The ringleader of a scheme that defrauded an Indianapolis investor out of $1.7 million has pleaded guilty to 20 counts of wire fraud and money laundering, U.S. Attorney Joseph H. Hogsett announced Thursday afternoon.
The guilty plea of Michael Russell, 54, stems from a December 2011 federal indictment alleging that he and two associates persuaded an Indiana physician to invest the money in their foundation and an ethanol-production business they said would fund it, but instead spent the money on personal luxuries.
Russell could be sentenced to between 57 and 71 months in prison, according to federal sentencing guidelines. Unlike state prisoners, federal inmates must serve 85 percent of their sentences, meaning Russell likely would serve between four and five years.
“Mr. Russell, today in federal court, admitted that [the foundation] had one and only one true purpose—to line the pockets of Mr. Russell and his friends,” Hogsett said at a Thursday press conference.
Russell's associates, Paul C. Bateman, a former City-County councilor, and Manuel Gonzalez, have not pleaded guilty to their charges and are set to go to trial Feb. 11.
Bateman, 58, faces eight counts of wire fraud and 10 counts of money laundering, and Gonzalez, 53, three counts of wire fraud and two counts of money laundering.
According to the indictment, Russell—also known as Rev. Michael L. Russell—co-founded The Russell Foundation in 2003 with the mission to “enhance society through compassionate concerns for the spiritual, moral and ethical fibers of the community.” He served as CEO, while Bateman served as chief administrative officer and chief corporate officer. Gonzalez held various other positions.
Russell proposed that the foundation fund itself through the production and distribution of ethanol, according to the indictment. In January 2007, he approached the physician, identified in court documents as “A.S.,” during a medical appointment about making an investment in an entity later established as Indiana Ethanol Capital Investments LLC. Russell, Bateman and Gonzalez attended several meetings with the doctor at a Denny's restaurant to further sell him on the investment.
Russell told the physician that the ethanol operation could reap an $18.5 million return on a $600,000 investment, and that he would be the last of 12 people to invest in it. In fact, the doctor was the only investor.
Between February 2007 and April 2007, according to court documents, Bateman picked up five checks for the ethanol investment totaling $702,000, most of which was deposited into Bateman’s personal account. The remainder was put into The Russell Foundation account, and later was transferred between that account and Bateman’s personal account.
All but $30,000 of the money was spent on items such as custom clothing, home furnishings, entertainment and “elaborate security details” that included members of the Indianapolis Metropolitan Police Department, the indictment said.
In that same month, Russell also solicited the doctor to purchase a corporate cash bond of $1 million issued by The Russell Foundation. He pledged a return of $600,000. Russell also falsely told him that the foundation already had raised $3 million.
Hogsett said Thursday that the trio spent more than $1 million in the span of just 33 days.