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Tag: U.S. Postal Inspection Service

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

    ponziblotterTwo 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.

  • Richard M. Harkless, Ponzi Scheme Figure, Sentenced To 100 Years In Prison; Judge Says He Showed No Remorse

    A California man convicted of wire fraud, mail fraud and money-laundering in a $60 million Ponzi scheme has been sentenced to 100 years in prison and ordered to pay nearly $35.5 million in restitution.

    Separately, Richard M. Harkless was ordered to pay $42 million in disgorgement, prejudgment interest and civil penalties in a case brought by the SEC. Three accomplices were ordered to pay assessments totaling $28 million and sentenced to a combined total of up to 18 years in prison.

    The scheme featured payouts to whet the appetites of investors, a program designed to encourage them to “roll over” money to keep it in the system and appeals to get family members and friends involved, prosecutors said.

    Dozens of victims wrote to the judge, requesting a harsh sentence. One of the victims in the case was a 79-year-man who lost $85,000 and now depends on help from a church and a senior center that serves free meals to get by.

    Harkless’ 100-year sentence is believed to be the longest sentence for a white-collar crime ever handed down in the Central District of California, and the judge minced no words in condemning the scheme

    U.S. District Judge Virginia A. Phillips said Harkless had shown no remorse for his crimes, pointing out that he had taken advantage of vulnerable people, some of whom lost their retirement savings and college funds.

    Harkless, 65, caused “every kind of grief and loss imaginable” and demonstrated he “would commit his crimes all over again if given the chance,” Phillips said.

    Harkless operated the MX Factors Ponzi scheme earlier this decade. Prosecutors said he began to hide money offshore when the scheme was on the verge of discovery by authorities.

    “As the scheme began to collapse [in 2004], Harkless diverted millions of dollars of investor money to Belize and Mexico,” said the office of Acting U.S. Attorney George S. Cardona. “In the final months of the scheme, once Harkless knew that he was under investigation by various state regulators, he accelerated his fundraising and accelerated the transfer of funds to his own accounts in Belize.”

    Harkless then fled to Mexico, prosecutors said. He tried to slip back into the United States in 2007, but was arrested by IRS special agents in Phoenix.

    The case featured the combined investigative tools of the Justice Department, the IRS, the SEC, the U.S. Postal Inspection Service and the FBI.

    Harkless “skimmed investor funds to finance a Mexican crab fishing business, pay personal expenses, and fund overseas bank accounts,” the SEC said today, in announcing the sentence.

    Three Harkless accomplices also have been sentenced to federal prison.

    Daniel Berardi, Thomas Hawkesworth and Randall Harding pleaded guilty and received sentences of up to six years each.

    Berardi and Hawkesworth were ordered to pay more than $11 million in disgorgement, prejudgment interest and civil penalties. Harding was ordered to pay more than $17 million.

    Investors in what MX Factors positioned as a government-guaranteed loans program were promised returns of up to 14 percent every 60 to 90 days and encouraged to keep their money in the system by “roll over,” prosecutors said.

    “The vast majority of MX Factors investors were ‘reloaded,’ meaning that they were convinced to invest money more than once,” prosecutors said.

    Much of the evidence in the case would sound like a familiar refrain to readers of autosurf Ponzi boards and surf promoters, although MX Factors was not an autosurf.

    “[S]everal victims testified that Harkless and his co-conspirators encouraged potential investors to try out the MX Factors program, investing in one 60- or 90-day cycle and then withdrawing their money to see if it worked,” prosecutors said.

    “Once victims felt more comfortable with the program, Harkless and his co-conspirators encouraged them to invest even more and to get their families and friends to invest as well,” prosecutors said.