The Amish Bernie Madoff?

An Amish man who promised guaranteed investment returns to thousands of Amish families actually lost half the money, and covered up the losses using a Ponzi scheme that ran for more than a decade, according to a lawsuit filed this week in federal court.

The man, Monroe L. Beachy, 77, allegedly raised $33 million from 2,698 Amish families, nonprofit groups and businesses. He lost $16.8 million of it, but used money from new investors to continue paying dividends to existing ones.

That’s the classic definition of a Ponzi scheme, as perfected by Bernard Madoff, the former chairman of the NASDAQ stock exchange whose scam defrauded investors of $18 billion.

In Beachy’s case, the victims include widows, children, a school cookbook fund and a Mennonite church.

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“This is fraud on a massive scale,” Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio, said in a press release. “This defendant took advantage of people’s trust in him and squandered the life savings of hundreds upon hundreds of families.”

Even before the indictment, some of Beachy’s statements would have rung false to an experienced investor. Beachy told his fellow Amish neighbors that investing with his company, A&M Investments, was perfectly safe, and would provide them a guaranteed interest income.

That would be possible, had Beachy restricted his investments to things like U.S. Treasuries, which provide all investors the same rate of return. Instead, Beachy promised investors he would earn them better returns than banks, and invested money in individual stocks, corporate bonds and mutual funds, which are more risky and fluctuate over time. Beachy’s investments appear to have fluctuated in only one direction, down. To cover up that fact, he mailed his investors fraudulent statements purporting to show the rising value of their investments.

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That’s what led to his grand jury indictment for mail fraud. If convicted, Beachy faces a potential prison term of 20 years.

“Thousands of investors entrusted their life savings to the integrity of Mr. Beachy’s investment business. Unfortunately, he violated this trust over and over again resulting in a combined loss of over $16 million,” Stephen D. Anthony, the special agent in charge of the FBI’s Cleveland office, said in the press release.

Image: Shannon Kringen, via Flickr.com