Ex-LeClairRyan CLO pleads guilty to obstruction of bankruptcy embezzlement probe – Reuters

  • Former LeClairRyan CLO could face five years in prison
  • Prosecutors say he nabbed $4 million in bankruptcy assets

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(Reuters) – A former lawyer and bankruptcy trustee has pleaded guilty to obstructing federal officials’ investigation into his alleged misconduct that allowed him to obtain more than $4 million in bankruptcy-related assets.

Bruce Matson, 64, entered his guilty plea on Thursday, according to a statement from Acting U.S. Attorney for the Eastern District of Virginia Raj Parekh. Prosecutors say Matson, the former chief legal officer of now-defunct law firm, LeClairRyan, lied to the U.S. Department of Justice’s bankruptcy watchdog, the U.S. Trustee, in 2019 when the office conducted a probe into allegations that he misappropriated funds as the court-appointed trustee for LandAmerica Financial Group in its bankruptcy.

“Matson abused his position as an attorney, officer of the court, and bankruptcy trustee to enrich himself at the expense of the people whose very interest the court appointed him to protect,” Parekh said in the statement.

A lawyer for Matson, Brandon Santos of McGuireWoods, did not immediately respond to a request for comment. Matson’s sentencing is set for Nov. 22. He faces a maximum of five years in prison.

LandAmerica, once one of the largest title insurance groups in the U.S., filed for bankruptcy in 2008 in the U.S. Bankruptcy Court for the Eastern District of Virginia. Several of its units were eventually acquired by Fidelity National Financial. A trust was set up to liquidate remaining assets.

Matson, through his role as the liquidation trustee, embezzled approximately $800,000 from the trust between 2015 and 2018, according to court papers.

Additionally, prosecutors say Matson misrepresented the amount of funds needed to wind down LFG and hid the amount of money that was actually in the trust’s accounts. He also added language to the budget the night before it was submitted to the bankruptcy court that appeared to give him authority to pay discretionary bonuses using residual funds, prosecutors say. He ultimately swiped more than $3.2 million for himself and others and depleted the trust two years before the end of the wind-down process, they said.

When questioned by the U.S. Trustee about the depleted trust funds, Matson said the money was in escrow and that he moved the funds because of high bank fees and tax identification issues, according to court papers.

Matson also embezzled around $23,000 in 2016 from Forefront Capital, for which he served as receiver, prosecutors said.

Matson agreed to be disbarred in November.

He had been chief legal officer at Richmond, Virginia-headquartered LeClairRyan, which entered into a joint venture with alternative legal services provider UnitedLex in 2018 amid sagging revenues as dozens of lawyers left the firm. In September 2019 the firm filed for Chapter 11 protection, saying it could not withstand the departures.

The case is USA v Matson, U.S. District Court for the Eastern District of Virginia, No. 21-cr-00079.

For Parekh: Assistant U.S. Attorneys Katherine Lee Martin and Kevin Elliker

For Matson: Danny Onorato of Schertler Onorato Mead & Sears and Brandon Santos of McGuireWoods

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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