Lansing Area Residents Sentenced for Securities Fraud in Oil-and-Gas Ponzi Scheme
|U.S. Attorney’s Office December 23, 2009|
GRAND RAPIDS, MI—Eric Riley Merkle, 55, and Jay Vernon Merkle, 53, both of Williamston, Michigan, were each sentenced today to 10 years in prison, announced U.S. Attorney Donald A. Davis. U.S. District Judge Robert Holmes Bell also ordered the Merkle brothers to pay their victims $21,583,148.44 in restitution. The sentences were imposed as the result of guilty pleas the defendants entered on April 28, 2009 and May 12, 2009, respectively, to conspiracy, securities fraud, mail fraud and wire fraud charges.
According to court records, the Merkle brothers created a company known as Platinum Business Industries (“PBI”), which operated as a large-scale Ponzi scheme. Eric and Jay Merkle solicited investors by telling them PBI would use their money to fund oil and gas exploration in Oklahoma, and promised returns as high as 6 percent per month, or 300 percent over three to five years. Instead, the Merkle brothers put the investors’ money in high-risk schemes unrelated to oil and gas in the United States and overseas, and lost it. In addition, the Merkle brothers used a substantial amount of the funds to pay off their previous investors in another oil-and-gas Ponzi scheme involving more than a dozen fraudulent shell corporations. The Merkles perpetuated the illusion that their sham corporations were profitable by using new investors’ funds to pay “earnings” to earlier investors.
Evidence presented at the sentencing hearing established that PBI and the Merkles’ other oil-and-gas schemes took in over $50 million in investor funds from more than 600 victims, resulting in many individuals losing their life savings. The Merkles continued to raise money under false pretenses even after they knew they were under investigation by federal and state authorities in 2006. When investors became concerned that their funds were not being returned, the Merkle brothers falsely represented their money was being “held up” by U.S. and foreign government agencies, and encouraged them to wire a total of over $1,000,000 to Nigeria, Ghana, and other countries for “fees” associated with releasing their money. The Merkle brothers also directed individuals not to cooperate with the FBI, suggesting that such cooperation would jeopardize their repayment.
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. U.S. Attorney Davis commended the hard work of the Federal Bureau of Investigation and the U.S. Postal Inspection Service for bringing this case to a successful conclusion. The case was prosecuted by Assistant U.S. Attorney Nils R. Kessler.