Tuesday, June 7, 2016

Amish Madoff

By Greg Wright
MBA, CFE, CFP®, CLU, ChFC
Certified Fraud Examiner
Certified Financial Planner™

Amish man on cell phone
Every day between 50 and 100 Amish readers visits a blog article I publishes last December.  “Amish on Amish Fraud” has had thousands of visits and 150 have added written comments.  The latest arrived today.  Most are written in the very early morning while most of the English (non-Amish) community is still in bed. 

Last November, Goshen Indiana resident, Earl Miller, was accused in a Federal lawsuit of securities fraud and cheating 70 mostly Amish Indiana investors out of $3.9 million.  He is alleged to have sold them promissory notes with a fixed-rate annual return of between 8 to 12 percent. 

Many of Miller’s investors belonged to a Northern Indiana Amish community where Miller and his wife were former members. He advertised his investment services in Amish newspapers, including The People’s Exchange, and at community meetings with Amish families, according to the Federal complaint.

The Federal lawsuit accuses Miller, 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 asserted his Fifth Amendment right against self-incrimination and refused to answer the SEC’s questions about his companies, according to court papers.  Also, according to comments made on my blog, Miller has filed for bankruptcy protection and moved to Colorado.  

How do they send email?  Amish are known to reject telephones in the home.  Yet, in recent years, the image of an Amish farmer speaking on a cellphone is increasingly common.  Amish churches regulate the use of technology through a set of guidelines known as the Ordnung.  My Amish friends guess that about 50% or more Amish have smartphones which also access the internet. Only a few pockets of their church districts do not allow this form of technology. 

Technology is not the only thing that apparently recently changed in Amish land. 

Monroe Beachy
In 2012, an Ohio Amish man, Monroe Beachy, was sentenced to prison for fraud.  Investors in Beachy’s investment fund lost $17 million, and the U.S. Attorney described it as “fraud on a massive scale.”

Beachy, age 78 at the time, pled guilty to defrauding hundreds of clients and requested to serve his sentence at home, but this was rejected, and the judge sent him to prison. Included among his victims were widows and retirees, children, a Mennonite church, a school fund, and the Amish Helping Fund. Beachy was the Helping Fund’s treasurer.

Beachy assured the investors their money was safe and sent them hand-written monthly statements that showed stable accounts and high interest earned, according to prosecutors. However, his investments actually were crashing in value, and by 1998 he had lost millions in risky stocks, mutual funds, and junk bonds.

The judge questioned Beachy during the hour-long hearing, asking why he had not simply informed his clients that he lost their investments, and avoided committing the crime of fraud.
Beachy told the judge he has confessed his sins to God and his church, and he sent letters to every investor seeking their forgiveness. Only two wrote back asking the judge to sentence Beachy to prison. The others said it was more important for them to forgive Beachy than to recover their lost money.

The Amish community wished to handle the matter themselves.They probably would have, had Beachy not first filed a bankruptcy claim.   An Amish committee made a special request to the court that they are allowed to deal with the matter themselves, but it was rejected.

Sometimes the Amish prefer handling transgressions internally.  However, the bankruptcy filing caused the matter to go ahead in a non-Amish court of law thus precluded an Amish sorting-out.  At the time, even though many people lost much money, many in that Ohio community considered it to be something that Amish could forgive.  

John Sensenig
Another Amish fraud case in 2010 involved a man named John Sensenig, a horse-and-buggy Mennonite living in Lancaster County, Pennsylvania.  Sensenig’s $90 million investment scheme involved investors drawn largely from the Amish & Mennonite community – this was nearly five times the size of Beachy’s scheme.

The SEC resolved the Sensenig case and settled for $131,500, which was, according to published reports, “about all he has left”, and he agreed to take no part in future financial offerings.

Interestingly, Sensenig was never the subject of a criminal case, and appeared to benefit from long-standing traits unique to that tight-knit, turn-the-other-cheek world of the Amish and Old Order Mennonites: Trust your brethren. Resist outside influences. Be forgiving.”

Earl Miller
Beachy’s big mistake was filing for bankruptcy or he probably would not have been sent to jail.  He will be released in a few months from Morgantown Minimum Security Prison in West Virginia. John Sensenig remains in the Mennonite community, working as a welder and attending church regularly. Earl Miller is hunkered down in Colorado not answering the phone.   

3 comments:

  1. We will See if Earl Miller comes to town by the end of June for a another chapter 11 meeting to talk to investors and answer questions.Stay tuned !

    ReplyDelete
  2. Please post the date and time of the June chapter 11 meeting.

    ReplyDelete
  3. Previous posted testimony states that large checks were written to Z Ministries.
    What was Z Ministries' role in Five Star, if any ?
    Will Z Ministries be required to disgorge funds derived from ill-gotten gains ?

    ReplyDelete