Michigan Men Who Urged Victims Not To Cooperate With FBI Sentenced To Prison In Oil-And-Gas Ponzi Scheme

Two Michigan brothers who urged investors in their oil-and-gas Ponzi scheme not to cooperate with the FBI have been sentenced to prison.

Eric Riley Merkle, 55, and Jay Vernon Merkle, 53, both of Williamston, Mich., were sentenced to 10 years in federal prison for conspiracy, securities fraud, mail fraud and wire fraud. They also were ordered to pay their victims nearly $21.6 million in restitution.

U.S. District Judge Robert Holmes Bell said the crime was deplorable because the Merkles traded on faith to recruit church members into their scheme.

Prosecutors said they created a firm known as Platinum Business Industries (PBI), telling investors PBI would use their money to fund oil and gas exploration in Oklahoma. The company advertised returns of 6 percent a month or 300 percent over three to five years.

Despite their claims that the money would be invested in oil and gas exploration, the Merkles instead “put the investors’ money in high-risk schemes unrelated to oil and gas in the United States and overseas, and lost it,” prosecutors said.

A substantial amount of the funds was used “to pay off their previous investors in another oil-and-gas Ponzi scheme involving more than a dozen fraudulent shell corporations,” prosecutors said. “The Merkles perpetuated the illusion that their sham corporations were profitable by using new investors’ funds to pay ‘earnings’ to earlier investors.”

The scheme ensnared more than 600 victims, many of whom lost their life savings, prosecutors said.

Even after state and federal investigators opened a probe into the business affairs of the brothers, the Merkles “continued to raise money under false pretenses,” prosecutors said.

The brothers then blamed the government for their predicament, lying to investors by telling them their money “was being ‘held up’ by U.S. and foreign government agencies,” prosecutors said.

That’s when an already-underhanded scheme turned took a turn for the worse, with the Merkles instructing investors to “wire a total of over $1 million to Nigeria, Ghana, and other countries for ‘fees’ associated with releasing their money,” prosecutors said.

Investors then were urged not to cooperate with the FBI, with the Merkles “suggesting that such cooperation would jeopardize their repayment,” prosecutors said.

“Judge Bell noted that the crime was especially serious in that the Merkle brothers abused their affinity with church members and extended family to gain their confidence,” prosecutors said.

U.S. Attorney Donald A. Davis said the FBI and the U.S. Postal Inspection Service played important roles in the case.