October 16, 2009

Attorney General Corbett announces arrest of Beaver man in $2 million credit union "ponzi scheme" in southwestern & northeastern PA

HARRISBURG - Attorney General Tom Corbett today announced that agents from the Attorney General's Bureau of Criminal Investigation along with Pennsylvania State Police have filed criminal charges against a Beaver County man accused of operating a $2 million "ponzi scheme," defrauding credit unions in Armstrong, Westmoreland and Luzerne counties.

Corbett identified the defendant as Eugene D. Miley, 58, 1055 Fourth St., Beaver.  Miley operated Miley Financial Services, 639 Third Street, Beaver.

Corbett said that Miley allegedly served as a financial broker for clients, including three credit unions operating in southwestern and northeastern Pennsylvania, offering to locate and purchase various high interest rate certificates of deposit (CD's) for those institutions.   Instead of purchasing CD's, Miley allegedly diverted the funds for his own personal use, depending on new credit union purchases to pay-off older fictitious "investments."

"Miley claimed to be helping his clients earn a good return on their investments, but this was simply an illusion," Corbett said.  "As with other ponzi schemes, the money received from new clients was used to pay-off older investors, or siphoned off for personal use, until the flow of new money stopped - causing the operation to collapse and leaving victims with nothing more than empty promises."

According to the criminal complaint, Miley sold $2,080,000 in fictitious certificates of deposit between 2006 and 2008, including $1,387,000 to Moonlight Credit Union, located in Worthington, Armstrong County; $594,000 to VANtage Trust Credit Union, in Wilkes-Barre, Luzerne County and $99,000 to Stanwood Area Credit Union, in New Stanton, Westmoreland County.

Corbett said that Miley allegedly used long-standing business relationships with officials at all three institutions to approach them with information about various high interest rate CD's.  If the investments were approved, the credit unions would wire transfer to Miley, who allegedly generated statements reflecting the fictitious purchase, interest payments and redemptions of various CD's. 

Corbett noted that Miley is not licensed to operate as a financial investment company, financial advisor or financial products dealer in Pennsylvania.

According to the criminal complaint, the funds for all of these fraudulent investment sales were allegedly funneled through several PNC Bank accounts belonging to Miley and his business.  The transactions were conducted using a PNC Bank branch in Cranberry Township, Butler County.  
 
Miley was taken into custody today by agents from the Attorney General's Bureau of Criminal Investigation and Pennsylvania State Police and preliminarily arraigned before Cranberry Township, Butler County, Magisterial District Judge Daniel George, who set bail at $50,000.  Miley is prohibited from leaving the Commonwealth of Pennsylvania and was ordered have his whereabouts electronically monitored.  A preliminary hearing is scheduled for November 20th, at 11 a.m., before Magisterial District Judge George.

Miley is charged with one count of securities fraud (related to untrue statements or a scheme to defraud), a second-degree felony punishable by up to ten years in prison and a $1,000,000 fine, along with one count of securities fraud (related to the sale of unregistered securities), a third-degree felony punishable by up to seven years in prison and a $250,000 fine.

Additionally, Miley is charged with three counts each of theft by deception and theft by failure to make required disposition of funds, all third-degree felonies which are each punishable by up to seven years in prison and $15,000 fines.

Miley will be prosecuted in Butler County by Senior Deputy Attorney General Christopher M. Capozzi of the Attorney General's Criminal Prosecutions Section.

Corbett thanked the Pennsylvania State Police Bureau of Organized Crime - Western Region Task Force and the Pennsylvania Securities Commission for their cooperation and assistance during this investigation.

(A person charged with a crime is presumed innocent until proven guilty.)