A longtime investment adviser in Omaha is unable to account for more than $1 million of his clients’ funds, authorities allege in court documents.
State regulators accuse Jerome “Joe” Bonnett, who runs an investment firm by the name of Bonnett Wealth Management, of misappropriating more than $1.35 million of client funds.
Two law enforcement officials familiar with the two-month-old ongoing investigation say that the losses to Bonnett’s investment clients have reached $2 million. The FBI has joined the state in the investigation, the officials said.
Those officials said they have not yet been made aware of any specific motivation for the alleged scheme.
The allegations go back at least nine years and have “all the makings of a Ponzi scheme” – in which someone takes money from new clients to replenish money owed to other clients – said the officials.
Bonnett told a widow who is out $400,000 that he “diverted (her) money to make it right’ with other clients,” according to an affidavit filed in court by a Nebraska Department of Insurance investigator.
The 51-year-old Bonnett, who has been an investment adviser for 24 years, could not be reached for comment. His attorney, Clarence Mock, did not return phone calls Thursday evening.
Douglas County Attorney Don Kleine said the investigation into Bonnett has just begun.
For now, Kleine said, Bonnett has been charged with two felonies: first-degree forgery and a fraudulent insurance charge.
Not many Omaha area cases have topped $1 million. In 2014, Caroline Richardson was convicted of stealing $4.1 million from Colombo Candy & Tobacco, where she worked as treasurer. Patricia Urbanovsky, owner of Creative Creations event planning, is awaiting trial in state and federal court on more than 25 charges alleging that she caused more than $4.7 million in losses. The 30-year-old has pleaded not guilty.
Kleine said he filed the initial charges to try to ensure that Bonnett remains in the Omaha area. Prosecutors say they asked Judge Susan Bazis to set “significantly high” bail. Bazis set Bonnett’s bail at $100,000 and ordered him to surrender his passport. He paid $10,000, 10 percent of the bail amount, and has since been released from jail.
In the meantime, state regulators sought and received a judge’s order to attempt to secure the accounts at Bonnett Wealth Management.
In all, Bonnett managed 83 investment accounts totaling approximately $47.5 million in assets, according to state officials.
The State Department of Insurance, which oversees investment advisers involved in securities, alleges in a civil lawsuit that since at least 2007 Bonnett has used clients’ money to pay himself, his mortgage and a restaurant startup loan, and to replenish funds in other clients’ accounts.
According to court documents:
Investigators initially became concerned after a routine check by regulators and an anything-but-routine discovery by an Omaha attorney handling a Bennington man’s estate.
In a court document, Assistant Attorney General David Lopez wrote that the department commenced a routine investment adviser examination of Bonnett’s personal and business accounts.
“During the examination, substantial co-mingling of assets … was discovered,” Lopez wrote. “Commissions were received directly into Bonnett’s personal bank accounts.”
So were client funds, the state alleges.
In August 2015, Bennington resident Duane Braesch died.
Upon his death, his widow, Helen Braesch, and her attorney, Robert Guinan, were checking into his finances. Part of the estate had included a lawsuit judgment that the Braesches received after a 1984 car wreck in which a driver fell asleep and crashed into a car carrying the Braesches’ 18-year-old daughter, Lori. Lori Braesch died from her injuries.
Guinan several times inquired about $400,000 that Bonnett claimed to have set up as an annuity.
After several delays, Bonnett produced a policy number.
In January of this year, Guinan contacted Assurity, the company that Bonnett said issued the annuity.
Assurity officials said they had no account by that number.
In April, Bonnett finally met with Guinan, Helen Braesch and one of the Braesches’ adult sons.
During that meeting, investigators allege, Bonnett showed Guinan and the Braesches spreadsheets. One of the spreadsheets had a note with this scribbling: “annuity does not exsit (sic).”
Guinan confronted Bonnett.
That’s when Bonnett admitted that he “diverted (Braesch’s) money to make it right’ with other clients,” according to Charles Starr, a state insurance fraud investigator.
Insurance investigators found that Bonnett had withdrawn that $400,000 – and had tried to replace it with checks from another client.
The Braesches weren’t the only victims, according to Starr.
The lawsuit filed by the Department of Insurance lists several clients by their initials, missing the following amounts: $340,000, $200,000, $152,000, $100,000, $50,000 and $15,000.
In the past eight months alone, investigators allege, Bonnett has “borrowed $550,000 from his clients.”
“And 500,000.00 of that debt remains outstanding,” the department alleges.
Bonnett’s assets have been frozen as the investigation continues. He and his wife are allowed to withdraw $10,000 a month for living expenses.
Kleine said he can’t say when the probe will be complete.
“We charged him based on some of the things that were found just in the initial investigation,” Kleine said. “It’s an ongoing investigation that’s really just started.”
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