Pennsylvania Creamery Owners Accused of State’s Largest Ponzi Scheme

Last September 25, the Trickling Springs Creamery posted a picture of a package of its organic butter, and it enthusiastically reminded its customers that its products contained "no added chemicals" or GMOs. A day later, the popular Chambersburg, Pennsylvania company abruptly announced that it would be closing its plant on September 27. "We would like to express appreciation to our wonderful employees for their dedication and hard work as well as the farmers who stood beside us and supported our mission," it wrote. "We are especially grateful to the community who has supported and loved our products throughout the past 18 years."

That was it. The Creamery cut prices at some of its retail stores, offering "buy 6, get 12 free" deals on points of ice cream, but didn't comment on the reasons for suddenly shutting everything down. It ultimately filed for bankruptcy in December.

Although the Creamery stubbornly refused to comment, the Pennsylvania Bureau of Securities Compliance and Examinations had plenty to say, and it alleged that the four current owners of Trickling Springs—Philip Riehl, Gerald Byers, Elvin Martin and Dale Martin––had offered and sold "at least" $7,803,829 worth of promissory notes to investors without providing any information about the Creamery's finances, and that they had allegedly failed to disclose that the Creamery was "insolvent and unable to fulfill its financial obligations stemming from the sale of the notes.”

Last week, Riehl was charged with securities and wire fraud, and he has been accused of cheating investors out of $57.7 million through Trickling Springs and his own Riehl Investment Program. Riehl allegedly ran a textbook Ponzi scheme, using the money from new investors to repay previous ones––and according to the U.S. Department of Justice, it was one of the largest "Pennsylvania-based" Ponzi schemes in the state's history.

The Washington Post reports that Trickling Springs allegedly had to use money from Riehl's investment program to cover both its payroll and its payroll taxes, and it also allegedly stopped paying a significant number of its dairy farmers. (At least 20 of those farmers eventually stopped working with Trickling Springs, moving their milk supplies to Organic Valley, one of its competitors.)

Riehl, who is a Mennonite, has also been accused of targeting members of his own faith, as well as members of the Amish community. “These investors were looking for honesty and integrity when deciding where and with whom to invest their money,” U.S. Attorney William McSwain said, according to Herald-Mail Media.

"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. 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. Fraudsters must be held accountable under the law—no matter what community they belong to—for justice to prevail."

During a hearing last November, Riehl's attorney almost shrugged off the accusations, saying that Mennonites are just known for giving financial support to businesses within their community. "[The investments are] but an extension of what they do almost on a day-to-day basis within the Mennonite community, and that is they loan money to each other," Norman Greenspan said. "They look out for each other. They help each other.”

The Mennonites seem less charitable in their assessment of the situation—and deservedly so. According to the Post, Riehl and two of the Creamery's other owners have been excommunicated from the church, accused of both turning away from God and taking advantage of the trust of the community.

Last week, the Banking and Securities Commission permanently barred all four owners from the securities business, and ordered them to pay a $4,375,000 administrative assessment, which works out to $25,000 for each of the 175 Pennsylvania Securities Act of 1972 violations that they committed. The Waynesboro Record Herald reports that the ruling is believed to be the largest civil penalty in the state's history.

That has to be hard to swallow—even with a glass of organic, non-GMO, minimally processed milk.