By now you've probably heard about Monroe Beachy. As if that given name isn't catchy enough to stick with you, the Sugarcreek investor has earned a new moniker he's not likely to shake any time soon: The Amish Bernie Madoff.
Earlier this month, Beachy's three-ring spectacle wheeled into federal court, where the 78-year-old refused on religious grounds to enter a plea to charges of mail fraud involving a $17 million Ponzi scheme.
Packing the gallery with a posse of horse-and-buggy types, Beachy also declined to swear to tell the truth ("Excuse me, I do not swear," he offered) and rekindled his oft-repeated line about how he's not some financial hustler, but a lowly hill-country bumpkin with a skimpy education. All of which would seem designed to point out that Monroe Beachy is really, really Amish.
But if Beachy's Old World street cred is the case's hook, it's worth taking a look at his somewhat more flexible identity on days when he doesn't happen to be staring down a federal judge. Since his financial empire popped like a pinata, a confetti shower of court filings has papered the scene. And the fine print shows Beachy may not have always stuck as close to his Amish ways as the beard suggests.
Between the mid-1980s and June 2010, Beachy, acting through his unregistered business, raised more than $33 million from investors, the majority of them fellow Amish and Mennonites, who would pass along their cash and checks to Beachy in return for hand-written receipts of purchase, according to court documents. He told his investors — collectively known in heartland circles as the "Plain Community" — that he was putting their money into risk-free U.S. securities, out of which he claimed he could squeeze better interest rates than those offered by traditional banks. The pitch worked on around 2,600 investors from 29 states.
But Feds say Beachy was actually engaging in risky investments that lost money over time. To keep his investors from freaking, he allegedly issued fake statements about the health of their accounts, then used cooked books to lure in new investors, whose money went to pay back the originals. Unlike your more uptown Madoff knockoffs, it doesn't appear that Beachy was trying to line his serge pockets with cash.
"In many of these fraud situations, we see the perpetrator spending a lot of it on themselves. We did not see that in this situation," says Timothy Warren, an associate director at the Securities and Exchange Commission's Chicago office. "There was clearly a fraud here, and investors were basically lied to, but it's somewhat unique that, no, he was not pocketing the money himself.
"The fundamental issue was, he was telling investors he was buying one thing, and in fact he was investing in things that were far riskier."
By the time Beachy learned last summer that the SEC was putting the magnifying glass to his transactions, he'd lost about half of the original $33 million his investors thought was safe and sound. When he realized the investigation would reveal his insolvency to investors, he filed for Chapter 7 bankruptcy — a move he would later try to renege on over religious grounds.
The image of Beachy that's creeping out of recent coverage is that he was some sort of awe-shucks, dust-on-his-pants Amish gentleman who got in over his head with those slippery Wall Street types. Beachy himself reinforces this with his constant credo to creditors and judges alike: His schooling topped out at the 10th grade, and he picked up all he knows about investing from some classes at H&R Block.
But that might have been shading the truth. In court filings related to the bankruptcy, the government says Beachy didn't just pop in at H&R Block a few times for the basics, but owned and operated an H&R Block franchise between 1978 and 2000. Beachy also was "an enrolled agent authorized by the Internal Revenue Service to represent taxpayers in disputes" with the IRS. He passed an advanced finance certification test in 1987, and between 1987 and 2004 he was a registered agent with a brokerage firm.
If it seems these days that Beachy is trying to duck behind his beard, it also seems his Plain Community brethren are more than willing to duck along with him. As part of the bankruptcy proceedings that took place in the latter half of 2010, the investor's Amish neighbors pushed the court to dismiss the case altogether on religious grounds, citing that bankruptcy is "abhorrent" to the beliefs of Plain folk. The consensus had been agreed upon at a meeting of 600 creditors at a Sugarcreek hotel that summer.
Their counter-proposal, heavy on chapter-and-verse citations from the Good Book, boils down to an effort on the part of the Plain Community to solicit donations from members of their nationwide tribe, collect the remaining assets that are unaccounted for, and pay all the creditors back in full, without the legal system tarring up the works.
In an affidavit filed by Beachy with his request for dismissal, the investor says, "Amish and other members of the Plain Community, as matters of their faith, do not use the court system or participate in litigation."
He goes on: "After initiating these bankruptcy proceedings, I consulted with community and religious leaders and have decided that I no longer wish to participate in these proceedings." It was as if he were declining a simple invitation to supper, let alone a federal trial brought about by an alleged pattern of misdeeds three decades in the making.
The legal filings accompanying this request make the case that Amish ownership of publicly traded shares of stock or membership in secular associations is objected to on the basis of such verses as II Corinthians 6:14, 15, which forbid believers to be "unequally yoked to unbelievers" — a stance that would seem to wave a prohibitive finger in the face of investing in the first place.
If the Plain Community would prefer to adhere to its beliefs — and maybe spare itself some embarrassment and humiliation in the process — it's also fair to ask whether Beachy should so richly benefit from their willingness to forgive.
The courts didn't think so: The proposal was rejected.
The Plain Community might have been willing to absolve Beachy because he seemed to have had a logical explanation for why the money was lost: Those Wall Street slimebags blew it. And there may be some substance to the accusations. Exactly how much substance? That's up in the air.
According to court filings pertaining to the meeting of the 600 creditors, Beachy repeated his creation myth (... 10th grade education ... classes at H&R Block ... may I go sickle my field now?). He then laid the blame for the losses on a rogue New York trader named Paul Chironis, who, according to Beachy, purchased dot-com securities around 2000 without Beachy's approval.
If it sounds like a simple case of passing the buck, it's at least a trophy buck that Beachy has targeted: Paul Chironis made his own headlines recently when he was fined by the SEC for defrauding a group of clients in 2007 — clients who happened to be nuns. He skimmed off their charity funds and the money the sisters had set aside for assisted-living facilities.
But when reached by phone at his home in Long Island, Chironis offers a different take on his relationship with the Amish investor. The broker says he worked with Beachy from the mid-1980s to 2007, and that there's no way he could have purchased dot-com securities — or anything else — without Beachy's blessing.
"Everything was authorized. Confirmations were sent out, from what I recall; this goes back 15 years," Chironis says. "There were documents on file, there were trading authorizations signed by him." Also, according to the broker's recollection, the SEC looked through all that material as part of an audit, which checked out. (The SEC agreed to comment only on the elements contained in its complaint against Beachy.)
In Chironis' telling, Beachy knew the game he was playing.
"I went back over 20 years with the guy. And he bought bonds, mutual funds, limited partnerships, government bonds, municipal bonds — he had a complete, diversified portfolio."
Beachy also doesn't appear to have been content to camp out on the sidelines watching the ticker-tape fly by; despite his later religious objections to hanging out in courtrooms, on at least one occasion Beachy used the U.S. legal system to go after what was owed him.
Around the time Beachy apparently claims he was scammed by Chironis and his magic dot-com shares, the broker was working with a firm called W.J. Nolan & Co. That firm went out of business in 2001 after a long list of SEC violations. In the fallout after closing its doors, W.J. Nolan was targeted with a suit brought by nine preferred shareholders who'd been receiving quarterly dividends. Among those plaintiffs were New Jersey doctors and Rhode Island traders — and one Monroe Beachy of Sugarcreek, Ohio.
The suit alleged that W.J. Nolan brass were filling their own bank accounts with bonuses when they should have been paying back investors. After churning through the court for a couple of years, the case was referred to arbitration, though no recent filings could be found. Chironis recalls the investors receiving a settlement. When Scene reached other investors listed in the suit, they declined to comment on the situation or a settlement. In the available court files, there's no mention of dot-com securities purchased without the knowledge of investors.
Before his creditors, Beachy seemed to suggest that the 2000 dot-com investments had something to do with his financial problems. That may have been so. But he could also be bending the truth to its breaking point: In the same filings, the government says Beachy may have been insolvent as early as 1998 — long before the W.J. Nolan kerfluffle.
After Beachy walled himself off behind his religious beliefs in court, the federal judge entered a not guilty plea on his behalf. He's set to go trial in early January. Scene was unable to reach Beachy for this story, and his attorney did not return repeated phone calls for comment. Simple 10th-grade-educated, sickle-wielding Amish Wall Street hustlers, it seems, don't have much use for telephones.