Private settlement with The First bank; lawyer anticipates recovering 60 to 70 percent of what was diverted from charity

Wed, 04/15/2015 - 1:45pm

Lynda Clancy

Rusty Brace, in 2012. (Photo by Lynda Clancy)

The Brace Building, in downtown Camden, is listed at $2.3 million.

39 Spruce Street in Rockport is listed at $774,800.

69 Steele Lane in Washington is on the market for $385,000.

The Rangeley home of Rusty Brace, on the market now for $399,800.

Rusty Brace, in 2012. (Photo by Lynda Clancy)

The Brace Building, in downtown Camden, is listed at $2.3 million.

39 Spruce Street in Rockport is listed at $774,800.

69 Steele Lane in Washington is on the market for $385,000.

The Rangeley home of Rusty Brace, on the market now for $399,800.

ROCKLAND — United Mid-Coast Charities President Stephen Crane announced in a news release this afternoon that the nonprofit agreed to resolve its civil suit against Russell Brace.

Crane said that in connection with the civil settlement, Brace admitted to breach of duty, fraud and conversion of money belonging to UMCC as a result his theft of hundreds of donation checks that were made payable to UMCC.

“Today, the parties have filed with the court a stipulation for consent to judgment in which Russell Brace has agreed that the court will enter judgment for UMCC and against him on all counts and award damages in the amount of $4,646,636,” said Crane, in the release.

UMCC’s attorney, Jay McCloskey, said Wednesday afternoon that UMCC has reached a private settlement with The First, the bank where Brace had been depositing checks intended for the charity but wound up in his personal checking account.

“The charity has reached a private settlement,” said McCloskey. “The First cooperated to settle the matter.”

McCloskey would comment no further on that settlement Wednesday afternoon, other than to say it was “reasonable and beneficial to both parties.”

McCloskey, now with McCloskey, of McCloskey, Mina & Cunniff LLC, was U.S. Attorney for Maine for eight years, and before that, was an assistant U.S. attorney for 13 years, prosecuting fraud and embezzlement cases. He said he hoped to recoup 60 to 70 percent of the money that Brace deposited for the charity.

There are no suits against Brace’s wife, Becky, he said.

“In order to partially satisfy the above judgment, Brace has agreed to sell real estate properties that he owns and to turn over his interests in the sale proceeds to UMCC. He also has agreed to turn over all the money that he holds in bank accounts as well as his interest in certain items of personal property that will be sold,” said Crane.

Because Becky Brace jointly owns the Rockport home, she will receive half of the sale of that house, McCloskey said.

McCloskey said in the release: “In order to settle this case, the charity required Mr. Brace to agree to liquidate virtually all his assets and turn over the proceeds to UMCC. At the end of the day, I think the charity will recover a substantial portion of the money that was stolen from it.”

Real estate property owned by Brace, and which are now attached, include:

• The Brace Building, 21 Elm St., Camden, assessed by the town at $1.7 million; the building is listed at $2.3 million by the Boulos Company

• House and land, 39 Spruce St., Rockport, assessed at $774,800; the house is on the market, listed by Sotheby’s, at $895.000

• House and land in Washington, 69 Steele Lane, assessed at $314,954, and listed for $385,000

• House and land at 51 Alpine Way in Rangeley, assessed value approximately $290,000. There is another piece of land he owns on Dorset Road that is assessed at $33,100. The house is on the market for $399,800.

McCloskey said that after a judgment is rendered specifying the amount taken by Brace, the property held in Brace’s name will be sold.

The bank declared in October how much Brace’s banking accounts are worth.

1) Personal checking account in the name of Russell Brace, $15,346.86

2) Personal checking account in the name of Rebecca W. Brace/Russell W. Brace, $30.23.

3) Business checking account in the name of Brace Management Group, Inc.: $8,051.60

4) Business checking account in the name of Brace Management Group, Inc., DBA UCRC Char Fund: $694,731.30

UMCC filed the suit against Brace Oct. 3, 2014 after current UMCC President Stephen Crane said in court documents that he met with Brace on or about Sept. 25 and Brace admitted to the diversion of the checks, some in the amount of $100,000 to $200,000, into his personal account at The First.

The nonprofit said in its suit it determined that former president Brace had diverted checks intended for the charity into his own Brace Management Group checking account at the First N.A., a bank with branches in Rockport and downtown Camden.

Soon after, both the U.S. Attorney’s Office for the District of Maine and the Internal Revenue Service launched their own separate investigations into the allegations.

Because of federal actions, Brace’s attorney, Peter DeTroy, of the Portland-based Norman, Hanson and DeTroy, filed three subsequent stays in Knox County, asking the judge for more time before officially filing a response to the UMCC allegations. The last stay was granted Feb. 7, with a March 6 deadline, and another 20-day cushion after the stay expired.

DeTroy said March 24 that while the precise timing is unclear, the civil matter may be resolved by the end of this week.

Neither the IRS nor the U.S. Attorney’s Office in Portland are commenting on the investigations.

Amy Hosney, IRS public information officer for New England, said she is precluded from providing any information about an ongoing criminal investigation, “or even confirming or denying the existence of it, due to very strict federal grand jury secrecy laws.”

McCloskey said he did not know when a federal indictment would be handed down.

“We have been told he will be charged very soon,” said Stephen Crane, on March 24. “We are looking to get this all behind us.”

McCloskey said he expects that the IRS will soon wrap up its investigations of potential tax violations, and that the charges against Brace may well include mail and bank fraud, as well as tax violations.

Before any charges are filed, those IRS findings and figures first go to Washington, D.C., to the Department of Justice for approval.

The FBI investigates economic crimes, including bank fraud.

On Feb. 5, Detroy wrote in his stay request: “The U.S. Attorney is still in the process of an investigation into potential criminal charges and discussions are currently underway between the parties and plaintiff’s counsel, which may resolve the present matter.”

He also said then: “Additionally, while Mr. Brace has not formally been charged criminally, an investigation by the U.S. Attorney’s Office is progressing and charges are anticipated.”

McCloskey said this week that the IRS investigation of the allegations does not diminish the chances of UMCC recouping its lost funding.

“It [the IRS] is no different than anyone else standing in place as a creditor,” he said.

On Oct. 17, The First N.A., a Damariscotta-based bank with branches in Camden and Rockport, submitted its court disclosure of “goods, effects or credits” of Brace. The First N.A. voluntarily froze Brace’s accounts as soon as the allegations surfaced. The First said in court documents that a business loan agreement exists between it and Brace.

“All of the funds in said accounts are subject to the bank’s first priority security interests and rights of offset under a certain Business Loan Agreement by and between the bank and Russell W. Brace and Brace Management Group, Inc., dated Dec. 8, 2004, and applicable law,” the First said in its document filed Oct. 17 at Knox County Superior Court in Rockland.

By Oct. 9, McCloskey obtained a judge’s approval to place liens on assets owned by Brace, as well as the Brace Management business accounts at the First.

United Midcoast Charities enthusiastic about future

• Rusty Brace asks for more time in UMCC case as investigation continues

• The First discloses amounts in Brace accounts

• Legal, investigative wheels turn on Camden charity theft case