News came last week of another financial scandal involving Amish investors as victims.
According to the federal lawsuit, Earl D. Miller began recruiting investors in 2008 to join a number of investment vehicles, despite having no experience in fund management.
The Goshen, Indiana resident is accused of “misrepresentations that Miller raised at least $3.9 million from at least 70 investors, but repeatedly lied to prospective investors.”
According to the complaint, here is how Miller operated:
“Miller encouraged people who trusted him to invest their money with 5 Star Commercial and 5 Star Capital,” the complaint reads. “Many of Miller’s investors are financial novices. In addition, Miller has been very successful at gaining the trust of — and recruiting investors from — the local Amish community. He advertised his investment services in local Amish newspapers, has touted his Amish heritage, and has arranged community meetings with local Amish families to discuss his investment ‘opportunities.’ Miller convinced some of his victims to invest their retirement funds or a majority of their life savings with those entities.”
In exchange for their investments, investors were given a promissory note with a fixed-rate of return ranging from 8 percent to 12 percent per year, far in excess of then-prevailing rates fro bank deposits, CDs and other fixed-return investments, according to the complaint.
Exploiting Trust For Profit
This is not the first time Amish and other Plain People have fallen victim to investment crimes.
Monroe Beachy is the first name which comes to mind. Beachy is a member of the Holmes County, Ohio Amish community who managed a fund with around 3,000 investors and which lost around $17 million. Beachy was sentenced in 2012 to 6 years in prison for fraud.
Other similar recent stories include the Pigeon King scandal and the John Sensenig case which affected many Plain Mennonites.
“Affinity fraud” is a term often used in these cases. It refers to a member of a community taking advantage of others in the community by exploiting strong bonds of trust.
Groups like the Amish are particularly susceptible to this. It sounds like Miller made good use of his Amish background to gain trust of those within the community.
It’s too bad we’re hearing about another one of these, though since this scheme began well before the Beachy story came to light, any lessons from that tale were probably not absorbed by the investors in this case.
But it also makes you wonder, will there be more stories like this to come?