RegulationFebruary 4, 2020

Mennonite Accountant Charged in $60 Million Ponzi Scheme

Philip Riehl allegedly scammed fellow Mennonites and Amish for nearly a decade.

Reported by Michael Katz

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.

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.