PORTLAND — In a borrowed wheelchair, hunched forward and decrepit, Rockport resident Russell “Rusty” Brace nonetheless appeared in U.S. District Court late this morning, May 29, to plead guilty to three felony charges: mail fraud affecting a financial institution, and two tax frauds that include making false statements to the Internal Revenue Service.

Brace faces up to 30 years in prison, five years of supervised release and a fine of twice the gain or loss on the fraud charge, and up to three years in prison, one year of supervised release and a $100,000 fine on the tax charges.

His sentencing, however, won’t be for another several months, as a pre-sentencing report is due to be completed by the U.S. Probation Office, and Judge George Singal decides how to punish this 81 year-old man, who, for at least 15 years, siphoned charity donations into his own bank account at The First, in Camden, and used the funds for his personal benefit. 

Brace will be sentenced after the pre-sentence investigation report is filed and terms are agreed to by U.S. prosecuting attorneys and Brace’s defense attorney.

U.S. District Attorney Dan Clark said this afternoon that his office declined to comment on what sentencing it wanted to see, and would wait for the pre-sentence report.

This morning, Singal released Brace on his own recognizance, less his passport.

Brace refused to answer questions from reporters, pending his sentencing, but did say as he was wheeled out of the courtroom, into an elevator and down to the U.S. Marshal’s Office for booking and DNA samples, that he would be returning to his home in Rockport, which is currently on the market as partial restitution for his crime.

Working over the winter, Federal Bureau of Investigations and Internal Revenue Service investigators determined that over the last five years alone, Brace moved between $176,000 to $334,800 per year into his own bank account, money that had been intended for UMCC. In total, he moved more than $4.6 million over 16 years into his account. The IRS is limited to its own statute of limitations, so did not go back in forensics earlier than 2008.

“Do you understand the charges?” asked U.S. District Court Judge George Singal, who presided over Courtroom C, on the third floor of the Portland federal courthouse.

It was a windowless room, somber in shades of blue. The contingent of attorneys were likewise in their dark blue summer suits. Even Brace, formerly a familiar sight around Camden in his obligatory Dartmouth-green jacket, was Friday morning in blue.

In the matter of 45 minutes, Brace had answered affirmatively to a series of questions from the judge — “yes” he wanted to waive a right to a trial, “yes” he was ready for his arraignment.

“I’m guilty,” said the 81-year-old.

Behind him, his wife, Becky Brace, sat ready to assist, helping him, at one point, to lift his arm into his jacket in the air-conditioned room. He turned toward her periodically through the hearing, and occasionally glanced around the room, toward the assembled media.

To his left, his attorney, Peter DeTroy, of the Portland firm Norman Hanson and DeTroy, clarified for Brace questions the judge was asking, when Brace’s hearing failed.

“Do I need to stand?” asked Brace.

“You do not,” said DeTroy.

Brace had aged dramatically since September 2014, when United Mid-Coast Charities president Steve Crane initially confronted him about taking money that was intended for the charitable nonprofit. UMCC collects donations, directly or through payroll deductions, and distributes them to dozens of nonprofits that benefit the elderly and infirm, and the abused, as well as educational organizations that serve the residents of Knox and Waldo counties, and beyond.

That was a month after Brace had stepped down from his role as president of UMCC, an occasion marked by much fanfare and local official lauding of his tenure. Brace had, for decades, constructed a persona recognized for philanthropic service. In 2005, he was named Camden’s townsperson of the year. In 2012, he was quoted in this PenBayPilot.com story: “Let me tell you, it is a challenge to raise funds," said Rusty, who has presided at the helm of UMMC since 1977. "I get motivated to raise money for these 52 agencies. I do it knowing how thoroughly we are satisfied that the assistance is going to the people who need it."

Now, Brace stands disgraced in a community that prides itself on nonprofit giving. 

And today, he stood before a federal judge admitting to fraud.

Brace had been transported May 29 from Rockport to the Portland courthouse by his wife, the only one to help him out of his Mercury Mountaineer, into a borrowed wheelchair and through the handicapped entrance of the courthouse.

Brace told the judge that he had undergone knee surgeries over the last six months, and that the “recovery from the replacements has been slow so I have been under the care of a doctor.”

Singal, in his formal attempt to discover whether Brace was of sound mind, asked him if he suffered emotional problems.

“No, I don’t think so,” said Brace.

The judge also asked him about the 14 medications he was taking. And he asked Brace if he understood the possible penalties after reading them to him.

“Yes,” said Brace.

The charges levied by U.S. District Attorney Clark resulted from a five-year pattern of not reporting business transactions that involved depositing, without authorization, UMCC checks into an account at The First, and using the funds to pay personal expenses for his benefit.

See the attached PDF for the complete court filing by the U.S. District Attorney

“Between about July 1999 and Sept. 25, 2014.... Russell Brace, aka “Rusty,” devised a scheme for obtaining about $4.646.636.45 by means of false and fraudulent pretenses, representations, and promises, and omissions of material fact, namely, that monies donated to United Mid-Coast Charities, Inc., would be used for UMCC’s charitable purposes and not diverted for the defendant’s personal expenses or benefits,” wrote U.S. Assistant District Donald Clark, in his prosecutorial statement to the court.

According to the court filing, Brace opened a bank account on or before 1999 in the name of Brace Management Group, Inc., dba “UCRC Charitable Fund,” at The First. Meanwhile, UMCC already had bank accounts at Camden National, Machias Savings and Bangor Savings banks.

The First bank account was not associated with UMCC, and Brace was the only signor on the account. The First statements were mailed to a Camden Post Office box or Rockport Post Office box, as controlled by Brace, the U.S. District Attorney said.

Last September, UMCC learned that three donation checks totaling $75,000 from a charitable foundation to UMCC had not been deposited into a UMCC bank account; instead, they had been deposited into Brace’s account at The First.

“On Sept. 22, 2014, UMCC contacted The First bank to discuss the missing funds,” Clark wrote. “As a result of the inquiry, The First bank issued a check for $75,000 to UMCC in order to cover the UMCC loss. The deposit of UMCC checks into The First bank account affected The First bank and exposed it to a risk of loss or civil liability.”

FBI and IRS forensics further discovered that between July 1999 and September 2014, Brace had deposited $3.8 million, at least, into his The First bank account.

The investigators ultimately determined he had deposited 377 checks, totaling $4.64 million, into his account.

IRS investigators also determined he failed to report income, and by his fraudulent scheme, obtained $305,500 in 2008; $335,452 in 2009; $303,000 in 2010; $227,100 in 2011; and $202,000 in 2012.

“Evidence of willfulness by the defendant includes a five-year pattern of understating taxable income, a failure to report illegal income, and the defendant’s direct involvement in preparing, signing and filing the income tax returns,” Clark wrote. 

Related stories

• Attorney says Rusty Brace to plead guilty May 29 in federal court on three criminal counts

• Rusty Brace admits to breach of duty, fraud and conversion of money in UMCC's civil suit

• Federal investigations of Rusty Brace inch closer to closure; lawyers anticipate movement on civil case

• 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

• Camden business files suit against Rusty Brace; UMCC will be stronger, more transparent, board president says

• Camden’s UMCC files suit against Rusty Brace, wants $3.8 million returned

• Camden’s United Mid-Coast Charities embezzlement investigation underway, says president 

• Making music for charity: 'Nobody made a greater mistake than he who did nothing because he could do only a little'

Editorial Director Lynda Clancy can be reached at lyndaclancy@penbaypilot.com; 207-706-6657.