The Towson millionaire entered court in a gray prison uniform, not his Louis Vuitton. When the hearing concluded, his future promised a federal prison term, not a jaunt on his yacht with the good wine.
Businessman Kevin B. Merrill pleaded guilty Thursday to conspiracy and wire fraud in what prosecutors called one of the biggest Ponzi schemes ever charged in Maryland. The 53-year-old admitted to defrauding investors around the world — some as far away as Singapore — in the five-year, $394 million cheat.
A charmer with a taste for luxury, Merrill acted as frontman in the brazen scheme, said Jon Lenzner, the first assistant U.S. attorney for Maryland.
“This scheme was sophisticated and meticulous and at the same time it was coldhearted and ruthless,” Lenzner said outside the courthouse, “[Merrill was] taking retirement savings from unsuspecting investors in order to buy himself yet another luxury vehicle.”
Merrill and his business partner, Jay Ledford of Texas, were arrested in September and indicted on federal charges of fraud, identity theft and money laundering. Initially, both men pleaded not guilty.
Then Merrill returned to U.S. District Court in Baltimore on Thursday to change his plea. Bald and slim, he said little in the courtroom beyond answering the judge. His wife, parents and brother sat behind him.
“After discussing it and looking at it in detail,” Merrill told the judge, “we decided this was the best choice for me and my family.”
Ledford, 55, is scheduled to change his plea to guilty in June, U.S. District Judge Richard Bennett told the courtroom. A third man, Cameron Jezierski, 28, of Texas, pleaded guilty to conspiracy to commit wire fraud. He’s scheduled to be sentenced in August.
The hearing Thursday for Merrill marked the downfall of a man who owned five homes, a fleet of foreign sports cars and share in a private plane. He amassed a designer wardrobe and a collection of comic books and sports memorabilia. Authorities say he decorated his home with art of the mustachioed Monopoly character Rich Uncle Pennybags.
Merrill grew up in Harford County and graduated from Joppatowne High School. He studied business at Slippery Rock and Towson universities, but did not graduate. He began his career as a salesman of X-ray machine supplies and through one customer met an accountant in Texas, Ledford.
The two became friends — sporting events, gambling trips to casinos — and Ledford began a business buying bundles of debt on student loans, credit cards and car loans known as “consumer debt portfolios.” Merrill saw Ledford making money, so he formed Delmarva Capital LLC to buy debt portfolios, too.
Over the years, Merrill bought more and more. In 2009, he was running his own collection business, recruiting investors, and he moved offices from Harford County to White Marsh. Then in 2013, he asked Ledford to make him phony sales bills to entice new investors. Merrill admitted to the phony documents in his plea agreement.
The deceptions grew into a massive Ponzi scheme, prosecutors say. Merrill admitted to selling investors on phantom debt portfolios. He also admitted to collecting their money without ever actually buying debt portfolios.
“All so-called ‘profits’ paid to investors were based on payouts from other investors’ monies,” prosecutors wrote in his plea agreement.
Ledford used Adobe software to make phony quarterly reports that purported to show the profits, prosecutors say. They say Ledford doctored Merrill’s tax records to be used to persuade new investors. The fake returns showed Merrill’s income jumped to $500,000 in 2012.
The partners swindled hundreds of wealthy investors: retirees, small-business owners, bankers, lawyers and doctors into paying millions for fake consumer debt portfolios over the years, prosecutors say.
More than 200 credible victims have contacted investigators, FBI spokesman Dave Fitz said.
“The case agents believe there are more people,” Fitz said.
A Bethesda group invested at least $16 million; a family in northern Virginia invested $52.8 million, a network in Boulder, Colorado, invested about $116 million, authorities say. Investor Linda Wahlig, a retiree in Monterey, California, told The Baltimore Sun she lost $150,000 to Merrill — money she had been saving for her grandchildren’s college tuition.
Meanwhile, Merrill spent the money on a lavish lifestyle. Authorities say he amassed an $800,000 Louis Vuitton wardrobe. Federal agents seized a fleet of Rolls-Royces, Ferraris and Lamborghinis — some 21 cars, including a $1.4 million Pagani Huayra.
Authorities have taken steps to begin to sell off Merrill’s treasures, including his $1.06 million home in Baltimore County and Eastern Shore retreat. Authorities filed documents with the courts that they intend to hire Sotheby’s International Realty to sell a dozen houses the men owned in Maryland, Florida, Nevada and Texas. Together, the homes are worth more than $20 million.
The U.S. Securities and Exchange Commission has sued the businessmen and sought court approval to sell off their assets. An SEC attorney called the list “mind-blowing.”
Prosecutors say Merrill used money from a group of Chicago investors last year to buy himself a $950,000 Bugatti Veyron, one of the fastest sports cars in the world. Bennett has granted a restraining order barring Merrill from selling his speedboat, 5 carat diamond engagement ring, and seven Richard Mille watches — the same luxury brand worn by tennis pro Rafael Nadal.
In January, Amanda Merrill, his 30-year-old wife, was indicted on a charge of her own: conspiracy to obstruct justice.
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According to court records, prison guards had found a note in Kevin Merrill’s sock with instructions for her to hide his last treasures.
“Have your dad take my golf clubs,” he allegedly wrote her. “Hide cash or checks … drink good wine in sub zero’s, replace with sh-- wine in basement.”
Her attorney, David Seide, said he expects her case to proceed to trial.
Prosecutors say Merrill and Ledford’s scheme took $394 million from investors. They say the men returned $248 million to investors under the disguise of profits and pocketed the rest — nearly $150 million.
Merrill admitted to the amounts with his guilty plea. He also admitted to an email he sent Ledford after seeing the phony tax returns.
“Perfection,” he wrote. “Thanks my shady friend!”