What some are calling one of the biggest scams and Ponzi schemes ever in the United States left a more than a $1 million mark on Amish families in eastern Daviess County. The case dates back to around 2015 when a number of Amish investors who had been promised double digit returns on investments with 5-Star Enterprises started getting letters instead of checks.

“We had some folks from the community reach out concerned that they weren’t going to be receiving payments from their 5-Star investments,” said attorney Grant Swartzentruber, who now is chairman of the Creditors’ Committee in the 5-Star bankruptcy case. “They had been promised double digit returns and instead they received a letter saying there were issues. They were going to have to re-organize and they hoped they could make that payment. They made no more payments after that and would up filing bankruptcy.”

The bankruptcy uncovered a massive fraud case involving millions of dollars, almost all of it coming from the Amish communities in Indiana, Michigan, Ohio and Pennsylvania. According to the bankruptcy documents, the chief fundraiser was Earl Miller, a man who was formerly Amish and still had connections into the Amish community in northern Indiana. Miller eventually took over the entire company.

Court records indicate that Miller would advertise in Amish papers and during meetings, would convince many people to use their 401K and IRA accounts as investments in 5-Star. The marketing campaign was directed almost exclusively to Amish and between 2009 and 2012, netted $12.1 million. A separate campaign in 2013 raised $13.6 million. In total, the court found 5-Star took in $54.5 million from investors and paid out $17.5 million.

“A number of folks in Daviess County fell victim to this scheme,” said Swartzentruber. “In some ways, there are elements of a Ponzi scheme where later investors were paying folks who got in earlier. There was no growth to it. It was get more investors in to pay off those you had previously agreed to pay.”

The 5-Star method included giving investors mortgages on pieces of property. The property was grossly oversold and often was not worth the face value on the paper.

“Some of the folks had mortgages,” said Swartzentruber. “They really weren’t actual mortgages. He would issue five notes for the exact same property and the thing probably wasn’t even worth the face value.”

During a hearing in South Bend Federal Court, the room was filled with Amish, lawyers and enforcement officials from the F.B.I. and the Securities and Exchange Commission.

“They were trying to figure out how this happened,” said Swartzentruber. “How he missed the requirements for selling investments. I attended the original bankruptcy hearing and got to ask some questions of Earl Miller. He used that his family had been Amish to his advantage to try and get folks to invest with him, to trust him.”

Swartzentruber says that he has worked with several Amish families from the area who were victims of the scam.

“We pointed people to filing a proof of claim,” he explained. “There were a number of folks we were assisting with this. Daviess County was one of the last places that was hit with this and that means they did not get in on any of the payouts.”

The impact was also pretty large in terms of money and the people involved.

“Daviess County was hit because of the background of the guy in the 5-Star investment scheme,” said Swartzentruber. “I don’t think he started out to take people’s money but it certainly ended in a way that was nefarious and illegal. People lost large sums of money locally and nationally. It’s been a sad process to try and recoup it.”

While the case was national, Daviess County was hit significantly by the scam that involved as many as 50 families and possibly up to $5 million.

At this point, the bankruptcy court has been able to recover $5 million to $7 million from the 5-Star assets and begun sending that money back to the investors.

“Typically in a Ponzi scheme, the return is around 3 percent,” said Swartzentruber. “The court has approved an interim distribution. It seems like this is getting sorted out in about as good a way as possible. The return in this case looks like it will be 30 cents to 40 cents on the dollar.”

The Creditors’ Committee and the attorney for the creditor William Jonas will be meeting with the victims of the scam Saturday at Dinky’s from 1:30 p.m. to 2:30 p.m. They will be providing an update on the bankruptcy case and the payments that could be coming in the future.

“It was a very big scandal in the Ponzi style but the dollar amounts were not as large as that that were, say involved in the Madoff scam,” said Swartzentruber. “The creditor’s attorney though calls it a landmark type of case nationally.”

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