Two directors of a Detroit area accounting firm – along with their wives – were instrumental in perpetuating a $250 million Ponzi scheme that collapsed last summer, according to a lawsuit filed Tuesday in Oakland County, Mich., circuit court.
The suit alleges that Doeren Mayhew & Co. PC and two directors, Todd Fox and James O’Rilley, along with their spouses, were a “de facto part of the management of the Ponzi scheme enterprise” that turned out to be a fraud.
The suit represents about 100 individuals and companies that invested in the Ponzi and seeks $20 million in damages as well as restitution of money lost in the investments.
Socializing was key in maintaining the investment scheme, according to the suit.
“Doeren Mayhew, through Messrs. Fox and O’Rilley, orchestrated and participated ‘dog-and-pony’ or ‘road’ shows targeting investors perceived to be the most vulnerable to the lure of ‘guaranteed high-return’ investments being offered,” according to the suit.
“These in-person marketing initiatives included dinners and barbeques at which Doeren Mayhew, through Mr. Fox, would speak individually to potential investors to tout the wisdom of taking a new position or maintaining an existing position” in the scheme’s offerings, which were in the form of bogus LLCs, according to the suit.
“At one point, Mr. Fox and Mr. O’Rilley delegated their investor-solicitation function to their wives.”
In November, the Securities and Exchange Commission charged Edward May with running the massive scheme that turned as many as 1,200 investors – many elderly - into victims.
According to investors and attorneys familiar with the matter, Mr. May, whose firm E-M Management Co. LLC of Lake Orion, Mich., in July stopped paying guaranteed monthly dividends on a series of companies that turned out to be fakes.
Doeren Mayhew of Troy, Mich., was prominently mentioned on prospectuses of many of the bogus companies sold by Mr., May, usually in shares of about $50,000. (InvestmentNews, Jan. 28)
Mark Crawford, Doeren Mayhew’s managing director, said that the suit was "just ridiculous stuff" and that Doeren Mayhew "never received any money up front and never got paid for anything other than tax returns."