The former majority owner of Trickling Springs Creamery, the beloved but financially troubled dairy that had been propped up with investments from the Mennonite community, is facing federal criminal charges, including securities fraud, wire fraud and conspiracy.

Philip E. Riehl, 68, a longtime tax accountant and the principal owner of Trickling Springs until its abrupt closure in September, had been running an investment program in the Mennonite community for more than 20 years. According to a filing this week from the U.S. attorney’s office in the Eastern District of Pennsylvania, investors, “generally members of the Mennonite or Amish religious communities,” had put nearly $60 million into the Riehl Investment Program and Trickling Springs, none of which has been repaid. Nearly 40 percent of that amount, or $22 million, was funneled to Trickling Springs, documents allege.

In securing the investments, the filing alleges, Riehl used manipulative and deceptive practices, made untrue statements and engaged in behaviors that “operated and would operate as a fraud and deceit upon any person.”

Riehl misrepresented both his investment program and Trickling Springs, the company that he co-owned with fellow Mennonites Gerald Byers, Elvin Martin and Dale Martin, according to federal prosecutors. As first reported in The Washington Post, all four men have been excommunicated from their churches over their business actions, and church committees have been established to help them repay millions to investors, including many Mennonites who had supported the creamery and its mission to provide mostly organic milk and other dairy products from grass-fed cows.

Reached at his accounting office in Myerstown, Pa., Riehl said he was not yet aware of the federal criminal charges. “I will withhold comment until I’ve had a chance to consult with my [church] committee and my lawyer,” he told The Post.

Riehl told investors that his investment portfolio was diversified, court documents allege. “In reality, up to approximately 40 percent of outstanding loans were to Trickling Springs Creamery.” He also allegedly told clients that he offered more security by requiring two co-signers for every loan that he made from his investment fund when, in fact, some loans had no co-signers. And he allegedly told investors his fund was profitable when it was, according to federal prosecutors, “plagued by defaults and uncollectible debts.”

What’s more, according to court documents, Riehl “portrayed Trickling Springs Creamery as a successful business worth about $20 to $40 million, when, in reality, it was losing money and was being propped up by investor funds and transfers of moneys from the Riehl Investment Program.”

Riehl and his “co-conspirators” “failed to fully disclose to investors the dire financial condition of Trickling Springs Creamery,” according to federal prosecutors. None of the other Trickling Springs owners are named or charged in the filing.

Federal prosecutors also allege that Riehl provided false statements to U.S. Securities and Exchange Commission officials during his September 2016 testimony and “sought to impede” the agency’s investigations of his fund.

The week, the SEC filed a separate civil suit against Riehl in U.S. District Court for the Eastern District of Pennsylvania. It alleges that Riehl’s investment practices violated the Securities Act of 1933 and the Securities Exchange Act of 1934. According to the SEC filing, Riehl began his investment program in 1995, when some of his accounting clients agreed to finance the purchase of a farm that Riehl wanted to buy in Berks County, Pa.

From there, according to the SEC filing, “word spread within Riehl’s religious community that Riehl was accepting investments and promising higher rates of return than those typically offered by banks.” Riehl pooled the investor money, much of it provided by members of the Mennonite and Amish communities, and “used it to make loans to other members of his religious community,” according to court documents. Many of those loans were made to Trickling Springs, and in 2007, those loans were converted to equity in the creamery, making Riehl the majority owner.

The SEC document added, “Riehl knew that members of his religious community had a high level of trust and respect for one another, and he relied on this trust to secure investments.”

Many of the details of the SEC filing mirror allegations in the federal criminal case. The agency also points out, as did The Post story in December, that many of promissory notes issued by Trickling Springs were merely notes transferred from Riehl’s investment program. By reissuing the notes under Trickling Springs, the SEC noted, Riehl effectively removed himself as the guarantor and placed the burden on the struggling creamery.

According to the SEC document, “Riehl burdened TSC with millions of dollars of additional debt without any corresponding infusion of capital, and TSC was insolvent for all or most of the time.” Riehl also allegedly did not tell those investors with converted notes that their investment would be subordinate to bank debt if the creamery failed.

Aside from the federal suits, Riehl is also a defendant in a Pennsylvania case. In November 2018, the Pennsylvania Department of Banking and Securities accused the four owners of selling at least 175 promissory notes in violation of the commonwealth’s Securities Act of 1972. Commonwealth attorneys accused the owners of not registering the notes in Pennsylvania, as well as not providing the financial information investors needed to assess the risks.

The department’s Banking and Securities Commission recently ordered the four owners permanently barred from the securities business. It also assessed nearly $4.4 million in fines.

Although Riehl declined to comment, he and former Trickling Springs co-owner Dale Martin testified at a July hearing before Pennsylvania regulators that they believed the business was in good financial position in 2015, just before it started issuing the TSC promissory notes.

“Sales were very strong and growing,” testified Dale Martin, former chief executive. “And we had a lot of potential customers coming in.”

But as a Department of Banking and Securities attorney pointed out, Trickling Springs had to borrow more than $2 million to cover payroll and payroll taxes from 2008 to 2014, much of it from Riehl’s loan program, while paying back just $400,000 on $13 million in existing loans.

The SEC is requesting that Riehl surrender “all ill-gotten gains derived from his unlawful conduct,” while the U.S. attorney’s office is seeking property from Riehl equal to the amount of the outstanding investments, roughly $60 million. A former associate of Riehl’s, who spoke on the condition of anonymity to protect his standing in the Mennonite community, said that Riehl has lived a “simple life,” though he owns property in Pennsylvania.

More from Food: