TOWSON, MD—U.S. District Judge Richard D. Bennett on Thursday sentenced Kevin B. Merrill, 54, of Towson, to 22 years in federal prison, followed by three years of supervised release, for conspiracy and wire fraud arising from a $396 million investment fraud scheme that operated from 2013 through September 2018, with an additional $260 million in attempted investments at the time of Merrill’s arrest.
Judge Bennett also ordered Merrill to pay restitution in the full amount of the victims’ losses, which will be determined later, but which is at least $189 million. Judge Bennett will also enter an order of forfeiture, with the exact amount of forfeiture still to be determined.
The U.S. Securities and Exchange Commission (SEC) has a pending parallel civil action in this matter.
The sentence was announced by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Jennifer C. Boone of the Federal Bureau of Investigation, Baltimore Field Office; and Special Agent in Charge Robert W. Manchak of the Federal Housing Finance Agency, Office of Inspector General.
“Kevin Merrill lured investors through an elaborate web of lies, duping them into paying millions of dollars into this Ponzi scheme,” said Hur. “As a result of this scheme, a number of victims were devastated, losing their life savings. This sentence sends a strong message that federal prosecutors, federal agents, and our SEC partners will continue to work together to investigate and prosecute those who perpetrate these kind of fraud schemes for their personal gain—leaving a wave of victims in their wake.”
“Considering there were hundreds of victims and millions of dollars lost, it is fitting that Kevin Merrill will be spending a significant amount of time in federal prison,” said Boone. “The FBI, and our partners, are firmly committed to holding accountable fraudsters who victimize the public by selling a false bill of goods.”
According to his plea agreement, beginning in January 2013, Merrill and his co-conspirators, Jay B. Ledford and Cameron R. Jezierski, perpetrated a Ponzi scheme to defraud investors of more than $396 million. Merrill and Ledford invited investors to join them in purchasing consumer debt portfolios. Merrill knowingly used fictitious sales agreements and other documents, including tax returns, provided by Ledford, to induce individuals to invest with his companies, Delmarva Capital and Global Credit Recovery.
For 2013, Merrill deposited approximately $4.3 million from investors, while Ledford raised just over $186,000 from investors. Thereafter, Merrill’s superior sales ability caused Ledford to assume a background role supplying Merrill with fictitious documents, while Merrill was the “front man,” promoting the fraudulent investments to potential investors.
The conspirators falsely represented to investors that they would use the investors’ money to buy consumer debt portfolios and make money for them by collecting the payments that people made on their debts or by selling the portfolios for a profit to other third-party debt buyers, in a practice called “flipping.”
According to court documents, the victims included small business owners, restauranteurs, construction contractors, retirees, doctors, lawyers, accountants, bankers, talent agents, professional athletes, and financial advisors, located in Maryland, Washington, D.C., Northern Virginia, Boulder, Texas, Chicago, New York, and elsewhere.
To induce investors to participate, Merrill and his co-conspirators falsely represented from whom they were buying the debt portfolios and how much they were paying for the portfolios, whether they were investing their own funds, and their track record of success. According to their plea agreements, sometimes there was no underlying debt portfolio purchased with the investors’ money.
Merrill, Ledford, and Jezierski then created imposter companies with names similar to actual consumer debt sellers or brokers and opened bank accounts in the names of those imposter companies. To lend credibility to the transactions, Ledford created false portfolio overviews, created false sales agreements which used the names and forged signatures of actual employees of the sellers, created false collections reports, and falsified bank statements and merchant account reports. In late 2014, Ledford transferred Cameron Jezierski to manage debt collections for Riverwalk/DeVille. DeVille had a collections center in Euless, Texas, and the conspirators began to invite prospective investors to tour Riverwalk’s office and the collections center, which added substance to their claims regarding the success of their portfolio purchasing strategy and collections efforts. In December 2017, Ledford recruited Jezierski into the fold because his analytical skills enabled him to contribute significantly to creating false documentation to induce investors to invest, and to conceal the mark-up Merrill and Ledford added to the purchase price charged to investors for debt portfolios.
Merrill and Ledford falsely represented that the funds the conspirators paid to investors were “proceeds” from collections and/or flipping debt portfolios, when in fact, the proceeds were paid from funds provided by other investors. Merrill and Ledford provided monthly or quarterly reports to investors regarding the “purported progress of the portfolio and its recovery,” which Merrill and Ledford created. From 2013 to 2018, the scheme to defraud took in over $396 million, and at the time of their arrests, the co-conspirators were attempting to obtain an additional $260 million from investors. Ledford assisted Merrill to divert investors’ funds to purchase a home in Naples, Florida, and also helped Merrill falsify records to the bank lender. Ledford diverted fraud proceeds to purchase and renovate a home in Las Vegas, Nevada; refinance a home in Texas; gamble at casinos; purchase luxury automobiles and jewelry; and to support a lavish lifestyle.
Merrill finally admitted that, while the scheme was ongoing, he met with the FBI, lied to the investigating agents, and provided false documents to the FBI. As detailed in his plea agreement, after his arrest, Merrill attempted to obstruct justice by causing his wife to remove assets from their Naples, Florida home on October 13, 2018, and by preparing a handwritten note instructing his wife to conceal assets from the court-appointed receiver, which he intended to hold up to the glass in the detention center on December 5, 2018, when his wife visited. These actions violated the restraining order with which Merrill was served in the criminal case, and the preliminary injunction ordered by the Court in the SEC’s civil action.
The Court has appointed a receiver to marshal the assets for the benefit of the victims.
Judge Bennett has scheduled sentencing for Jay B. Ledford, 55, of Westlake, Texas and Las Vegas, Nevada, on October 29, 2019, at 10 a.m. and for Cameron Jezierski, 28, of Fort Worth, Texas, on November 14, 2019, at 3:00 p.m.
Kevin Merrill’s wife, Amanda Merrill, 30, of Towson, pleaded guilty on October 9, 2019, to conspiracy to remove and conceal assets in violation of court orders, and is scheduled to be sentenced on January 22, 2020, at 3:00 p.m. Merrill and Ledford have been detained since their arrest on September 18, 2018, and Amanda Merrill and Cameron Jezierski are released under the supervision of U.S. Pretrial Services.