Lansing Area Man Pleads Guilty to Securities Fraud in Oil-and-Gas Ponzi Scheme

GRAND RAPIDS, Michigan—Jay Vernon Merkle, 54, of Williamston, Michigan, pled guilty to securities fraud, wire fraud and conspiracy charges, U.S. Attorney Donald A. Davis announced today. Mr. Davis was joined in the announcement by Andrew G. Arena, Special Agent in Charge, Federal Bureau of Investigation, and by Joseph Pirone, Inspector in Charge, U.S. Postal Inspection Service.

Merkle admitted at his change of plea hearing that he and his brother Eric Merkle created a company known as Platinum Business Industries (“PBI”), that operated as a large-scale Ponzi scheme. The Merkle brothers 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 Merkles put the investors’ money in high-risk schemes unrelated to oil and gas, both in the United States and overseas, and lost it. At a separate plea hearing on April 28, 2009, Eric Merkle pled guilty to the same conspiracy, as well as releated securities fraud and mail fraud counts.

Jay Merkle admitted that when PBI could not pay promised returns, he and his brother used money raised from new investors to pay “earnings” to earlier investors, creating the illusion of a profitable company. He further admitted that when soliciting new investors, he did not tell them their funds would be sent overseas, or used to pay off previous investors. According to Merkle, he deliberately concealed both PBI’s insolvency and his actual plans for investor funds, because he knew clients would not invest if they were told the truth.

Merkle faces up to 20 years' imprisonment for each of the two fraud counts, and up to five years' imprisonment for the conspiracy charge.

U.S. Attorney Davis commended the Federal Bureau of Investigation and the U.S. Postal Inspection Service for their thorough investigation. This case was prosecuted on behalf of the United States by Assistant U.S. Attorney Nils R. Kessler.

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