Mr. Boydston and began attempting to raise money, through investments, to repay the plaintiff in full,” Mutter said in his answer.
“Individuals were financially wiped out,” O’Neill said in court Tuesday for why bond should be set at $5 million. “He gambled with money that didn’t belong to him in hopes of looking like a hero.”
He asked Morgan to take Mutter’s passports and guns and argued that Mutter might be safer if he were incarcerated.
Beechler said Mutter doesn’t have the resources or the motivation to run away.
“He has no valid passport. There is no money to flee,” Beechler said. “He is not going to leave his family, his wife and his two daughters behind.”
In setting the bond at $5 million, Morgan also ordered that Mutter be under electronic monitoring.
After the hearing, Beechler said Mutter has cooperated with the investigation, including the raid on his house in February.
“For a person who has never been in trouble with the law before, this has been overwhelming for him, his wife and his daughters,” he said. “They are trying to get a grasp on how the rest of this year looks with the case progressing.”
firstname.lastname@example.org 336-727-7326 @mhewlettWSJJournal reporter Scott Sexton contributed to this story.