Mennonite Accountant Charged in $60 Million Ponzi Scheme

A Mennonite accountant in Pennsylvania has been charged by the US Justice Department and the SEC for swindling members of his own community by allegedly defrauding Amish and Mennonite investors out of about $60 million over nearly a decade.

The US Attorney’s Office for the Eastern District of Pennsylvania charged Philip Riehl, 68, of Bethel Township, Penn. with conspiracy, securities fraud, and wire fraud. The SEC charged him with violating the anti-fraud provisions of the Securities Exchange Act.

The alleged fraud targeted members of the Mennonite and Amish religious communities in Pennsylvania and is one of the largest alleged Ponzi schemes in the state’s history, according to the Justice Department.

Riehl provided accounting services and developed his own investment program, pooling money raised by selling promissory notes to community members. He said he would invest the funds in business and real estate loans to others in the religious community. According to the SEC’s complaint, Riehl falsely claimed he required two co-signers on every loan, and that he would personally guarantee repayment with interest.

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He offered and sold to his investors new notes issued by a struggling dairy creamery that he owned, and fraudulently solicited direct investments into the creamery. He promised to pay returns of 4.5% to 5% on the notes but failed to disclose to investors that the creamery was suffering financial troubles. The SEC said those problems were exacerbated when he increased the company’s debt load without a corresponding infusion of money into the business. The creamery ceased operations in September and filed for bankruptcy in December.

The SEC said the investors “are owed millions of dollars, with little chance of repayment.” In a letter to investors, Riehl apologized for his misconduct and said, “I am sorry for any form of dishonesty I am guilty of, and for my part in any false impressions.” He added that “this includes stating repeatedly that I require two signatures for each loan. This gave a false sense of security, in that such a considerable percentage of funds invested were channeled into my personal projects.”

According to the Justice Department, the allegations constitute what is known as “affinity fraud,” which typically involves investment scams that prey on members of identifiable groups, such as religious or ethnic communities.

“Riehl presented himself as a trusted member of their religious community, only to betray that trust and swindle them out of tens of millions of dollars,” US Attorney William McSwain said in a statement. “It is only natural for members of a tightly knit community to want to take care of one another, but Riehl did not care about anyone but himself.”

If convicted, Riehl faces a maximum sentence of 45 years in prison, a $5.5 million fine, a three-year term of supervised release, forfeiture, and mandatory restitution.

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Tags: Amish, Department of Justice, Fraud, Mennonite, Philip Riehl, Ponzi Scheme, SEC, William McSwain

Canadian defined benefit pension plans had a median return of 13.6% during 2019, thanks to a sharp increase in equity market returns in the latter part of the fourth quarter, according to data from the Northern Trust Canada Universe.

The median Canadian defined benefit plan generated a 1.9% return during the fourth quarter, which was up from 1.6% during the third quarter, despite geopolitical tensions. Northern Trust attributed the strong showing to favorable monetary policy, progress on US-China trade negotiations, and potential clarity on the path to a Brexit resolution.

“Despite a year plagued with negative headlines, fueled with uncertainty and low expectations, Canadian pension plans navigated through the turbulence and continued on a journey of positive returns” Arti Sharma, CEO of Northern Trust Canada, said in a statement. “Equity markets closed 2019 in a strong position, realizing solid double-digit gains for the year. As a result, plans in the Northern Trust Canada Universe marked a considerable improvement over the -1.0% median return in 2018.”

Canadian Equities, as measured by the S&P TSX Composite Index, increased 3.2% during the quarter and ended the year with a robust 22.9% return, its best annual return in a decade. Northern Trust said that while the labor market was soft early in the quarter, there was improvement later as employment numbers increased. It also said the November announcement by Alberta that new conventional oil wells could be drilled without government production limits was another supportive economic measure.

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But it was the IT sector that had the strongest momentum, generating a double-digit return for the quarter and ending the year as the top performing sector. US equity markets also gained momentum on positive announcements surrounding phase one of a US-China trade deal, strong economic data. And a rally in technology stocks helped as the S&P 500 reached new highs and produced a 6.8% return in Canadian dollars for the quarter, and a healthy 24.8% return for the year. A strong economy, resilient labor market, and accommodative monetary policy also contributed to the positive results for the quarter and the year, said Northern Trust.

International equities, as tracked by the MSCI EAFE Index, increased 6.0% in Canadian dollars during the final quarter and ended the year up 16.5%. Despite economic weakness in the Eurozone, the equity index closed on a positive note, which Northern Trust attributed to the UK prime minister Boris Johnson’s election victory coupled with the European Central Bank’s re-engagement in quantitative easing. All sectors in the index ended 2019 with positive returns, led by the IT and Health Care sectors both for the fourth quarter and the year.

Emerging markets investments also had a strong rally during the fourth quarter, with the MSCI Emerging Markets Index rising 9.6% in Canadian dollars for the quarter and generating a 12.9% return for the year. Despite the political tensions in Latin America and Hong Kong, emerging markets responded well to easing trade tensions between the US and China. Central bank actions in the fourth quarter in China, Brazil and Turkey aided their respective economies. All sectors in the index showed positive returns for the quarter, with the IT sector the top performer for the quarter and the year.

The Canadian fixed-income market, as represented by the FTSE Canada Universe Index, saw a 0.9% decline during the fourth quarter. However, the index still managed to generate a 6.9% return for the year despite the weakness during the quarter. During the quarter, corporate bonds outperformed both the federal and provincial sectors, and short-term bonds surpassed returns of the mid- and long-term segments, said Northern Trust.