By Greg Wright
MBA, CFE, CFP®, CLU, ChFC
Certified Fraud Examiner
Certified Financial Planner™
Amish turned securities promoter bilks Amish investors.
On Nov. 5, 2015, a Federal Complaint accused, Earl D. Miller, a northern Indiana man, of securities fraud accusing him of cheating 70 mostly Amish investors of $3.9 million. Miller promised to invest their money in rehabilitating residential property, “green” technology and gave them a promissory note with a fixed-rate annual return of between 8 to 12 percent.
Many of the investors – largely novice investors -- belonged to a local Amish community where Miller and his wife were former members. He advertised his investment services in Amish newspapers and at community meetings with Amish families, according to the Federal complaint.
The Federal lawsuit accuses Miller, age 36, of committing a fraudulent scheme through two investment vehicles — 5 Star Commercial LLC and 5 Star Capital LLC. In the suit, the government said, “Miller repeatedly lied to prospective investors” about how their money was being used.”
Miller, who has been in the real estate business since 2006 with real estate agent and “life-long friend,” Matt Gingerich, started rehabilitating depressed real estate properties. Together they formed 5 Star Commercial LLC and, in April 2014 they filed an SEC Form D notice of the intent of selling “exempt’ securities. Then, according to court documents, Miller bought out his business partner in exchange for $651,265 cash.
A former business partner, life-long friend and apparently former Amish community member, Matt Gingerich, was not named in either the Nov. 5, 2015, SEC Complaint or the April 2015 Indiana Securities Division Order of Consent. Mr. Gingerich has not returned my telephone calls attempting to hear his part of the story. Was he a whistleblower? Will the regulators attempt to “claw back” the $651,265 cash taken from 5 Star to buy out his interests?
In exchange for their investments, investors were given a promissory note with a fixed-rate of return of between 8 percent to 12 percent per year, which is much higher than prevailing rates for bank deposits and other fixed-return investments, according to the complaint.
Miller and his wife, according to local business client sources, left the Amish community on good terms and maintained ties with them. Since the Amish do not enter profession employment, they use outside accountants, attorneys and real estate agents to conduct business.
Miller touted his Amish upbringing, advertised in Amish newspapers and held seminars at Amish meeting houses. In 2012, Miller started raising money from 5 Star Commercial, gaining sole control of the entity two years later. In 2015, he created 5 Star Capital, which was supposed to invest in “green energy saving product (sic) that save the average American consumer hundreds of dollars each year,” according to the complaint.
|Miller's Goshen, IN Home|
Miller was highly successful in encouraging his investors, but, in doing so, the complaint states that he lied to them, saying he would not get paid anything for managing the fund.
He apparently had also told 5 Star Commercial investors that their money would be invested exclusively in real estate when, in reality, he transferred more than $390,000 of 5 Star Commercial’s funds into “highly speculative, fledgling companies” that allegedly made green products.
The company did invest in several companies controlled by two men who were supposedly developing products such as a pedal-operated wheelchair and energy-efficient washing machines. In reality, 5 Star Capital owned no “green product” patents and Miller performed virtually no due diligence into the purported “green” companies before handing them the bulk of 5 Star Capital’s assets, and – contrary to his oral representations to certain investors – the overwhelming majority of 5 Star Capital’s assets were not invested in real estate.
According to local sources, Miller was born and raised in an Amish community and, following the traditional Amish “rumspringa” period, he chose not to be baptized and join the church. Amish that later abandon the community after they have joined the church are banished or shunned. Since neither Miller nor his wife was banished, he was given broad access to the normally closed and suspicious community. It is believed that Miller’s business partner, Matt Gingeritch, had a similar background.
Affinity frauds are common; but, it is uncommon to find one in the Amish community. They are generally successful farmers and business owners. While about half of all business fail within five years, only about five percent of Amish business fail within the same period.
The People's Exchange newspaper is published every two weeks targeting the Amish community in northern Indiana. It is published by LaGwana Printing, Inc. and has a circulation of 16,500. The following email was received Dec 21, 2015:
We published no articles regarding either 5 Star Commercial or 5 Star Capital Fund. I do not know either of these two gentlemen personally.
They did run advertisements in our publication from October of 2009 through July of this year. They were always very prompt in paying for their advertising and are completely paid up.
PO Box 70, Shipshewana, IN 46565
MAY 24, 2016 UPDATE
Is Earl Miller, Mrs. Miller, Matt Gingerich, Mrs, Gingerich, Scott LaFazer, Karen LaFazre all pastors of Z Ministries? Can you name any other Z Ministries pastors?
According to sources, except for Gingerich, they all now live in Buena Vista, Colorado. Is this correct? Does the Gingerich family still live in Indiana?