An alleged Ponzi scheme involving the Amish community is being called a “landmark” case of fraud—not for the dollar amounts, but because of the number of victims involved.
The case, which began in 2015, came to light when Amish investors received notices from 5-Star Enterprises, informing them that bankruptcy was a possibility, according to the Washington Times Herald.
“They had been promised double-digit returns and instead they received a letter saying there were issues,” attorney Grant Swartzentruber, who now is chairman of the Creditors’ Committee in the bankruptcy case, told the paper. “They were going to have to re-organize and they hoped they could make that payment. They made no more payments after that and wound up filing bankruptcy.”
The ensuing proceedings uncovered a massive fraud involving millions of dollars involving Amish communities in Indiana, Michigan, Ohio and Pennsylvania.
One of their own
“According to the bankruptcy documents, the chief fundraiser was Earl Miller, a man who was formerly Amish and still had connections into the Amish community in northern Indiana,” the Times Herald says. “Miller eventually took over the entire company.”
Miller advertised in Amish papers, and during subsequent meetings, would convince people to use their 401K and IRA accounts as investments in 5-Star.
“The marketing campaign was directed almost exclusively to Amish and between 2009 and 2012, netted $12.1 million. A separate campaign in 2013 raised $13.6 million. In total, the court found 5-Star took in $54.5 million from investors and paid out $17.5 million.”
“A number of folks in Daviess County fell victim to this scheme,” Swartzentruber said. “In some ways, there are elements of a Ponzi scheme where later investors were paying folks who got in earlier. There was no growth to it. It was get more investors in to pay off those you had previously agreed to pay.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
