CAMDEN — While United Mid-Coast Charities works to separate from its recent dark history, the federal investigations into alleged fraud by Rusty Brace, of Rockport, are said to be winding down, with a possible indictment in the next several weeks. The civil case in Knox County Superior Court against Brace, alleging he diverted approximately $3.8 million in charity funds, might see new developments by the end of this week, Brace’s attorney said.

If it is true that Brace diverted $3.8 million over a span of 13 years from the charity nonprofit over which he once presided, then his actions would rank as one of the biggest charity embezzlements in the country’s history, said Portland Attorney Jay McCloskey, who is representing UMCC in Knox County Superior Court. 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 March 24 that UMCC has a good chance of recovering a substantial portion of its money.

“I am hoping we get a fair amount back,” he said. That money would derive from the sale of Brace’s four real estate parcels: homes in Rockport, Washington and Rangeley, and the downtown Camden Brace Building, a four-story office building on the corner of Elm and Mechanic streets.

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, but anticipated another two to three weeks.

“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.

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

Related stories

• 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 

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