SEC: San Antonio lawyer used investment funds as 'piggy bank' to pay personal expenses, businesses
Photo of Patrick Danner
, Staff writer
Sep. 1, 2021
Updated: Sep. 1, 2021 5:32 p.m.
Federal securities regulators have accused a San Antonio lawyer and investment adviser of using money raised from investors as his own “piggy bank” to pay personal expenses and those of his businesses — including for a pinball manufacturer.
The Securities and Exchange Commission alleges Robert Jeffrey Mueller spent more than $1.5 million of investor money to pay for his second and third weddings, engagement rings and wedding bands for both wives, a divorce, vacation cruises, his daughter’s private school tuition and a condo in Hawaii.
Mueller and his Deeproot Funds “funneled more than $30 million” in investor funds to businesses he controlled, including Deeproot Pinball, the SEC says. The pinball company last year was developing its debut game, “Retro Atomic Zombie Adventureland.”
Mueller raised about $58 million from nearly 300 investors through Deeproot Funds over several years, the SEC alleges in a civil lawsuit filed in San Antonio federal court. The agency wants a court to order Mueller to turn over his allegedly ill-gotten gains.
Calls to Mueller, 46, and his attorney were not returned Wednesday.
Mueller asserted his Fifth Amendment right against self-incrimination when SEC counsel asked him about the use of assets of the funds he advised to pay personal expenses, according to the lawsuit.
The State Bar of Texas’ website shows Mueller has no disciplinary history and is eligible to practice law.
Mueller faces various securities fraud-related charges. The SEC seeks to prevent him from offering or selling securities and to prohibit him from serving as an officer or director of any securities issuer.
Mueller and Deeproot Funds were investment advisers to two pooled investment funds launched in 2014. They persuaded investors, many of them retirees, to cash out their annuities and individual retirement accounts to invest in the funds, the SEC’s lawsuit says.
Investors were told their funds would be invested in life insurance policies and Deeproot-related businesses to provide “relatively safe returns,” the complaint says. Mueller used a company called Policy Services Inc. to purchase life insurance policies for the funds. But the SEC says he used Policy Services’ bank accounts to pay personal expenses. Less than $10 million was spent on policies, the SEC adds.
The private placement memoranda given to investors “did not uniformly describe how the funds would invest in the Deeproot-affiliated businesses,” the suit says. A 2015 version of a PPM for one of the funds, though, described an investment in Deeproot Tech and its “sole project,” Deeproot Pinball, in exchange for Class B shares in the pinball company.
The lawsuit adds that the funds never actually received any ownership or other interests in return for the significant assets that went to the various Deeproot entities. Those Deeproot companies are listed as “relief defendants” in the lawsuit. Those companies are not accused of any wrongdoing, but their operations were funded with assets from the funds, the SEC says.
“Mueller falsely informed investors and prospective investors that Deeproot and Policy Services were structured to minimize the opportunity for very kind of fraud that was actually then occurring,” the SEC adds.
Since the first investors joined the funds in 2015, the SEC says, the various life insurance policies and Deeproot-affiliated business ventures yielded less than $1.9 million in revenue. Yet Mueller paid $2.8 million in monthly returns to certain investors.
Bank account records show that at least $820,000 in payments were made to some existing investors from money raised from new investor contributions to the funds in a “Ponzi-like scheme,” the SEC adds.
In an interview last year, Mueller said he chose San Antonio to launch Deeproot Pinball because he’d spent most of his life here and because the Texas economy is favorable for pinball manufacturing and development.