Affinity Fraud Ponzi Scheme

3 weeks ago
AMERICA NEWS NOW

Hundreds Swindled out of $59 Million in Affinity Fraud Scam

When members of the Pennsylvania Amish and Mennonite communities were offered the opportunity to invest with someone they knew and trusted, many jumped at the chance.

Philip Elvin Riehl, an accountant in Berks County, Pennsylvania, claimed he would invest their money in local businesses, offering a solid return.

But in reality, Riehl was not licensed to invest people’s money, and he also did minimal research on the companies he was loaning money to. For example, he loaned much of the money he received to a failing creamery that went out of business, leaving investors with nothing. He also forgave loans if borrowers left their faith, making it impossible for the money to be collected.

“He was essentially a broker between a borrower and a lender,” said Special Agent Michael Mocadlo, who investigated this case out of the FBI’s Philadelphia Field Office.

About 400 Amish and Mennonite families, many in Pennsylvania, lost a combined $59 million.

Riehl’s entire scheme is what is commonly referred to as affinity fraud, which typically involves investment scams that prey upon members of identifiable groups, such as religious or ethnic communities. These types of scams exploit the trust and friendship that exist in groups of people who share common interests or beliefs.

Riehl’s operation started small, as he was trying to invest enough money to buy a home. But as more and more people heard about what he was doing, more wanted to invest.

Because of their religious beliefs, many in these communities often do not pay into Social Security, so some members seek out their own opportunities to fund retirement. Because many of the victims were investing for the long term, they often didn’t ask for their money for years. So they saw statements that showed their money was doing fine, when it had actually been invested in failing businesses and was gone.

“Riehl was a well-known member of the community. He did people’s taxes year after year. They knew and trusted him,” Mocadlo said.

“One of the victims ... lost everything. Unfortunately, that happened to so many people.”

Michael Mocadlo, special agent, FBI Philadelphia

As the losses snowballed, the Pennsylvania Department of Banking and Securities began to investigate and notified the FBI of possible criminal fraud.

After the investigation, Riehl pleaded guilty to conspiracy and fraud charges in February 2020. In July 2020, he was sentenced to 10 years in prison.

Many victims told investigators they forgave Riehl, even though he took so much from them.

“One of the victims transferred all of her money out of a traditional 401k and gave it to Mr. Riehl to invest for her. And she lost everything. Unfortunately, that happened to so many people,” Mocadlo explained.

He noted that the churches asked for donations to help some of the victims, especially the elderly ones who have little time to recover financially.

Investors should always do their due diligence in making investment decisions, assuring anyone investing their money is licensed and regulated.

“A lot of these investors sent in a check, without asking a lot of questions. It’s important to ask lots of questions and know exactly what’s happening with your money,” Mocadlo said.