United States Attorney Jenny A. Durkan
Western District of Washington
Former Lakewood Stockbroker Sentenced To Prison For Wire Fraud And Filing A False Tax Return
A former Lakewood, Washington stockbroker who now lives in Aspen, Colorado, was sentenced today in U.S. District Court in Tacoma to five years in prison and three years of supervised release for wire fraud and filing a false tax return. MICHAEL D. MONTGOMERY, 44, was a licensed stockbroker and investment advisor in the Tacoma, Washington area until 2009, when the Washington State Department of Financial Institutions revoked his registration as a securities dealer for unethical conduct. MONTGOMERY stole more than one million dollars from an elderly client and his heirs. At sentencing Judge Robert J. Bryan said that there was a “high probability that MONTGOMERY stole from his victims for 7 years, beginning in 2001.” The amount of restitution MONTGOMERY will be required to make will be determined at a hearing on January 25, 2013.
MONTGOMERY pleaded guilty in June 2012. According to the plea agreement MONTGOMERY was first an investment advisor for an elderly man residing in the Tacoma area, and later became the trustee of the man’s revocable living trust. MONTGOMERY also had power of attorney for the victim. Over the years 2003 through 2007, MONTGOMERY misappropriated, by deceit and fraud, a substantial amount of money from the elderly man’s bank and investment accounts. From 2005 through 2007, MONTGOMERY caused $654,600 to be sent by wire from his client’s Charles Schwab account to his client’s Key Bank account. Then MONTGOMERY took the money and used it for his own benefit. From January 2004 and July 16, 2006, MONTGOMERY wrote $598,916 in checks to himself from his client’s accounts, purportedly for services to his client. Following the client’s death on July 18, 2006, MONTGOMERY wrote an additional $243,745 in checks to himself from the client’s estate, purportedly for “estate services.” However, MONTGOMERY never provided the victim’s family with any accounting of what these services entailed. MONTGOMERY also failed to report any of the income on his federal income tax returns. Judge Bryan added a special condition of supervised release that MONTGOMERY must file all necessary tax returns with the IRS.
MONTGOMERY’s theft devastated the client’s heirs leaving them with little while MONTGOMERY continued to live a high flying lifestyle in Aspen, Colorado training to be an elite triathlete. “In the years since he was caught and exposed, he has paid nothing in restitution, and offered nothing to the victims. He has continued to pursue his hobbies, but found no time to earn a dollar for his victims. MONTGOMERY is nonchalant about his fraud, displaying a slick indifference for what he has done. In fact, he is arrogant and shameless,” prosecutors wrote in their sentencing memo.
MONTGOMERY testified at his sentencing and admitted that he had stolen from his deceased client and the client’s heirs. He admitted that he had billed the client’s estate for such things as driving his client’s truck and visiting his client at a nursing home. On cross examination, MONTGOMERY admitted that he had lied during a deposition taken by the Washington State Department of Financial Institutions.
“When you entrust your hard-earned money to a “Money Manager” you understand there are risks in the investment markets, but you don’t expect that your advisor will use your money as their personal slush fund,” said Kenneth J. Hines, Special Agent in Charge of IRS Criminal Investigation in Seattle. "This sentencing should serve as a warning to professionals managing others’ money that taking advantage of elderly clients carries severe consequences.”
At sentencing, Judge Bryan said that MONTGOMERY’s “was not an ordinary fraud, but a course of criminal conduct that made this the most serious of frauds.” In arriving at the sentence of five years, Judge Bryan also noted that “the public still needs some protection from Mr. Montgomery.” At the end of the sentencing hearing, MONTGOMERY was remanded into the custody of the United States Marshals. In response to MONTGOMERY’s failure to pay a single dollar of restitution, Judge Bryan noted, “true remorse begins with atonement.”
The case was investigated by the Internal Revenue Service Criminal Investigation (IRS-CI) and the Washington State Department of Financial Institutions. The case is being prosecuted by Assistant United States Attorneys David Reese Jennings and Justin Arnold.