Matthew D. Hutcheson, who faces charges of allegedly diverting money from plan clients, was hired last year by the California State Teachers' Retirement System.
CalSTRS — the third-largest plan sponsor in the nation, with $139.5 billion in assets, according to sister publication Pensions & Investments — executed a contract with him last June.
The fund's executives hired the high-profile 401(k) fiduciary advocate to provide an online process for vetting and screening advisers who wanted to work with school employees in California, CalSTRS spokesman Ricardo Duran said.
The retirement system terminated the contract just four months later, citing Mr. Hutcheson's “failure to perform the services under the agreement,” Mr. Duran said.
But according to an e-mail from Mr. Hutcheson's attorney, Dennis Charney, the adviser was unable to perform the services “due to the theft of intellectual property necessary to complete the tasks set forth in the contract. That matter will be addressed in court at a later date.”
CalSTRS didn't pay the fiduciary and doesn't have any connection to the allegations that the U.S. Attorney's Office in Boise, Idaho, has filed against Mr. Hutcheson, Mr. Duran said.
Both the Labor Department and its Employee Benefits Security Administration were involved in the investigation that ultimately led to Mr. Hutcheson's arrest this month.
Aside from allegedly using plan assets for personal purchases, federal prosecutors say that he also used plan dollars to acquire a golf course and ski lodge at the Tamarack Resort in Idaho.
Federal authorities are seeking $5.3 million in forfeitures from Mr. Hutcheson. The plan adviser, who has appeared before Congress to advocate the fiduciary standard, has pleaded not guilty to the federal charges and awaits a June 12 trial.
“One branch [of the case] alleges Matt used investor funds for personal ex-penses,” Mr. Charney said. “That allegation is denied in its entirety.”
The other branch alleges that Mr. Hutcheson used plan dollars to invest in the golf course, Mr. Charney said.
“Under [the Employee Retirement Income Security Act of 1974, Mr. Hutcheson] had full discretion to do so,” Mr. Charney said. “Thus, this activity was not criminal in nature, and we intend to fully defend all the allegations in court.”
dmercado@investmentnews.com
