A financial broker from Bellingham must spend four years in prison and repay a quarter-million dollars he embezzled from 26 clients, according to a U.S. District Court judge’s ruling Monday, Jan. 5.
Jeffrey Michael Knutsen, 43, opened Bellwether Financial Services, a wealth management business, in Bellingham in 1999. A few years later one of his clients complained to the Financial Industry Regulatory Authority that Knutsen had “misappropriated” about $90,000 from an account without permission. In a kind of plea bargain with regulators, Knutsen didn’t admit or deny guilt, but he signed a form on June 11, 2005, agreeing to no longer work as a financial trader.
Around then, Knutsen persuaded some of his clients to open new accounts with TD Ameritrade or E-Trade, ostensibly in response to rising fees from the old service, LPL Financial. He neglected to inform them he was no longer licensed. His clients, many of them elderly, were told to open the accounts under their own names. Knutsen said he would manage the accounts for them for a fee of 0.85 to 1 percent.
Over the course of the next seven-and-a-half years, however, he took much more than that.
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One elderly couple, identified in court papers as C.G. and S.G., had their savings come into Knutsen’s hands when their old broker retired.
Knutsen gradually transferred $91,700 into his bank account via 109 unauthorized electronic checks. Under the agreed-upon rate of 0.85 percent per year, he should have been paid about $12,500.
“In the beginning,” Knutsen wrote last week in a remorseful letter to the judge, “I was continually afraid that people would discover my lie and that I would embarrass my family and bring shame to those around me. I had many sleepless nights, and the situation added stress to my marriage and to my family life.”
Eventually C.G. and S.G. did notice a huge chunk of their savings had gone missing. They walked into the Bellingham Police Department in November 2012 to report the theft. Local and federal law enforcement investigated further and found a total of 26 victims. The total theft amounted to roughly $251,000.
Knutsen pleaded guilty to wire fraud in August in federal court.
“I wish I could go back and do it all over again, for I know how different I would do things if given another opportunity,” Knutsen wrote to the judge. “I know that the struggle starting a new career is nothing compared to the hurt, mistrust and pain I have caused my clients. I know I can’t restore their trust, but I promise through whatever means I will have, that I will right my wrongs.”
His public defender, Peter Avenia, asked U.S. District Court Judge James L. Robart for a prison sentence of 18 months. Robart, in his judgment on Monday, called Knutsen’s actions “a crime of greed — pure unadulterated greed — plain and simple,” according to the U.S. Attorney’s Office in Seattle.
Judge Robart sentenced Knutsen to four years and three months in prison.
Prosecutors noted that Knutsen started stealing money from his clients less than three months after signing the reprimand papers in 2005. Some victims wrote that they’d lived very modestly to build a safety cushion for their retirement; others had struggled to leave their savings untouched, or to manage their money alone, in the face of mounting medical problems.
“When a fraudster like the defendant engages in such blatant, long-lasting fraud, the victims are often embarrassed left wondering whether they did something wrong by entrusting a con man with their hard-earned money,” federal prosecutors wrote in a sentencing memorandum.