A former Wisconsin broker was sentenced to more than five years in federal prison for engaging in a $2.6 million investment scheme that raided the accounts of mostly elderly victims, including his parents and a cognitively disabled individual, according to a news release from the U.S. Attorney’s Office in the Eastern District of Wisconsin.

Edward E. Matthes, 51, of Milwaukee, worked as an independent broker-dealer at Mutual of Omaha Investor Services Inc. and before that at Thrivent in St. Louis and Pewaukee, Wis. He pleaded guilty in November 2020 to three counts of wire fraud, the release said.

The release noted that Matthes worked in a one-person branch office in Oconomowoc, Wis., and was a prominent member of the community.

According to the complaint, between April 2013 and March 2019 Matthes persuaded 26 of his brokerage customers and clients, who included his own parents and a cognitively disabled individual, to invest in fictitious Mutual of Omaha accounts, which he described as a “safe fixed investment” that would earn a guaranteed minimum yield of 4% per year. He told them to transfer about $1.4 million to him so that he could fund the investment. But the purported fixed investment did not exist, the complaint said.

While Matthes took clients’ money, he provided several of them with fake quarterly earnings statements, using Mutual of Omaha letterhead, the complaint said, adding that he stole an additional $1 million from his brokerage customers by making unauthorized sales and withdrawals from variable annuity contracts that they held in accounts with him.

He used the loot to fund personal expenses such as home renovations, car payments, child support and luxury item purchases. He also used about $170,000 to make Ponzi-like payments to certain investors to keep his fraudulent scheme alive, the complaint said.

Matthes was fired by Mutual of Omaha in March 2019. The Financial Industry Regulatory Authority also barred him in March 2019 for refusing to turn over documents and information relating to the case, and the Securities and Exchange Commission barred him in February 2020. 

The court release said before the sentencing that several victims filed impact statements, and two victims during the hearing spoke of how Matthes betrayed their trust, causing them significant financial and emotional harm. A representative of Mutual of Omaha also spoke during the hearing and explained that Matthes’s actions cost the company “considerable resources to investigate the matter and to reimburse most of the victims for their losses.”

In sentencing Matthes to 63 months in prison, U.S. District Court Judge Brett H. Ludwig noted that Matthes “cultivated trust” and maintained a “veneer of friendship” with the victims while robbing them of their retirement savings. The judge, the release noted, said the “protracted nature of the offense conduct, the magnitude of loss and Matthes’s betrayal of trust, required a sentence that both punished and deterred.”

The case was jointly investigated by the Federal Bureau of Investigation, the U.S. Department of Labor, the Employee Benefits Security Administration, and the Oconomowoc Police Department. They were aided by representatives of Mutual of Omaha and the SEC. Assistant U.S. Attorney Kelly B. Watzka prosecuted the case.