Richmond’s Own Ponzi

pyramidsThe owner of a Richmond-area investment firm who is a former football player at the University of Virginia and for the Philadelphia Eagles was arrested Wednesday and charged in an alleged $8 million fraud scheme that victimized the elderly and others.

Merrill Robertson Jr., 36, was charged with conspiracy to commit wire fraud and faces up to 20 years if convicted, according to the U.S. Attorney’s Office. A civil complaint filed Wednesday by the U.S. Securities and Exchange Commission against Robertson and Sherman C. Vaughn Jr., 45, both of Chesterfield County, alleges they used their Midlothian company, Cavalier Union Investments LLC, to defraud more than 60 investors out of $10 million — resulting in $8 million in losses — in a “Ponzi-like” scheme from 2010 until this year. Vaughn was not charged criminally.

The SEC complaint accuses Robertson, Vaughn and Cavalier of violating the anti-fraud and registration provisions of federal securities laws and is seeking permanent injunctions, the return of allegedly ill-gotten gains with prejudgment interest, and civil penalties. “Defendants targeted unsophisticated senior citizens and former football coaches, donors, alumni and employees of schools Robertson had attended and induced them to buy Cavalier’s promissory notes that allegedly paid a fixed rate of return between 10 and 20 percent annually,” alleges the SEC complaint. The SEC alleges: “To commit this fraud, defendants lied about their sophistication, the safety and security of the Cavalier promissory notes, and Cavalier’s financial condition.”

The two are accused in the complaint of portraying themselves as experienced investment experts and Cavalier as a sophisticated company, “with various divisions, investment funds and investment advisers. They claimed that Cavalier used investor money to invest in a broad range of business ventures, such as restaurants, real estate, alternative energy and assisted-living facilities.” “All of these representations were false,” the SEC complaint alleges. “Unbeknownst to investors, Robertson and Vaughn treated Cavalier like their personal piggy bank. They stole nearly $6 million in investor money and used it for themselves on things like cars, family vacations, spa visits, luxury goods, educational expenses for family members, and a luxury suite at a football stadium.” In March 2013, the two induced an existing — and unidentified — investor to invest an additional $2 million in a purported water-bottling company called Drops Inc., according to the complaint. “The defendants told the investor that Drops used a ‘unique’ seven-step process to energize the water that Drops bottled and distributed to customers.”

The U.S. Attorney’s Office said Robertson is accused of misrepresentations and omissions about the use of investor funds, the assets securing investor funds, and how the money was being invested. Some investors were allegedly given false annual statements that misrepresented the value of their investment and the account number where the funds were supposedly located. During a deposition with the U.S. Securities and Exchange Commission last October, Robertson allegedly acknowledged that Cavalier failed to pay back the approximately $8 million in principal invested with the company and said that Cavalier at the time had no income or assets.

The SEC complaint said that from April 2008 to December 2009, Robertson worked for a large broker-dealer and held security licenses. “Robertson attended Fork Union Military Academy and the University of Virginia, playing football at both schools. He also played football professionally for the Philadelphia Eagles,” the SEC complaint says. Robertson played football at L.C. Bird High School before transferring to Fork Union. In 2013, Cavalier Union Investments donated $30,000 to Fork Union Military Academy.

The SEC said the defrauded investors include coaches he knew when playing football at Fork Union and the University of Virginia.