Federal prosecutors are asking that a former lawyer with the now-defunct law firm of LeClairRyan, who misappropriated $4 million, be sentenced to nearly four years in prison and fined $250,000 for obstructing an official proceeding.
In papers filed Monday, lawyers for Bruce H. Matson, a once high-profile bankruptcy lawyer, are asking for a term of slightly more than three years, citing Matson’s lack of a prior record, his repayment of the money, his work as a law school professor and Sunday school teacher, community service and other mitigating factors.
Matson, 64, pleaded guilty to the charge in July and is set to be sentenced Nov. 22 by U.S. District Judge John A. Gibney Jr. He faces a maximum of five years in prison. However, federal sentencing guidelines — not binding on Gibney — call for a term of 37 to 46 months.
While recognizing that Matson has repaid the money, a sentencing memorandum filed by the U.S. attorney’s office asks Gibney to impose a term at the top end of the guidelines.
Prosecutors wrote that the crime “stemmed from the defendant’s furious but ultimately unsuccessful attempts to conceal a course of criminal conduct that spanned from 2015 to 2019, during which time the defendant used his position as a court-appointed fiduciary to embezzle, misappropriate, and dissipate more than $4,000,000 from the bankruptcy trust he had been entrusted with.”
Matson’s lawyers conceded that his conduct “was and is inexcusable. Nothing he has done or will do going forward can ever change that fact, and we do not endeavor to suggest otherwise.”
But, they added, “Mr. Matson took immediate steps to atone for his misconduct. He voluntarily resigned from the bar ... he directed [his lawyers] to disclose critical information about his conduct that was not then known to the government, to cooperate fully, and eventually to negotiate a resolution with the Office of the U.S. Attorney. During that process, and beginning prior to pleading guilty, Mr. Matson worked with the government to make certain that all restitution was made.”
“While his extraordinary efforts to pay restitution do not excuse his conduct or lessen the seriousness of the offense, they present a substantial mitigating factor that the Court should consider,” his lawyers wrote.
Court records show that in 2019, Matson made false statements concerning allegations that he misappropriated funds as a court-appointed trustee in the bankruptcy of LandAmerica Financial Group. A federal investigation found instances of Matson’s embezzlement from the LandAmerica Trust between 2015 and 2018, totaling approximately $800,000 in misappropriated funds, prosecutors said.
LandAmerica, a Henrico County-based title insurance company that was one of the largest in the U.S., filed for Chapter 11 bankruptcy protection in 2008. In 2009, Matson was appointed the liquidation trustee by the U.S. Bankruptcy Court for the LandAmerica Financial Group Liquidation Trust. Then in 2015, Matson was appointed to serve as the fiduciary of the wind-down funds.
His law license was revoked by the Virginia State Bar last year after he admitted disbursing more than $2.8 million in wind-down money in 2019 to himself and another lawyer that was not to be disbursed until this year.
Aware that scrutiny would expose his criminal conduct, prosecutors said, Matson engaged in obstructive conduct to conceal his misdeeds that included: “filing letters with the Bankruptcy Court that contained deliberate misrepresentations; attempting to mislead and/or pressure other individuals; making misrepresentations to the U.S. Trustee’s Office; and appearing before the Bankruptcy Court to personally deliver additional misrepresentations to the Court.”
They complained to Gibney that, “Over the course of a four-year period, the defendant designed and executed a multi-step and multifaceted scheme to defraud the LFG Liquidation Trust of as much money as possible ... diverting the bulk of those siphoned-off or embezzled funds into bank accounts that he controlled; transferring some to his associates; and directing the remainder to his law firm to settle a personal debt.
“The defendant used different methods to complete his draining of the Trust account — embezzling some funds by re-directing checks intended for the Trust, drawing duplicative payments from the Trust, and depleting the Trust’s wind down budget with payments to himself and others,” the U.S. attorney’s office wrote.
Investigation also uncovered an unrelated case of Matson embezzling $23,000 in 2016 from the estate of Forefront Capital, a defunct futures broker for which he served as receiver and debtor-designee, the government said.
Matson’s lawyers said that from 2015 to 2019, when LeClairRyan failed, Matson’s life was under a great deal of personal and professional turmoil and that he acknowledges and accepts responsibility for all he has done.
“Despite significant wrongdoing, Mr. Matson did not use the money to fund a lavish lifestyle. He promptly repaid the bulk of the funds and has since worked with the government and the successor trustee to ensure full payment of all remaining restitution,” they wrote.
In asking for a 37-month sentence, his lawyers told Gibney that Matson “has had a tremendous fall from grace. He was once a successful, widely respected bankruptcy attorney of more than 30 years. He was an elder and leader of his church and was deeply involved in the community.
“At the age of 64, this matter represents his first and only contact with the criminal justice system and he has led an otherwise law-abiding life. He has been disbarred and has tarnished his once-stellar reputation in the community,” they said. “He stands before the Court not only humiliated and ashamed but with steadfast contrition.”