A former Lititz resident now living in North Carolina is facing federal criminal charges of bilking $7.5 million from dozens of investors by taking outsize commissions and management fees on various unregistered securities he sold.
A federal grand jury has indicted Marlin S. Hershey, along with his business partner Dana Bradley, on charges of mail and wire fraud conspiracy, mail fraud, securities fraud and money laundering conspiracy for the alleged scheme that lasted from 2009 to 2021.
The charges were announced Friday by the U.S. Attorney’s Office in the Western District of North Carolina. Hershey was released on bond following a court hearing Friday, during which he pleaded not guilty. Bradley is scheduled to appear in court Monday.
The indictment says Hershey and Bradley, both 52 years old, provided false and misleading materials to investors buying the securities.
For example, investors were told that nobody would be paid a commission when in fact Hershey and Bradley took a 10% commission on initial investments, with additional commissions levied on follow-up investments, according to the indictment. Hershey and Bradley also both received undisclosed “management fees” from the various entities through which they took investments, the indictment says.
Hershey and Bradley also hid the true financial condition of investments by making undisclosed loans to various entities so they could pay investment returns, and then used money from new investors to repay those loans, the indictment says. They also used new investments to pay returns to earlier investors, the indictment says.
The mail and wire fraud conspiracy charge and the mail fraud charge each carry a maximum prison term of 20 years and a $250,000 fine. The securities fraud charge carries a maximum prison term of 20 years and a $5 million fine. And the maximum prison term for money laundering conspiracy charge is 10 years and a $500,000 fine.
The indictment is the second time Hershey and Bradley were linked to illegal investments.
In October 2019 the Securities & Exchange Commission opened a civil fraud case against them alleging they raised $20.2 million from dozens of investors, including family and friends, and then used $2.7 million to pay themselves commissions and earlier debts.
That SEC case was settled in September 2020 when Hershey and Bradley, without admitting guilt, each agreed to forfeit $20,000 profit and pay a civil penalty of $193,000.