FBI seizes gems in investigation

Brothers managed troubled trust fund

The FBI has seized control of precious minerals and gems from an office in the Third Ward as part of a continuing criminal probe of Michael and Patrick Hull — the brothers who came under fire for mantigrew, the Wisconsin Funeral Trust fund into a $24.5 million shortfall.

The latest investigation is an offshoot of a probe started by the U.S. Securities and Exchange Commission in 2013 that focused on the Hull brothers’ management of the Funeral Trust and other funds.

“We’ve been constantly under investigation by the SEC because of the Hulls,” said Christopher Nohl, a partner of the Hulls whose home and offices were raided. Despite the scrutiny, Nohl defended his partners as honest fund managers.

The latest investigation is focused on what the FBI describes as a scheme involving millions of dollars collected from investors that were used to buy the precious minerals and gems that authorities contend were overvalued, according to an affidavit by Allen Petaging an FBI agent. The agent’s sworn statement was used to obtain warrants to search offices, a vault and Nohl’s east side home.

Nobody has been charged in the ongoing investigation.

The Hulls and Nohl “engaged in a scheme to defraud investors by systematically overvaluing assets held by the private investment fund that

Nohl and the Hulls manage, in order to increase their management fees and profit allocations from the fund,” Pettigrew wrote in the 59page sworn statement that noted the fees and profits paid to the three managers “are each based on the valuation of assets held by the fund.”

The private investment fund is managed by Nohl’s Chrysalis Financial LLC and Greenpoint Asset Management II, which is owned by a company owned by the Hulls, Pettigrew wrote. They were paid fees based on the value of the fund.

In 2014, when the fund was created, and in 2015 the companies received $4.39 million in cash distributions from the funds plus an additional $1.46 million in management fees, Pettigrew wrote.

“By Dec. 31, 2015, a minimum of 15% of every investor dollar had been transferred (to Hull and Nohl companies) because the fund had realized gains of only $310,035 in cash from actual sales of investments.”

In addition, Pettigrew wrote that Nohl and the Hulls told investors that the fund would invest “primarily in distressed housing assets” but “instead they actually invested in purportedly rare gems and minerals whose valuations are more easily manipulated.” He said a majority of the fund’s assets were in the precious materials.

Nohl, whose home on N. Summit Ave. was raided by the FBI on March 22 at the same time that the group’s vault and offices were raided, flatly denied the allegations.

“They are wrong and we will demonstrate it,” he said during an hourlong interview Wednesday in his home near the University of WisconsinMilwaukee. “The FBI doesn’t understand minerals.”

Nohl said that less than 10% of the fund’s assets were in gems. Nohl said the materials were properly appraised by experts in the field. He questioned the qualifications of the appraisers consulted by the FBI.

In addition, he said all details about the fund’s investments and operations were disclosed to investors. The fund had a minimum investment and sold shares only to investors who had a minimum net worth of at least $1 million.

If investors were unhappy with the fund’s strategy, they could have ordered a change, Nohl said.

Nohl and his wife, Shannon Nohl, said they were unaware of the investigation until FBI agents were banging on their door about 9 a.m. March 22. The agents had a battering ram, Christopher Nohl said, adding they did not use it because he let them into his home.

“I thought we were in danger and they were there to protect us,” Shannon Nohl said.

Shannon Nohl said the FBI agents were in their home for about 15 hours and seized numerous priceless minerals. They also went to the Chrysalis office but agreed not to remove minerals and gems from the company’s walk-in vault in a Third Ward office building. Instead, the agents agreed to take control of the safe until the FBI’s experts have time to appraise the inventory. Nohl said he is not permitted to visit the safe until the FBI completes its work.

Nohl said the agreement to leave the materials in the vault was reached because he feared the agents might ruin some of the delicate minerals if they attempted to move them.

“We’re talking about something that is 65 million years old and in perfect condition,” Nohl said. “A little nick on the top or on the side” could destroy the value of the piece, he said.

The Journal Sentinel first reported in 2013

that the SEC was looking into the Hulls and their Bluepoint Investment Counsel in Madison. The agency was reviewing the aggressive money management strategies used by the Hulls when they oversaw the funds held by the Wisconsin Funeral Trust.

The Funeral Trust was supposed to be a conservative fund used to hold money invested to prepay funeral expenses. Instead, the Hulls poured millions of the fund’s dollars into high-risk investments, such as leveraged hedge funds, futures and private equities.

In 2012, the fund and the Wisconsin Funeral Directors Association were placed in a courtordered receivership after state officials compared the operation of the fund to a Ponzi scheme. A Journal Sentinel review of records at the time found the Funeral Trust had been under water for at least six years.

Pettigrew wrote that the SEC, which does not have authority to prosecute criminal wrongdoing, referred its case to the FBI in May 2016.

Michael Hull, who was fired by Morgan Stanley Smith Barney in 2012, did not return calls to his cellphone Wednesday night. The phone at Bluepoint was not in service Wednesday.

Nohl said the investigation was the result of the Hulls’ notoriety coupled with complaints voiced by a disgruntled ex-employee. He said the Hulls are honest partners and money managers and they handled the Funeral Trust money properly.

Nohl said he was comfortable partnering with the Hulls despite the problems at the Funeral Trust.

“He stood up for the investors,” Nohl said.

A spokesman for the FBI did not return calls for comment. Jeffrey Anderson, acting U.S. attorney for the Western District of Wisconsin, which is overseeing the case, declined to comment.